If you’re running a business, it’s important to know what your assets are worth. A lot of people don’t realize the value that their non-revenue assets can have on their company until they take the time to find out and analyze them. When analyzing these things, you’ll need to look at how much money they generate as well as how long it would take for somebody else to acquire those same assets from you.
You will also need to consider if there is any potential future profit in these items or not. To help you understand this concept better, we’ve created this blog post which includes the hidden value of your business in non-revenue assets.
Missing The Forest For The Trees
It’s easy to focus on the money that flows in and out of your business each day. As a small company, you are trying to get off the ground and keep overhead low so expenses don’t eat up all of your profits. You might be wondering: will I ever break even? When should I consider hiring another employee or expanding my space? These are good questions, but you need to take a step back and see the big picture.
“What’s my ROI?” is an important question that every small business owner should be asking themselves on a regular basis (at least once a month). This will help identify how much money your company has spent versus how many customers you have acquired in return.
But what about the non-revenue assets that are also generating value for your business? If you’re not measuring these, then there is no way to tell if they are worth investing in or where their ROI lies. Non-revenue assets can be broken down into tangible and intangible categories.
Never Limit Your Thoughts Inside Outside the Box — Flip It Upside Down
As a business owner, you need to be aware of the hidden value in your Non-revenue assets. When people hear “Non-revenue,” they might think about things such as furniture or cars. But there are many more than that! Think of it this way: if you sold all your non-income producing property at 100% market value, how much would you make? If you don’t know, it’s time to take a closer look.
To augment your organization’s worth, you should comprehend and use the nonrevenue resources that are key worth drivers accessible to you. Here’s the secret:
Comprehend Your Potential Buyers
You may not realize how valuable your non-revenue assets are. Assets such as property, equipment, and intellectual property can all have a significant value when you’re looking to sell or buy a business. Understanding the potential valuation for these items will help you make decisions about what to do with them in order to protect their full value.
It’s important to understand that when valuing an asset, such as a piece of equipment or intellectual property, the value is not only based on what it costs to buy but also all the future costs you’ll incur in order for it to continue operating.
Examine Possible Constraints To Valuation
The value of your business is dependent on a number of factors, many of which are difficult to measure. Valuation and valuation techniques can be used for this process. However, it’s not enough just to have one or two methods; you need more than that in order to get the best idea about what your company may be worth. One of the most common constraints on valuation is liquidity.
Valuing a company that has limited or no access to capital markets will be more challenging than valuing one with ready access to public equity investors, for example. Significant assets which are not generating any revenue can also impact the value of your business; this may include land and buildings.
Distinguish Actions For Capturing Value
Identify what non-revenue assets your company has. Some common examples are intellectual property, patents, copyrights, trademarks. Determine what other value these assets provide to the business or its stakeholders and how this can be used for valuation purposes (e.g., licensing deals).
Consider the growth potential of the non-revenue asset. For example, if your company is working on a patent for what has been dubbed as “the next big thing” and has no competitor’s insight, that could provide significant upside value to the business (i.e., future revenue).
The Bottom Line
To summarize, you need to know the value of your company’s assets. You’ll want to consider if there is any potential future profit in these items or not. A lot of people don’t realize the value that their non-revenue assets can have on their company until they take the time to find out and analyze them.
When analyzing these things, you’ll also need to look at how much money they generate as well as how long it would take for somebody else to acquire those same assets from you.