We are all sensitive – some to a greater level than others but what about your Development?
Do you know exactly how sensitive your development is… and more importantly – too what?
A few simple steps below will guide you to a more clearer understanding of all the moving parts of your business…because that is what a development is, with lots of interconnecting parts.
So here is your 5 Step SAS (Sensitivity Analysis Start-up):
- Understand ALL the variables that your development could face
- Model how sensitive your goal (profit/cash/outcome etc) are and how they would be effected by changes in each variable in turn, as well as multiple variable at the same time.
- Identify the ones you can address
- Plan a mitigation strategy to reduce, eliminate or transfer risk
- Monitor residual risk remaining and repeat the review regularly
I have used this on £100m+ developments over nearly three decades with complex simulations. Whilst these were necessarily sophisticated, the reality is the basics are not hard to follow, IF you understand the process and logic behind them.
We recently worked with one of our Masterminder’s examining the sensitivity of mezzanine finance within their development financing structuring and we were able to help the restructuring to avert any fundamental issues later down the line, enabling £30k of additional profit.
Thats right, understanding variables, sensitivity and risk management is a foundation system in your property business and can save and make your £10,000’s.
Follow this simple 5 step plan above to help you better understand your developments and businesses and safeguard from many risk materialising announced.