Tuesday, July 3, 2012

Proactive or Reactive? Where Do You Stand?

Many people find taking a proactive stance to be very difficult - you are essentially making repairs to something that is not yet broken.  The opposite, being reactive, is responding to a circumstance requiring immediate attention. Research shows that the majority of people naturally fall into this latter category. The basic belief about the proactive approach is that you are spending monies that are not (yet) needed.

A better understanding of a proactive view leads to a better appreciation about what is being done and probably more importantly – why it is being done!
A car analogy:  You are planning a long trip. You realize your tires are becoming worn and are approaching the end of their useful life. Your two options are: 1. Being reactive – waiting until the tire blows out and then replacing it or; 2. Being proactive - replacing the tires before they blow out.
A reactive perspective:
You leave and a hundred miles into your trip, you find yourself with a blown out front tire. You are now on the side of the road with no way to replace it, except by using your spare.  You change the tire, knowing that the spare will only get you so far (at a minimal speed) and continue on your way. You go another hundred miles and you lose a back tire…what are the odds, right? Now you are in a pickle! You are stuck on a highway, far from home, where you know no one to call and fix the tire. Your smart phone locates a local tire company, but after calling them, you discover they do not tow cars. They refer you to a local tow company who comes to you within the hour and transports you to the local tire shop. You meet with the tire shop representative only to discover that your size tire is not in stock and will not be available until noon the next day. You order the tire and then get a taxi to a local hotel for the night. The next day you return by taxi to the tire shop, the tire is mounted in 45 minutes and you are finally back on your way.
Now let’s recap the total costs of this reactive venture.
Tow bill to the local shop                                             $85.00
Ordering a single special tire incl shipping costs        $185.00
Cab rides to and from hotel                                         $36.00
Hotel for the night                                                        $129.00

Total                                                                            $435.00 (plus a day lost from your trip).
And let’s not forget that lost $155 deposit on the hotel room at your destination
Grand Total                                                                 $590.00 reactive cost per tire
Now from a proactive perspective:
Since you are aware that your tires are worn, a few days prior to your trip, you call up the local tire shop with which you have done business for years.
The owner pulls your records.  He sees that he has ordered your tires in the past and that the installed cost for the set of four tires is $540.00. It will require a three day order time, which comes in the shop’s regular shipment and requires no additional cost. Since you planned ahead, this doesn’t inhibit your trip, since you are not scheduled to leave until next week. You place the order, the tires come in, you drop off your car at the shop and because you are a regular customer, they drop you off and pick you up from work. Absolutely no additional hassle or time on your behalf. So, that $540 divided by 4. Your proactive cost per tire $135.00. (In terms of actual dollars spent - by being proactive, you actually spent $50 less and got 3 additional tires!)

In terms of just replacing the one tire, being reactive cost you an additional $455.00 plus a lost day of your trip. This does not include the mental anguish you suffered – being stranded in an unfamiliar area, spending monies not planned or budgeted, missing out on certain activities planned, etc. All of these things may have removed a lot of enjoyment that you were anticipating on your trip.

Now consider your building, house, clubhouse, etc. A professional can review certain items that need to be addressed before they become costly. For example, a typical paint job on the exterior of a building has a useful life of 4 to 8 years. Again, this estimation is based upon several items and can be easily identified.  The loss of paint coverage can result in water entry and wood rot. These items can become very costly to repair but can be avoided if you repaint before the failure of the original base coat of paint. This means preplanning and prebudgeting your expenses.  Another negative of allowing paint to fail (and subsequent wood rot) is the potential for mold growth within the walls of your building. This mold growth could lead to thousands of dollars in expenses to remove the mold - not to mention the potential impact to your life and safety due to mold spore inhalation.

This same process applies to your roof, sewer systems, lighting, gates, roadways, gutters and drainage systems, just to mention a few.

One way to be proactive is to have a Reserve Study completed by a reputable engineering firm. This process will show you the anticipated life each item, the future replacement or repair costs (based upon normal inflation) and help you allocate the appropriate funds to make the repairs required when needed.  This may mean you actually have $150,000 allocated and in the bank for that new roof before it actually begins to leak.
So now ask yourself:  Are you as a Board of Directors going to be proactive and preplan to maintain your community’s property or are you going to be reactive and pay a premium for work when the work HAS to be done and you are in a bind?
We, at Access Management Group, promote being proactive. Not only does it save you money in the long run, it shows your community that their money is being spent wisely. We can assist you in every aspect of the process and will refer you to tried and true contractors that are fully insured and capable.  Let us help you help yourself.

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