Do You Need an Asset Management Plan?

a whiteboard drawing of interlocking circles illustrates an asset management plan

In today’s business world, developing an effective asset management plan is absolutely essential to achieving success. Businesses who embrace this as an opportunity to succeed will prosper, while those who deny the need for an effective plan can end up losing in the long run.

Effective asset management can reduce risk and thereby decrease the chance of business failure or substantial loss. By planning everything strategically from beginning, resources can be allocated in the most efficient way possible to maximize return on investment. A successful plan should include some of these important factors.

Driving Factors of Asset Management

Corporate culture and the philosophy of management and shareholders drives effective asset management. Consider subjective opinions such as risk tolerance, target markets, marketing strategies, recruitment strategy, and other elements before the firm planning takes place. Entrepreneurial firms willing to risk it all to succeed should focus more on the end goal rather than allocate resources to mitigate losses. Those that wish either to maintain the current status quo or are fearful of losses should focus their strategies on risk avoidance.

Specialize in One Asset Strategy

Businesses should keep in mind that they can be more competitive by specializing in one asset management strategy. An entrepreneurial firm attempting to overcome impossible odds with a risky new venture will have a difficult time succeeding if they allocate significant resources to prevent loss. Rather, these firms can add more value by taking the risks required to realize success. Firms determined to achieve slower growth or a general return on investment should avoid risky choices. Regardless of which way a company decides to go, it must pick one overarching asset management strategy before other decisions.

Minimize Commitments

Following general strategy, the actual purchasing decisions come next. Whether a company actively avoids risk or accepts it, business commitments should always keep assets as flexible as possible. Loans that cannot be refinanced, assets that cannot be sold, and contractual agreements that bind businesses to certain processes should be avoided if possible. While they might provide some short-term benefits, in the long run, these commitments could cost more due to reduced flexibility.

Evaluate Contingencies

When developing an asset management plan, businesses should always consider possible contingencies and how to adapt. Like a chess game, decision-makers should always think ahead and plan for several possibilities. This is often difficult, especially in entrepreneurial environments where endgame success is the only contingency. In reality, businesses that survive generally plan for several possibilities and allocate their resources accordingly. Businesses that do this will be much more competitive. On the other hand, those that fail to do so will have a difficult time competing. By planning assets effectively now, businesses will be much more flexible in the future.

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