The 3 Essential Ingredients To Better Capital Planning

Capital planning that gets approval from leadership takes three key ingredients. Mix them well and you’ll have a result financial decision makers can’t resist.

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Want to know the best way to fail at getting the facilities budget you need? Guess how much you actually need. Be unprepared to defend that number when pressed. Don’t clearly communicate the good consequences of getting the money you need and the bad consequences of not getting it.

Top-tier capital planning that gets the rubber stamp of approval from leadership takes three key ingredients.

Capital Planning1. Compelling Storytelling

People invest in stories. Why? Because stories are interesting and engaging. If you want more facilities money, you have to explain why – by telling the story of your facilities’ needs.

If you’re not much of a public speaker, don’t worry – you don’t need to be one of the Brothers Grimm. You just need good data that’ll give you the confidence to state what’s going on in your facilities and what capital needs are most important.

Presenting your budget request is more than just sharing a bunch of numbers. It’s telling the story of those numbers. What impact will these budget requests have? How will they help the organization fulfill its mission?

Bring the data to life. While you may understand your facilities budget just by looking at the line items, the decision makers who aren’t elbows deep in facilities stuff every day probably don’t.

Illustrate what it means in terms your audience can understand.

To do that, you absolutely must have accurate, dependable facilities data.

2. Complete And Accurate Facilities Data

Most facilities managers realize that data is integral to tell their story, but many don’t have the data to do it.

You can’t tell a story and not back it up with hard facts. For example, you could say, “we need a new boiler.” But the financial decision makers may not take your word for it. However, if you show data on your current boiler’s steady deterioration, it’s a lot easier to believe that a new boiler is needed.

Better data helps you tell a stronger story. One of the key ways to ensure you always have the accurate data necessary for good capital planning is a facility condition assessment (FCA). But not just any FCA …

3. A Living FCA

A living FCA is always current. The data never becomes outdated. That’s because it’s tied into the rest of your facilities data (work orders, inspections, preventive maintenance, etc.). With a living FCA, there’s no more scrambling to pull together data right before budgets are due only to find out you’re missing key information. You always have a clear picture of how your facilities are doing and any areas of concern.

Capital PlanningStart With Fresh Data

Whatever you’re doing – from baking a cake to building a facilities budget – poor quality ingredients yield a poor quality result. When it comes to capital planning, having fresh data allows you to:

Avoid problematic deferments: Overestimating the stamina of equipment leads to incorrect maintenance deferments. You end up blindsided by unexpected breakdowns requiring emergency repairs or total replacement, which lead to unexpected major expenses. As a result, you may have to deal with safety or operational ramifications as well as customer dissatisfaction.

Stop exceeding useful life: After an asset has reached its useful lifespan, it’s more expensive to maintain it than replace it. But how do you know when you’ve reached that point? Without precise data, the notion that fully functioning equipment is slowly bleeding capital reserves dry becomes particularly hard to communicate.

Properly deploy capital: Underestimating how long equipment will hold up leads to the direct mismanagement of capital reserve. When funds are budgeted to resolve problems that don’t transpire, investment gains cannot be realized. And when there are no budgeted funds for issues that do occur, capital must be pulled from other priorities.

Prioritize correctly: Without a clear picture of the overall status of every component of a capital plan, it’s impossible to correctly prioritize for the coming year. Priorities end up being shifted on an ad hoc basis – a.k.a. “the squeaky wheel gets the grease.”

Not have to start from scratch: Without a current data feed of facility conditions, facilities managers are forced to reassess capital allocation with every budget cycle. From replacements and major repairs to new construction, starting budget planning from square one on big projects consumes tons of time without adding significant value.

Instead, you want accurate facilities data specific to your facilities as well as clear priorities of what costs must be kept and which can be cut (and the ramifications).

Trouble is, for many facilities teams, their facilities data is unavailable or inaccessible due to:

  • Inaccessible information silos
  • Necessary information not being tracked consistently
  • Outdated FCAs that aren’t kept current over time
  • Complicated paper-based or legacy systems that aren’t easy to search and may contain mistakes

Comprehensive facilities management software (AkitaBox being one example) can solve those problems by:

  • Providing a fully digital, easily accessible environment for facilities data
  • Tracking data down to the asset level
  • Managing assets, maintenance, FCAs, inspections, and capital planning in one place

Ideally, you want current data on the state of your facilities, including the age, condition, and estimated life span of your assets. Compiling that information shows you:

  • The benefits of moving ahead on a project
  • The risks of deferring a certain project
  • Which projects should take priority

However, the biggest issue in traditional facility capital planning is the lack of accurate data specific to your assets and your facilities. That’s where a facility condition assessment comes in.

