In my last Blog I discussed use of Lease Analysis integrated into IWMS to provide the cost side of an ROI prediction tool. Cost is only half the data needed however, an accurate and trusted prediction of sales is equally important.

Sales prediction modeling is a tool used by real estate organization with multiple revenue producing sites whether it is direct sales, cell phone contracts, walk-in patients, investment clients, or tuition payments. In all cases a picture of “the customer” must be produced, usually based on past location results or a client defined picture of their customer.

Building these prediction models is an art and requires a sophisticated statistician as well as knowledge of the industry and available data. There are a number of companies that specialize in producing these models and some, like the market leader Buxton, have software tools that include their models providing a visual, usually map-based, view of market opportunities. Many clients also have analysts inside their walls to build and maintain their models. In-house models, like cost estimation models, are very often built in MS Excel and then loaded into some mapping technology like Streets and Trips for use by a few users with seta licenses for that software. In-house models, while likely accurate at some moment in time, generally do not take advantage of the most up to date data and rarely utilize the most up to date technology for disseminating the results of the model.

To come up with a trustworthy and accurate ROI Prediction for any site you need to have an accurate sales prediction model. The quality and accuracy of the model comes from years of experience building models for companies in retail, restaurant, hospitality, healthcare or whatever specific sector your company is in. There are few companies who are capable of providing a really meaningful and accurate picture of “the customer”. However when you invest in developing a model that fits your organization you should make the most use of it. Most real estate organizations will use the sales prediction model and, using a combination of tools usually involving MS Excel, compare the sales prediction per site to estimated cost to figure out the ROI or IRR for that site. This process is rarely real-time, usually involves multiple steps and is often open to error through human keying and re-keying.

As far as I know there is no real estate software solution on the market that has both a time-tested cost projection tool and an accurate sales prediction model fully integrated into it in a real-time manner. If it does exist it is likely custom built for the customer (which means expensive).

Having a real time ROI on every site under consideration would allow for quick, effective decision making on site acquisition and would allow those negotiating leases to see the real-time impact of a change in lease terms on the site ROI. This would give any company a strong advantage in good or bad economic times and, if used over the long term, should substantially increases overall location profitability.

Shameless Plug

My last Blog discussed how Lucernex had labored to overcome the common problems associated with simply integrating desktop MS Excel based financial models for lease cost analysis and sales prediction.

Having solved the cost side of the equation with Lx LseMod online, we set our sights on overcoming the sales prediction side. Last week we announced a partnership with Buxton, the premier predictive modeling firm in retail, restaurant, hospitality, healthcare and government.

One of the most important goals of this relationship was to bring the technology containing predictive models inside the Lx IWMS Location Performance Management Solution allowing Lucernex to provide a real-time ROI prediction tool for every site under consideration. In its first version, the ROI predictor will focus on leased properties followed quickly by an ROI predictor for owned properties.

To learn more go to the Lx Location Analysis page.

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Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?

It is a big step for many companies to implement an IWMS and to simply establish a single source of all location data. It can advance a companies effectiveness substantially with that first step of IWMS use. Once this has been done successfully though, users of IWMS systems start to come up with ideas of how the system can be used to further improve their internal processes and evaluate success. By having all the data in one place, hopefully organized by location, users can begin to apply decision tools to make better decisions.

Without doubt, one of the most important decisions that can be supported by a location-centric IWMS is site selection and lease renewal. For most companies with large portfolios of revenue generating real estate, the selection of the right site is the key to their success and deciding whether to keep a lease or move to a better site is just as important.

To make that decision a manager of real estate needs to evaluate a number of factors; most importantly current or projected revenue and expected cost. A real estate manager with an ROI estimate that they can trust can quickly and effectively make good decisions that can lead to successful sites.

However most IWMS solutions don’t really provide the appropriate data to produce a trustable ROI. To do this effectively an IWMS must have sales prediction that is accurate and complete, thorough cost predictions.

Some IWMS solutions that serve companies with revenue generating locations effectively may include the ability to integrate a prediction engine or an in-house model to produce trustable sales prediction. These models are very often developed in-house over years of trial and error, often in the form of complex MS Excel financial models. Sometimes the models have been produced by a vendor that specializes in producing highly accurate sales prediction models that customers can integrate into user friendly mapping tools like Buxton’s Scout. Either way, Location-centric IWMS solutions can usually utilize the results of a sales prediction model though, in some cases, this can be a very expensive integration.

An accurate and trustworthy prediction of total cost is even tougher to get into an IWMS. Once again time-tested models of cost typically are developed in-house using MS Excel or come from a vendor like Lucernex’s Lx LseMod solution.

Building and maintaining the sales prediction model and the cost model can be a difficult proposition. Without a professional software organization applying tested development and quality assurance procedures maintaining integrity in a model can be very difficult. To make matters worse, a mistake in what is typically a very complex cost model may not get discovered until an audit at which time it is way too late. Lucernex has been called on numerous times to provide our Lx LseMod Corporate Lease Analysis product after some disaster caused by a “minor” error in a model that resulted in years of inaccurate reporting.

