Considerations in Maximizing Asset Value

We all should wMaximizing Value2ant to maximize the value of our assets. By asset, I mean anything you own that earns you a return, which could be a business, property, website, etc.  It is important to continually analyze your assets to look for opportunities to earn better returns.  Further, analyzing competing assets to see where you can improve or find potential acquisition and value add opportunities is also critical to maximizing value.

Some examples of assets that could be value maximized are:

  • A product review website with a large audience that does not have affiliate accounts for the products being reviewed.
  • Owning a bar that does not have an ATM. You are missing out on not only adding a service to your customers, but adding a revenue stream and maximizing cash sales to reduce your credit card fees.
  • Driving a cab that does not take credit cards. These days you will lose out on a large amount of customers.
  • Maybe adding a synergistic product to your line will help build customers and allow for cross selling opportunities creating a multiplier effect such as adding moisturizer to your line of existing soap products. People who have brand loyalty to your other products are likely to consume this new product as well.
  • Putting coin-operated tire inflation machines, vacuums, and self-serve car washes at a gas station.

There are many ways to maximize the value of an asset.  You just need to keep your eyes open and think about it.

However, you also need to consider that attempts at maximizing value can be detrimental.  Here are some questions that may help you ascertain whether a particular addition is worthwhile:

1) Does this addition detract from the core value of your asset and what is the trade off?

It is important to consider whether an addition to your asset detracts from the core value you are providing.  Sometimes a monetization strategy by its very nature will detract from the core value of your business. So it becomes a question of degrees.

Think about advertisements.  There are multiple business models that require advertisements as a sole means of monetization.  Radio is certainly one of those.  In this example, you often have to gauge what degree of distraction or annoyance your audience will tolerate before going elsewhere.

I recently listened to a Joe Rogan podcast in which he went through twenty minutes of sponsorship ads before his podcast even started.   As a podcaster myself, I appreciate the effort to monetize your work, but this was gratuitous.  I am less likely to listen to a Rogan show again.  I know that I can skip through these ads, but even that takes effort on my part since I do most of my listening in the car and I don’t know how long the ads will be.

At the end of the day you have to utilize tact when making these decisions.  People expect to be sold to at a certain level.  As long as the value you provide is strong enough they will accept it.  Do not oversell to too great a degree or they will find alternatives.

2) Is this addition a distraction?

This idea meshes with the minimum viable product thesis.  You have to build and refine your core business before you start adding features or products.  Entrepreneurs have a tendency to jump around to various features or side businesses thinking that more is better (I am guilty of this myself).

As an owner, your attention and creativity are limited resources. As your business grows you can put people in charge of various segments, but this still takes some oversight and it will take time to find the right people for these jobs.

Some options to help you focus on building and refining the core values provided by your business are to:

  • Find partners that complement your skillset and can focus on ancillary features for you
  • Outsource business segments so you can provide a fuller range of features without having to focus on the development of those segments yourself
  • Remove unnecessary or distracting business segments so you can focus on what really matters for your business

When Steve Jobs returned to Apple, the company had many products that were only slightly different from one another.  One of his first actions as the “interim CEO” was to slash this number down to a core set of products.  This cut costs, made it less confusing for the consumer and created a laser focus on the remaining products so that their quality improved.  Further, it allowed for huge layoffs that turned the company from being on the brink of bankruptcy to being profitable.

Remember your business cannot do everything but it has to do at least one thing and that is MAKE MONEY!

People often assume more is better and greater complexity is superior.  Steve Jobs has proven that simplicity and less can often be the better answer.

3) Are you opening yourself up to incommensurate risks?

There can often be great opportunities for adding a feature to an existing business that would actually be quite lucrative without detracting from focus or the core value proposition.  The tradeoff here is you may become exposed to some kind of catastrophic risk that makes the potential upside pale in comparison.

Perhaps renting little barbecues for slip holders at your marina would be a great amenity to attract customers.  The problem is the risk of a fire burning down the docks (and other customers’ boats) would greatly outweigh the extra revenue earned.

You always have to weigh the upside with the potential downside.  Selling drugs at your existing retail establishment may offer a strong upside, but the potential downside of spending years in jail is not worth it.

Making sure you maximize the value of an asset is important, but don’t lose sight of the big picture or as the saying goes – don’t kill the goose that lays the golden eggs.

Speak Your Mind