Read More: The ​Facility Data And Metrics Behind Successful Capital Planning

Capital PlanningStir In A Living FCA

There’s no better way to get a snapshot of the actual condition of your assets than with a facility condition assessment. But that’s also the problem: a traditional FCA is just that – a snapshot. It’s a view of your facility at one moment in time. By the next budget cycle, your FCA results will be obsolete.

The last thing you want to do is use outdated information to build a budget. Instead of paying thousands for a fresh FCA every year, consider doing a living FCA.

Living FCAs are completed and presented using special software. Once the initial FCA is done, you can integrate it with your facilities management system. Every maintenance work order you complete or condition note you make in your FM software updates the original FCA data – keeping it current regardless of how much time has passed.

With a living FCA, you can approach your next capital planning cycle with confidence because you’ll always have the most up-to-date condition information to draw from. That aging hot water heater replacement that keeps getting deferred? You’ll know exactly what condition it’s in and whether or not it can wait another year.

Living FCAs empower you to:

  • Create more exact facilities budgets
  • Justify every item in your budget with accurate data
  • Illustrate the costs and risks of deferring capital purchases and projects
  • Give data-backed input to your leadership and finance
  • Serve as a trusted resource for any facilities-related questions

Read More: Moving From A Cyclical To A Continuous FCA

Watch the Webinar: How to Get More from Your FCA Data

Coat It All With Compelling Stories

Now for the most important part – presenting your facilities budget to the decision makers.

On its own, without context, your data won’t make an impact on the financial decision makers. You need to build a story around what the data is saying – a story the big wigs can relate to.

Don’t assume the decision makers will understand why a cost is necessary or important. You must lay out the advantages of saying “yes” and the consequences of saying “no” to each item in your budget request.

Say a handful of air handler units haven’t been serviced in a long time. They need attention – and soon. So you add it to your budget request.

Without context, the financial leaders will see just one more costly expenditure. It’s up to you to tell the story behind the line item. Detail how much more it will cost to replace the air handler units if they aren’t maintained. Explain how these aging air handlers are already hurting indoor air quality. Talk about the people and processes it’s impacting.

You can’t go wrong by showing how your budget aligns with the strategic priorities of the organization. Whether your company is focused on gaining efficiencies or stepping up their ESG game, explain how your capital requests will directly support those goals.

Capital Planning Software Can Help

Facilities management (FM) software and capital management (CM) software work together to deliver data-driven budgets.

FM software tracks, collects, organizes, and shares accurate, up-to-date facilities information. It pulls together multiple data streams (maintenance activities, asset conditions, etc.) to give you a clear picture of your overall situation.

Taking all of that information one step further, CM software uses your facilities data to help you identify key areas for investment, prioritize spending needs, and run various budget scenarios.

Ideally, you want CM software that directly integrates with your FM software. That way, there’s no need to manually transfer data between separate software programs. You’ll avoid any potential mistakes or data loss that can happen during data transfer and enjoy greater consistency between programs.

You can also use CM software to present easy-to-understand visual illustrations of your budget. Pie charts, bar graphs, and tables are the native language of finance people. With CM software, you can highlight various aspects of your facilities budget using professional-looking graphics, reports, and predictive models. It’s a great way to bridge the divide between how facilities and finance communicate.

Free Ebook: The Future of Capital Planning Ebook

Read More: 5 Easy Ways to Improve Facility Capital Planning

Capital PlanningSpice Things Up

Still stumped on how to turn your facilities budget into a great story? Most organizations are driven by one or more of these 5 outcomes. Explain how your budget supports any of these goals.

  1. Mission-related outcomes. Help your company fulfill its mission by making sure the facility functions as desired and provides a safe working environment for employees.
  2. Compliance-related outcomes. Proper maintenance ensures your organization is 100% compliant with codes, regulations, and industry standards.
  3. Condition-related outcomes. Spending less on deferred maintenance or replacements today means you’re setting yourself up to spend more money later. There’ll be an uptick in reactive maintenance costs due to assets failing more often.
  4. Operations-related outcomes. Budgeting for deferred maintenance, preventive maintenance, and asset replacements reduces the amount of unplanned reactive maintenance that takes facilities staff away from their regular duties.
  5. Stakeholder-driven outcomes. Properly funding the facilities’ needs minimizes the chances of something going wrong that can prevent employees from doing their jobs or interrupt the flow of business.

A Recipe For Capital Planning Success

Better data and better storytelling leads to better capital planning. Accurate facilities data (and the ability to meaningfully showcase it) can help you bring finance on board with your needs and vision.

Leveraging FM and CM software lets you visually showcase the “why” behind your budget requests and tell the story of your facilities’ needs. It brings your budget to life for people who don’t live and breathe facilities every day like you do.

As a comprehensive facilities management software suite, AkitaBox can be your partner in:

  • Improving your data management
  • Transitioning to a living FCA
  • Conducting data-driven capital planning
  • Taking control of your facilities’ future

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