An asset can be gold in your business.
A business asset is often referred to as the “gold” in your business. But if the gold is sitting in a vault and costing you a lot of money in insurance it could actually be a liability. We usually think about assets when selling a business. The better the assets the higher the value of a business to a prospective purchaser.
So what is an asset? Business premises that you own would be an obvious asset, as are products that bring you in money year after year. An idea in your mind for a fantastic new product which has not yet seen the light of day is not an asset. In fact it is the opposite – a liability. It is not making a difference in people’s lives, nor making money. It may also be draining you of energy because unfinished ideas can rob you of focus and vitality. Many small business owners have more than enough ideas but they lie around like Sleeping Beauty and are never woken to start contributing.
It is worth taking the time to look at all aspects of your business and decide where you have assets and what you want to focus on.
What assets does your business have already?
Your email list.
An email list indicates that there are potential customers for products and services in the future. If you have people who already trust you enough to want to be on your newsletter list that is wonderful. A small number of people who read your emails and take action is more of an asset than a list of millions of people who never open anything you send. You don’t need millions. You may need about 1,000 as indicated by Kevin Kelly of Wired Magazine in his blog post 1,000 true fans.
All orders are good. They are promises that you will be paid. But some orders are better. Best of all are orders where money comes in each month without negotiation. If people are signed up to pay you each month, your business is more stable which allows you to plan ahead. Of course there will be attrition and people will leave but a business model with “recurring revenue” turns your orders into real assets.
If you are in a market that is growing your chances of doing well increase. There may be more competition but there may be more opportunity, too. Banks have fairly rigid views about markets and base their lending decision on the market you are in. Prospective purchasers or their advisers will consider the market you are in when deciding the “multiplier” which determines the initial formula that values your business for sale. Some markets die – think of video. Some dying markets come back – like vinyl records. If you are a hero in a dying market you may adopt the tactics of other markets in order to succeed. If you have a real shop that people visit you could consider making the shopping experience more memorable, as well as having an online presence as well. Just relying on footfall in the high street might not be enough.
The profit you make.
What is left over after customers have paid you and you have made essential payments. You can grow profit with more customers, higher prices, more frequent purchases. All these decisions have major impact on your business and help to position you in a way that helps you make more profit. The easiest most cut-throat way to more profit is simply to strip out a lot of expense. Expenses and overheads tend to grow through inertia and have to be assessed and managed regularly. There is no point running a business if there is no profit. It means no holidays, no thinking time for renewal, no money for business risks or adventures. You might as well get a job.
Your intellectual “property” is potentially your biggest asset.
These are products and services you have created which are valued by customers and belong to you. Lots of small businesses are run by brilliant people who work almost intuitively with clients one to one, and sadly when they retire a lot of their knowledge goes too. If your knowledge and approach has been identified in online courses, the books you write, the white papers you have an asset that enhances the business value. And it can work while you are not there. Excellent!
When your business runs relatively smoothly with good written and updated systems you have an asset. If your business is always putting out fires and coping with endless problems your processes – or lack of processes – are a liability. Maybe the problems are symptoms that everything is too complicated. Take a tip from Gordon Ramsey. When he goes to a restaurant that is not performing well he almost always simplifies the menu and improves the quality of what is served. This is one of the key features of that essential business book The E Myth. If you have never thought in terms of processes read this book!
The contribution of others is an asset. Have you paid for somebody on fiverr? Do you have a dedicated team? A mentor? A wonderful accountant? Don’t shoulder all the issues yourself. When you have good people your business will grow faster.
Aha this is the magic that connects you and your customers. It is easier to think of it as an asset if you have ads running which generate a good profit. But have a look around at your website, at the emails you send out, your blog posts and your presence on social media sites like Linked In, facebook and twitter. Are they performing as assets? It is usually better to focus on getting something working well than try to do too much.
If you are a small business the biggest asset is definitely you! You thought of the idea, you keep the business going. Without you the business would not exist. But of course you do have the odd flaw! There are some things you do better than others, some areas where your input is vital, and some where you would be better taking a back seat. Do you know where?
Of all these assets which is the most important to you?