Real Estate / Property Development / Long term Projects - Pre Launch

Launch of a Real Estate Product in a market is a step followed by countless efforts and significant hours spent in planning and managing the work. I had been engaged with reviewing the product pricing, alignment of marketing strategy and project budgeting & working capital management of the client. The launch ceremony is going to be held in couple of weeks in #UAE and #KSA.

I would suggest the engagement of a strong finance team with an acumen of skills right at the beginning. All the companies especially the startups should review the following for Pre-Launch preparations;

1- Product BOQ catalogue for every SKU;

BOQ review include the involvement of engineering, architectural and operational staff to re-evaluate the requirements of materials, skilled and unskilled labors for every SKU. This will help the management to avoid uncertainties in the medium or longer term of project. Real estate projects mainly cover 2-5 years.

2- Product Cost catalogue for every SKU

Product cost catalogue review involves the re-evaluation of production plan and requirement of inventories and skilled labor in every stage of project. Cost optimization and achieving efficiencies in utilization of resources. This will help the companies to monitor variances during project management phase.

3- Product pricing strategy re-evaluation

This step is crucial for the success of a company, measures should be taken to align the pricing strategy with organization's vision and strategic direction. For a start-up the company may opt to choose Cost + Profit% to penetrate in the market. However, the number of units offered at this price may vary as per the working capital requirements of the project.

Lets take an example of scenario to discuss more in detail about the pricing strategy. A start-up company may offer 30%-40% units for its first launch at market penetration pricing strategy. After 6-12 months, upon the completion of 25%-30% project, the company would gain a good reputation and remaining units maybe offered at value-based pricing.

In the Real Estate or development projects it is not recommended to sell 100% project in the first launch. The company would have to forfeit the opportunity to charge value-based pricing on the basis of perceived value. It is also not recommended for a start-up to charge value-based pricing at the start of project.

4- Benchmark pricing for sales team

The sales manager of a company should have the complete menu card of product pricing (for internal use only). The menu card should include the provisions for full cash payment discounts, bulk purchase discounts and the maximum discounted price they could offer to the prospective customers.

5- Working Capital Budgeting

The company should have a formal detailed budget for the utilization of funds raised from the launch of project. It has been witnessed that companies suffer due to lack of working capital and inefficient utilization of funds.

6- Investors Heaven

If the company is trying to raise the investment from venture capitalist or real estate investors, they should have a strong display of estimated ROI unit wise, Gross margins, EBITDA and pricing strategies for the medium or longer term of projects which yields greater capital gains.

Customer acquisition costs, variance reporting, project management, investors schedules and management reporting are the topics which need to be included in Project management Phase.

Scenarios may differ from project to project but I have discussed the core of the idea.