Transcript Business Planning: A Blueprint for Success

The New Normal: Budgets, Cost
Recovery and Pricing
2013 Massaschusets Parks and Recreation
Association-Annual Confernece
Chris Nunes, CPRE
Director of Parks and Recreation
The Woodlands Township
The Woodlands, Texas
Session Objectives
• Identify the types and
components of a
budget
• Develop a
program/cost center
budget
• Forecast cost recovery
percentages thus
identifying a potential
program price
Then
Then
Now
Now
Background Information
• Somewhere between
then and now our
facilities, programs, and
services changed but did
our budgeting and
pricing techniques?
Is this you and your facility?
• Decreased share of base
fund/tax base
• Competition/market share
• Increase in requests for services
• Facilities built in the late 1990’s
and early 2000’s
• Slow growth, if any
• Limited capital improvement
How can we better
funding
understand these
• Decreasing agency support
challenges?
Background Information
• Purpose of a Budget
• Document use of funds
spent and received
• Standardized for ease
of comprehension
• Means for evaluating
program and service
goals and objectives.
If you can’t measure it, you can’t manage it.”Peter Drucker
Budget Information
• Where does our revenue come from?
• Membership
• Dedicated Fees
• Taxes
• Fees/Charges
• Contracts
• Grants
• Donations
• Other????
Budget Information
• Operating Budget Formats
• Line Item Object
Classification
• Program/Cost Center• Costs are separately
figured and allocatedmacro, micro, nano
Budget Information
• Types of Budgets
• Capital
• long-range, high-cost,
long-term budget
items
• buildings, vehicles,
major facility
renovations etc.
• ROI on new
facilities/equipment
Program/Cost Center Budgeting
• How can you increase funding/decrease cost?
• Increase membership/sales/base
fee/property/sales tax rate
• Review existing programs/services for
efficiency/cost effectiveness
• Re-tooling the inventory- “sacred cows”
• Other revenue- concessions, lease/rentals,
contract services, etc-CAUTION
• Review programs and services on a micro
level, i.e. cost center
Program/Cost Center Budgeting
 Why do I want to do a
program/cost center budget?
 Accountability
 Constant review of budget
 Reduce reliance on subsidy
 Ensure quality of service
 Ability to understand market
and service paradigm
 Ability to understand core
services and patron needs
Program/Cost Center Budgeting
 Setting up a Budget:
Expenses
 What is your internal cost
structure?
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In House vs. Contract out
Supply Costs
Cost to produce a service
Utilities
Repair and Maintenance
Efficiency of Staff
Need for Staff
Technology
Other?
Program/Cost Center Budgeting
 Budget Development
 What programs/services could be offered?
Pool Heater Example
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Swim Lessons
Swim Team
Staff Training
Rentals
Water Polo
SCUBA
Stroke Training
 Remember that there are costs associated
with providing these services.
Program/Cost Center Budgeting
Budget Development-Expenses
Program/Cost Center Budgeting
Budget Development - Expenses
Program/Cost Center Budgeting
Budget Development-Expenses
Program/Cost Center Budgeting
Budget Development- Direct Cost
What costs are missing……………….
Program/Cost Center Budgeting
Budget Development - Indirect Cost
GreenPlay, LLC, 2008 Cost Recovery Study Bend, OR
What are you required to recover?
Program/Cost Center Budgeting
Budget Development- Indirect Cost
Should there be a different overhead cost for different services?
Program/Cost Center Budgeting
Budget Development - Revenue/Pricing
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Who benefits from the service?
Who generated the need, therefore, the cost?
What is the commitment or intensity of the program?
Do community values support subsidy?
Are we obligated to provide this service?
Will the level of the fee affect the demand for the
service?
 Cost Recovery / Goals Recovery Policies
Pricing
• How can price be
determined?
• Cost Recovery Goals
(25%, 50%, 75%, 100%,
150%)
• What costs need to be
recovered?
• Market Based
• Price based on
time/location
• Supply/Demand
Program/Cost Center Budgeting
Budget Development - Revenue/Pricing
• How do I arrive at program estimates?
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Educated Guess
Historical Numbers
Trend identification
Competition (lack of)
Growth/Contraction
Other agency’s numbers
Fee Increase
Hunch………..
Pricing
• Will price have an
impact on use rates?
• Increase
• Decrease
• No Impact
• Elasticity
Pricing
• Minor fee increase
• Decrease 10%
• Major increase
• Decrease 20-40%
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Value
Understand market,
Undervalued Services
Psychology of Pricing
• 5’s and 9’s
• Price breaks
• First year is the
toughest!!
Program/Cost Center Budgeting
• Historical Numbers
• Growth/Contraction
• Fee Increases
Program/Cost Center Budgeting
• Price by Height
• Price by Location
Program/Cost Center Budgeting
• Riva Row Boat House
• 2 years old
• Elastic or Inelastic
• Impact of a $5 fee
increase?
• Growth or No Growth?
• Impact of advertising
and marketing
• Desire to keep fees
constant for two years or
more
Program/Cost Center Budgeting
Pricing- Market Based
Differentiation = Quality, Expertise, Speed/Level of Service
Pricing- Market and Cost Recovery Based
• Approach
• Two year-2007
• Tiered facility
• Service Levels
• Service
Differentiation
• Reaction of the
public/board
• What was the
impact of these
increases?
Pricing- Market and Cost Recovery Based
While there is a decrease in use, there may be a
decrease in expenses, 51% decrease in use, yet
$39,000 increase in net effect.
Pricing- Market and Cost Recovery Based
Program/Cost Center Budgeting
• Ability to meet goals
• Management Tool
• Monitoring
Techniques
• Are you on track?
• Additional marketing
needed to reach
goals?
Program/Cost Center Budgeting
Can we use
this
methodology
for individual
programs?
Pool Fees
Pricing- Market Based
Pool Fees
Pricing-Issues
• My competition just
changed their
price…..what do I do?
• Evaluate the
competitor’s reason for
the price change
• Evaluate marketplace
response
• Considers own
product’s strategy
Pricing Issues
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What do I do?.......
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Reduce price
Raise perceived
quality
Improve quality and
increase price
Launch low price
“fighting brand”
Capital X Budgeting
Capital X Budgeting
Program/Cost Center Budgeting
• Things to remember
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Understand your pricing philosophy
Benefits/costs of micro detail
Decreasing use may increase revenue
Ability to use for programs, services and
maintenance
• Understand the marketplace and its relation to
your price
• Control leakage
• The devil (and the savings) is in the
details………….
• "A billion here, a billion there—sooner or later it adds up to real
money.“ — Senator Everett Dirksen
Thank You!!!!!!
Chris Nunes, Ph.D., CPRE
Director of Parks and Recreation
The Woodlands Township
2801 Technology Forest Blvd
The Woodlands, Texas 77381
281-210-3906
[email protected]