Control Your Budget, Don’t Let Your Budget Control You
By Nicholas Nociforo
Whether we like it or not, money is the fuel that keeps the world going round. Managing money at any level can be challenging, but managing a collection of funds, as in the instance of an HOA, comes with even more complications. So many things need to get done to keep the community beautiful and property values appreciating. And with so many services done routinely like tree work, or sporadically like sidewalk repairs, spending the money needed to get it all done is hard to do. I am an arborist who sells tree care services to HOAs and other multi-family properties. I have been in the industry for eight years and have worked with all types of boards and property managers in California. I am also a new homeowner who is now faced with service providers and proposals for all the things I need to get done at my house. The purpose of this article is to help HOAs manage their money with inside secrets from service providers. I will be writing from the perspective of tree care services, but these principles can be applied to any service-related vendor for your HOA. Trust me, I have used these practices to get the best savings for my own home.
First things first: know how much you want to spend. When you know what you want to spend, you’re halfway to maximizing your money. Oftentimes, boards listlessly request a bid for tree pruning and just rely on the expert’s opinion for what needs to be done, with very little information on what is in their budget. What ends up happening is boards receive a wide range of costs and scopes that makes it hard to pick the right vendor. This frustrates vendors because it becomes a game of throwing darts in the dark. And, more importantly, tree care costs become unpredictable. This is easily remedied. Boards need to decide at their meetings how much of their funds are delegated for tree work, landscaping, plumbing, pool services, etc. If you tell your tree vendor the board only wants to spend $15,000 this year, it gives the vendor focus to do the best they can with that figure; and, it keeps the board in control. Your budget should not be a big secret to your vendors. Be decisive and open to discussion. This is a game changer in managing HOA spending.
Second, stop requesting apples to apples. An apple-to-apple bid is when all tree vendors need to price out the exact scope of work so costs can be ranked on an even playing field. It is all in the name of getting the lowest deal and making it competitive for the vendors’ bids. But it actually does the opposite. For one, if there are three bids needed, and Company A builds the scope that Company B and C need to match, then Company A already has a huge advantage. What if Company A’s assessor is ill-qualified? What if Company A’s assessor is difficult to work with? Also, what if even the lowest bid comes back more than your decided budget? When you hire a tree care company, you’re not just hiring guys to come prune your trees; you’re also hiring the sales rep who is managing your project from start to finish. Is that representative responsive, honest, and reliable? All of these important hiring decisions are lost when pure costs are rated from lowest to highest. Have your decided budget amount be the great equalizer. It keeps you in control.
Third, price is never set in stone. Shopping for a tree care provider is not like going to Target and filling your cart with items that are individually priced and when you check out, the cost is calculated. You also can’t ask the cashier at Lululemon to give you $20 off your tab. But, with tree care, for instance, it is different. Negotiation is allowed in service industries; and negotiating can save you. Here’s why. I don’t care if you have been working in the tree care industry for one, 10, or 60 years, nobody knows how much it costs to remove a tree. When you receive a quote for tree work, it is pure guesswork. We’re not selling iPhones where we know the exact cost of every component of the physical item being sold. We are selling labor, which is someone’s time to complete a task. People are not robots, so things like call outs, broken equipment, weather conditions, and vehicles not moving can all happen when it’s time to remove the tree. This affects the time to complete the task and makes it more expensive if additional time is needed. Flat tires and sick workers are impossible to predict. So, pricing for tree work has a little "wiggle room" to account for these uncertainties. If you get a quote for tree pruning for $17,000 and wanted to spend $15,000, just ask the rep if he’ll do it for $15,000. Eight times out of 10, they’ll accept and the other two out of 10 times they’ll counter with something lower than the original amount quoted. Pricing is a conversation. If you’ve been working with the same vendor for more than five years, you can basically set the price for anything you want. Do not be afraid to haggle a little.
Effective management of an HOA’s finances requires careful consideration and strategic planning. The complexities of handling various services, from routine tree work to sporadic repairs, make it essential for boards to establish clear budgetary allocations. Communicating these budgetary constraints to service providers, such as tree care professionals, enables focused and efficient decision-making. Furthermore, recognizing that prices in service industries are negotiable opens the door to cost-effective solutions. Engaging in open and honest negotiations with service providers can result in significant savings, benefiting both the HOA and the vendors. Ultimately, by implementing these principles, HOAs can navigate the challenges of managing their funds more effectively and enhance the overall well-being of their communities.
Nicholas Nociforo is an arborist by day, and an entrepreneur by night. Currently, he is actively involved in the development of an app tailored specifically to cater to the needs and preferences of arborists. Nociforo is resolutely dedicated to creating exceptional value for his HOA managers and boards, as well as fellow arborists in the industry.