If you had to put a number of the value of your business today, would you have any idea where to start? Reevaluating your company assets is smart for insurance and other purposes, but it also highlights any areas of weakness in your enterprise and allows you to continue growth without the growing pains many companies face.
According to the United States Bureau of Labor Statistics, about 20% of small businesses fail in the first year. By the five-year mark, more than half are no longer in business. If you want to stay on top of any problems and avoid closure, knowing your strengths and weaknesses is vital.
There are many different reasons to reevaluate your company assets. Here are some of the top ones and how doing so can help your business thrive in the next year and beyond.
Secure Adequate Coverage
Every business benefits from insurance to protect it in case of a natural or man-made disaster. However, if you don’t fully understand the value of your fixed assets, it’s difficult to know just how much coverage you need.
An audit also gives you a written record of what your company owns in case you need to replace everything. It’s easy to forget smaller items, in particular, if your entire physical location gets wiped out in a tornado or flood.
Make a full list of everything your business owns. Get current values for fleet vehicles, property, computers, equipment and even things such as furniture and artwork.
Replace Old Equipment
Part of reevaluating your company’s assets includes looking at your equipment and whether it is worthwhile to repair it. Sometimes it’s cheaper to replace items than risk constant breakdown and not meeting deadlines you’ve set with your clients.
For example, if you have a fleet of service vehicles, you have to decide if they are still serving your needs. When is the best time to resell them and get maximum value so you can replace them with newer models? As a rule of thumb, maximum mileage runs between 150,000 to 200,000 miles before companies replace their vehicles.
Know Financial Risks
If your liabilities exceed your assets, you may be at high financial risk. Take the time to figure out what you own and what you owe. Maybe it’s time to scale back and sell some of the assets you don’t need that cost you high payments every month.
If you aren’t sure which items should be replaced, sold or kept, consult with a business coach. While a CPA can help you see the cold, hard facts, you need someone who understands the underlying value each asset brings to your business.
For example, if you run a service business, you must have technicians in the field and they need work vehicles to perform their tasks properly. Your payments on those vehicles may be high, but without them you couldn’t serve your customers. Owning them is not optional.
On the other hand, if you have a few company vehicles not used in the field, you may not need them to run your business successfully. Can you sell them or replace them with cheaper models?
Train Employees Better
Your staff is one of the top assets helping your company grow. Bring in the right people and invest in their growth, and your company will prosper. Hire the wrong people and let them stagnate and your business will suffer.
Find the best candidates you can afford. If your wages don’t match larger corporations, offer perks the big guys don’t, such as more paid family leave when someone has a child or sick family member. Think outside the box about what perks you’d like to have as an employee and offer those to your workers.
In a QuickBooks survey of 1,600 business owners, researchers found around 56% advise researching the competition if you want to succeed. Pay attention to the assets your competition keeps. While you can’t know every detail about a competitor, you can pay attention to the things they make public.
What are their fleet vehicles like? Do they offer any special services your equipment doesn’t allow? How can you revamp your vans or purchase a few pieces of equipment to take you to the next level?
If possible, study their training programs for employees, how they handle their customers as assets and any other public information you can track down. Even their website is an asset you should study and learn from. Pay attention to the successes of others in your industry, so you can rise above them.
Pay Down Debt
A clear understanding of what assets you have and what bills you owe gives you an opportunity to pay down your debt. A company with lower debt will prosper more easily than one with lack of cash flow.
Analyze where you owe money and if you can either increase revenue or decrease expenses in other areas. Throw extra payments at your debt, refinance to reduce your interest rate and do everything you can to make your business as debt-free as possible.
Interest rates are currently still at a historic low. You might wish to take advantage of them but you’ll still have ongoing payments, so weigh the pros and cons carefully before taking on more loans.
Conduct a Complete Audit
When doing a reevaluation of your company assets, don’t just limit yourself to physical goods you own. Take the time to consider everything from your employees to how you handle your customers.
Most businesses don’t consider the full scope of how every little area of their business works together like a well-oiled machine. Take the time to understand both fixed and unfixed assets. Know what your virtual advantages are. With a complete audit, you’ll have a better understanding of where you need to improve to take your business successfully into the future.