Welcome to week 17 of our 2020 #BusinessChallenge and week 2 of our Assets theme.
Last week we kicked off the Assets theme. Your homework was to create a value-adding Asset Register and list all of the assets your business has.
This week we expand on it. So you have your value-adding asset register, now what?
Analyse each asset
You should now analyse each asset for usefulness or uselessness.
Your first reaction might be “yeah well that is a ton of work”. And you are right.
However, nothing to be done in business worth while is an easy or quick task. So toughen up buttercup. Let’s go.
You need to analyse each asset and determine whether it is a useful asset or a useless asset in your business. Remember that this decision only relates to your business and its operations. Nothing else.
The easiest way to determine this is to divide your assets into 3 categories.
– The most valuable assets which need to be maintained on a constant basis.
– Assets which need to be repaired to become valuable again.
– Redundant assets which need to be sold as they provide no value.
I once assisted a business within 2 hours to sort out their problems. I was very excited to work with the client and hoped that it would have been a long-term client, but I solved their problems with one asset.
Their main income generating asset was broken down and they did not have the cash to fix it. So I walked around the factory and saw a machine standing in the corner.
I asked them what it was and they said they bought it to move into another market but haven’t used the machine since they bought it a year ago.
So I simply said that they should sell the asset to pay for the repairs of their main income generating asset. They subsequently did that and I had no further input in their business.
Their problem was solved. But, this is something they could have sorted out themselves had they only had a simple value-adding asset register with asset valuations in it.
Maintain. Repair. Sell.
That is the magic words for any asset manager of a business.
The asset manager needs to be given the tools (money, scope and freedom) to be able to give effect to this statement:
– Maintain the assets so that they do not break down and that they continue to retain their value. These assets are extremely useful to the business and should be well looked after.
– Repair the broken assets which are still valuable to the business and that can continue to bring in cash. These assets can still be very useful to the business.
– Sell the redundant assets to reduce space needed, unlock cash stuck in these assets and to reduce the possible wastage of funds by repairing something which is redundant. These are useless assets and just take up space.
Homework for this week
Again, this is a short piece, but the homework is extreme.
* Remember that your list of assets should include all your computers, coffee machines, power tools, chairs, desks, vehicles, trailers, small industrial machines as well as large industrial machines. Everything! Do not leave out one asset.
Divide each asset into one of the 3 categories above (name them whatever you feel like) and decide how useful or useless the asset is to your business.
Decide if you should maintain the asset as it is critical to your operations, whether you should repair it as it can become valuable or decide to sell it to get in some cash.