Understanding How Operational Dynamics Correlate to Financial Performance and Valuation is the Key to Driving the Best Possible Results for Any Project.
Sadly, our industry is plagued with operators who themselves, cannot connect these dots. This is the catalyst that leads several projects to fail.
When a stable community’s performance falls or a new community startup is unable to achieve anticipated lease up and financial schedules. The first thing most operators think to do is cut expenses. Expense management is important; however, the answer lies in the fanatical understanding of the operational dynamics that correlate to revenue, which drives EBITDA and creates value for your project.
When trouble occurs, capital partners and shareholders become concerned. This causes tension between the operators and capital partners. This forces the dominant party, being the capital partners, to take control and immerse themselves in the operations, creating even more friction between parties. Thus, taking more attention from finding a solution and ultimately prolonging the cash bleed.
Capital partners and their operators must be aligned for the project to succeed. Alignment can only be reached through candid communication and a clear understanding of the end goal. We find that when performance starts to decrease, many operators are reserved in their communication towards their capital partners in hopes they can fix the issues before they become large. Typically, this is due to an inability of the operator to truly see the problem and course correct, they’re not able to connect the dots that lead them to the solution. They rely on “hope”. This ends up eroding trust of the capital partners and they get involved when it’s too late.
These typical scenarios open up risk for both parties, litigation, Shareholder disputes, Investors lose money, labor turnover, quality of service declines, employees start telling residents and families they can’t do their job because they’re short staffed, people move out, word spreads that the project is in trouble, expenses rise while revenue drops. The project teams are left to figure it out while everyone places blame and struggles to find a solution. Meanwhile lawsuits mount, EBITDA erodes, the value of the project diminishes, and still no solutions.
We Can Help
At Alcore we understand the risk taken by the Capital partners and shareholders. We have owned, operated, refinanced and sold projects. We know that vague communication means people don’t have the answers and misalignment leads to failed projects. We also know, in most cases, this can be avoided.
We holistically evaluate every aspect of the business and orchestrate a strategic plan to minimize loss and risk for the vested parties. We communicate our plan with candor, highlighting the root cause, and current options. We present how we came to our conclusions and why our proposed plan is your best option. Then we outline how we will get to the end goal, which may be different than originally desired.
We know how to connect the dots and the sequential approach needed to reach and maintain project stability.
If you are reading this, you’re most likely experiencing some of these issues. We are here to help. Contact us and let’s see if we are a fit.