How do you improve something that you can't measure?

How do you improve something that you can't measure?

I am always amazed at how numbers can make ideas seem so black and white when the numbers themselves are always so obtuse.  There are so many ways of manipulating data that no one really understands anything anymore.  The numbers have gotten too big. The statistics are too manipulated and the politics or corporate sensitivities too great to allow numbers to be accurate.  The sub-prime crisis and the housing bubble are a clear example.

At Signature Community we were swayed by this trap in the heyday of the real estate market. When financial engineering had a lot more influence on real estate than the location or building.   We were more interested in the keeping rents high to show future profits and not paying enough attention to what really matters in business, cash flow.

Cash flow is monthly revenues less monthly expenses.  Forget about the amortization, depreciation and accruing expense. It's simple, what came in less what goes out. 

At the end of the day, our company's success or failure is going to come down to this simple formula.  Can we bring in more rents than we need to pay out in expenses?  The rest is just noise.  Over the past year we have pushed our managers at Signature to understand how this formula works for their properties and the focus of managing cash flow to positive territory has been amazing. We have always been an ideas company, but successful execution has not always been there. Today, managers are focused on monthly cash flow and they clearly see the results of ideas that we executed on. They are making things happen because they clearly see in the impact in black and white.

If only we could get big business or the government to start posting clearly defined cash flow numbers we would have a much better picture of where we really stand. 

Thanks for making it cash flow at Signature Community. 

Nick