For several years now we have seen this same issue play out in organizations looking at IWMS solutions or just after implementing our IWMS. The power of having that trustworthy ROI is enormous and an obvious value to any location-centric real estate organization so Lucernex and other IWMS vendors would often try to move the clients sales and cost modeling tools inside our IWMS or integrate the results into the IWMS for reporting or dashboard views.

The problem with this strategy is three fold:
1. it can get very expensive. Replacing a client-modeling tool usually means some amount of customization even for highly configurable tools. Integrating it is often just as expensive as few IWMS providers have tools to effectively integrate Excel models,
2. Even if you effectively integrate an Excel model you often lose the real time value of the data,
3. Once you introduce integration, especially with a desktop tool like Excel, or you introduce customization, you have an interface to maintain over time, which is both expensive and risky.

At Lucernex we struggled with the best solution for this problem for years in our attempt to provide a trustworthy ROI model for each site under consideration inside our Location Performance Management IWMS. We tried a number of different methods including all of those listed above. About 9 months ago we endeavored to take a huge step forward in solving this problem, which led to our purchase of Least Cost Solutions (maker of LseMod ). LseMod has been the leading tool in corporate real estate since 1995 for every type of real estate portfolio manager out there whether its retail, industrial, corporate, education, hospitality, healthcare, finance and banking or economic development. However, buying LseMod did not solve the problem either because it too is an MS Excel financial modeling tool. So we had the expert modeling tool but had not really improved the process by much as it was a separate desktop based tool that required integration just like a client Excel modeling tool.

In the second quarter of 2010 we will have finally solved this problem. We have successfully integrated Lx LseMod into our IWMS Lease Analysis module as a server side application with the integrity and flexibility of both products intact. Furthermore, in developing this technology we figured out how to launch any client Ms Excel model as a web ready, server-based application inside our IWMS. This will mean clients will now be able to use their time tested financial modeling tools or our Lx LseMod tools inside their Lx IWMS to produce real-time, trustworthy and thorough cost prediction including GAAP and SOX impact and a host of other critical factors.

So we have solved the cost side of the ROI prediction puzzle. In my next Blog I will tell you how we are solving the Sales prediction side and taking another great stride towards putting the “Performance” in Location Performance Management.

Get Lucernex Blogs sent straight to Outlook or iMail or any other RSS Reader!
Click here to subscribe

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?

DALLAS, TEXAS, (March 22, 2010) — Lucernex Technologies, an innovative developer of business intelligence software for real estate management and development, today announced that it has entered into a partnership with Buxton®, the industry leader in customer analytics. This new partnership will provide clients of Lucernex and Buxton® with a wider array of software solutions that both manage the real estate lifecycle process and provide detailed financial models for customer behavior.

“We are pleased to announce this partnership that will mutually benefit Lucernex and Buxton clients by providing a web-based real estate software solution with integrated GIS, mapping and customer analytics from the best prediction modeling company in the business,” said Joe Valeri, president of Lucernex Technologies. “Thanks to this new alliance, real estate professionals will be hard-pressed to find a more comprehensive, effective solution than the one we are offering.”

This new partnership with Buxton®, combined with the recent acquisition of LseMod, has enabled Lucernex to achieve its long-term strategic goal of offering its clients products that provide site by site return-on-investment indicators so they may make the best possible site, location and lease decisions. The alliance also extends Buxton’s real estate modeling capabilities to any of Lucernex Technologies’ clients who are seeking new business opportunities for existing products and services.

“Partnering with Lucernex allows Buxton to offer its clients software solutions to better manage the real estate development lifecycle,” said Charles Wetzel, president and chief operation officer of Buxton. “This unique software tool addresses real estate development and location management from the top down which is something we’re pleased to be able to offer our client base.”

About Lucernex
Founded in 2000, Lucernex Technologies provides real estate developers and facility managers with powerful software tools to guide them through the real estate development process. For nearly a decade, Fortune 500 companies in the commercial real estate, hospitality, retail, construction and engineering industries, both in the United States and Europe, have been utilizing Lucernex Technologies software solutions every day to better manage the development lifecycle. As an innovative leader in Integrated Workplace Management System (IWMS) solutions, Lucernex continues to grow its customer base by applying its Web-based software expertise and real estate development insight to provide advanced tools and services for business. For more information, please visit www.Lucernex.com

About Buxton
Since 1994, Buxton® has been the industry leader in customer analytics for the retail industry. Its focus now includes healthcare organizations, consumer packaged goods manufacturers and city governments. Buxton® draws from its individual- and household-level data to determine lifestyles and buying habits to clearly identify an organization’s best customers and find more like them anywhere in the U.S. Among its 1,900 clients are retailers Weight Watchers, New Balance Shoes, Sally Beauty Supply and West Marine.

For more information, visit www.Buxtonco.com

Media Contact:
Lindsay Hebert
Devaney & Associates
410-296-0800
lhebert@devaney.net

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