Article contributed by AssetNation
After years of a strong economy and exceptional growth, companies now face uncertain times with increasing pressure to deliver results. These uncertain times have no doubt created concern. Winston Churchill once said, "Let our advance worrying become advance thinking and planning." In a struggling economy, it is imperative to be efficient and this is accomplished through advance planning. In building an efficiency strategy, addressing the organization’s idle assets will make an immediate impact.
For nearly 10 years, large companies have turned to professional organizations like AssetAuctions to develop an asset disposition strategy. Based on these experiences, below are five steps to help you be more efficient and turn your idle assets into cash.
1. Conduct an inventory of your assets:
The first step is to know what you have. Beyond that, know what you use as well as the last time you used it. Many times, executives do not even know what assets they own. This is the first step in knowing the opportunity and building an effective strategy.
2. Understand the asset needs of your organization:
Cost avoidance is a term used when an organization is able to take an unused asset from one location and use it in another - avoiding the new purchase at the location in need. If a manager in one location sells his asset while a manager in another buys the same asset new – this is truly money wasted. Communicate internally the desire to clean up your inventory and get employees to buy in to the process.
3. Understand the asset’s current market value:
The laws of supply and demand are always in motion. Early in 2009, for example, the commercial assets market began to slow. Because of the construction slowdown and excess capacity from organizations with large fleets, supply of things like heavy equipment and rolling stock was high, but demand stayed constant resulting in lower market prices for assets. Many organizations responded to the lower prices by choosing to sit on the sidelines to wait for prices to recover. Over the past month, a shift is once again occurring. Supply is dwindling while demand has stayed constant. This reverse shift is causing prices to start to rise. Now is the time to act to maximize the market value of your assets.
4. Build a plan:
It is important to understand the total cost of ownership (TCO) for the assets and build a broad plan around the acquisition, management and disposition process. In fact, most large organizations have a proactive corporate strategy to automatically address the flow of assets. Create a calendar and methodically begin the process. In areas such as fleet vehicles, many set a fleet refresh time of seven to nine years. They have learned it becomes more expensive to continue to maintain and operate a fleet asset beyond its lifespan than it is to simply buy a newer one.
Nike said it best, "Just do it" - but be smart about it. When asset disposition strategies fail, they fail for two reasons: 1) no one owns the process; 2) when someone does own the process, they are not empowered to make decisions. The solution is to have a proactive strategy with an Asset Disposition company. It minimizes the organizational disruption and outsources the process management to a third party held accountable for results. Who owns the process depends on the organization, the asset and the frequency of the disposition.
These five steps should help you get on your way. The time to clear out your idle assets is now. Supply is low, so prices are high. Organizations that move quickly will take advantage of these conditions and maximize their return. The simplest way to start is to engage an asset disposition provider to help you build an asset disposition strategy. This strategy looks at the TCO of your assets and generates a proactive plan – from the warehouse to the office. From there, empower your team to methodically execute on this plan. Organizations that capitalize on the current market conditions will free up working capital, allowing them to be more competitive and win in the marketplace.