The well-known business guru Peter Drucker once said, "Long-range planning does not deal with future decisions, but with the future of present decisions." This is the basic philosophy professional financial planners use in guiding their corporation shareholder clients. Board members who are responsible for guiding their buildings’ financial futures must always consider both long-range and short-range needs and contingencies.
The first step in preparing for the future is to begin to think beyond the budget for the current year. Take the time to develop a realistic business plan that will map your route for the next five or ten years down the road. This is an excellent opportunity to explore costs outside of routine maintenance fees, taxes, and the like. Suppose, in a year or two, your building needs a new roof, or new windows. Paying for expensive capital improvements within a one-year time frame can spell financial doom for a building. Clients must think of their co-op or condo corporation as a "going concern," a business that is able to remain viable and operate successfully through the ups and downs of a dynamic economic environment.
- A successful business plan always starts with the budget process and has a life that extends far beyond one year.
- The following important guidelines can help build your corporation’s secure financial future:
- Set current priorities and establish future needs.
- Hire an engineer to study the physical needs of your building over the next two years.
- Obtain appropriate estimates for costs of these improvements—new elevator, windows, concrete, etc.
- Once the physical needs have been assessed, set priorities for installation.
- Incorporate the costs for capital improvements into each year’s annual budget.
- Determine your fixed and variable annual maintenance costs.
Based on these figures, decide how much of the corporation’s reserve funds will be depleted on these projects and how much should be replenished by either special assessments or from the current year’s operating surplus.
Consider whether your maintenance charges are competitive with surrounding buildings and in line with your geographical location.
Of course, a budget is not carved in stone and can in fact be used as a tool in assessing your corporation’s changing needs. Three to six months after the budget is in place, take a second look. Are you reasonably on schedule? Are you far ahead of your plan, or might you need a special assessment or maintenance adjustment? It is important to constantly compare the current situation with earlier projections.