In your business, what happens to machinery and equipment when it reaches the end of its useful life?
If you’re like most businesses, your answer may well be either the asset gets sold on the cheap by taking the first offer, sold for scrap, or just stuck in a nook somewhere and plundered for parts.
If this sounds familiar, you might be suffering from an acute case of “zombie assets” – an increasingly common affliction facing UK agriculture.
The fact is - if you don’t have a complete cradle-to-grave asset management strategy in place, your business could be losing out on hundreds of thousands – or even millions – of pounds.
Alan Bell, UK MD of Troostwijk Asset Management advises businesses on the importance and value of developing a proper strategy for how to get best value from assets when they reach their end of use cycle.
How much value could be lost?
The B2B auctions market is worth around £480m per year in the UK, but based on our experience, we believe only a quarter of businesses currently uses B2B auctions as part of an asset management strategy.
That means that UK farmers could be leaving around £1.7bn worth of assets to lose their value for no real good reason.
Asset management 101
A full asset management process starts with valuations, understanding the assets worth, which coupled with the business needs, means an asset management specialist can then advice on the right approach for your surplus assets, whether this is redeployment, disposition strategy private (treaty/tender/auction) or scrap out.
It is all about applying the right approach at the right time so that business objectives and meets are realised.
So why don’t more businesses have a full asset management strategy in place?
Well partly it’s about ownership of the issue and where it should sit within an organisation.
But mostly it’s because businesses fail to recognise the scale of the opportunity of assets that are deemed to no longer be of use.
Build a long term strategy. Selling assets isn’t just something you do when your business is in trouble.
It’s actually part of a wider asset management strategy that seeks to strategically sell items for the best price, at the right time. Only by being proactive in developing a strategy can a business optimise value.
Affect grassroots change. Assets are often unloaded at times of cash flow need, but this is rarely the best way to get best value.
Ingraining asset management in your day to day operations can maximise the return and delivery of business objectives.
Make someone responsible. All too often a lack of strategy means that there’s no clear owner of the issue of what happens to an asset as it is reaching the end of its useful life.
Make a department, or an individual, responsible for this so you’re one step ahead and will have the foresight to unlock the best value.
Remember that everything has value…and that value fluctuates. The value of assets isn’t static, it changes over time depending on market conditions and industry demand.
This level of knowledge is hard to attain and keep which is why enlisting the help of a specialist asset management advisory can help to ensure you don’t sell at the wrong time or wrong price.
Choose the right asset management partner. There are a number of things to look out for including: side-by-side partnership, tailored valuations, turnkey solutions, international reach and crucially trust to help you reach best value.
Think global. Just because an asset has reached the end of useful life in the UK, doesn’t mean it’s not going to be highly sought after overseas.
Similarly, even if you have buyers in the UK, there may be someone willing to pay more elsewhere. This is why it’s important to consider marketing assets through international channels.
Knowledge is key. The selling process can be complicated, it involves a lot of moving around and logistical coordination…but it doesn’t have to be.
A good and experienced partner can take care of everything for you, from the organisation of viewings to dismantling through to delivery.
In summary, there is a huge lack of awareness when it comes to asset management strategy, and manufactures are effectively giving money away as a result.
In these tough economic conditions, where a single piece of legislation can drastically change businesses fortunes, can businesses really afford not to put a plan in place to avoid the curse of the zombie asset?
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