Asset disposals and the stages a changing company goes through

Do entrepreneurs feel embarrassed when they have to dispose of their plant and machinery? This article describes some rationale behind asset sales. Sales of plant and machinery are not limited to when a company fails, closes a product line, or goes into liquidation. It is also a process you go through when your company grows and changes strategy. There is also a positive side where one can feel proud to dispose of assets even if they continue to market the exact same product.

Contrary to the common belief that the sale of plant and machinery is associated with failed companies, it can also happen in positive situations.

We all learned in university about the corporate cycle: a company starts as a startup, then moves to a growth stage, then saturation, and finally to decline. Each stage involves the purchase and sale of assets to cater for the change in structure and production capabilities. In the first stage, shifting from startup to growth stage, the sale of assets is involved when there is a shift from manual tools to semi-automated machines and also machines that provide more precision when producing the products. At this stage, the company is shifting away from handmade products to larger production facilities.

In the second stage, when the company moves from growth to saturation, they will require plant and machinery for mass production, buy and create testing equipment, and machinery for improved packaging. We all know what the last stage is, so I will not discuss this. The point is that growth in the first two stages involves the sale of plant and machinery. In these situations, you should feel very proud to sell your assets.

Another scenario revolves around the company's change in production strategy. The production process itself also has a cycle of change. The cycle begins with handmade goods moving to semi-automation, then to automated mass production, and then lastly to logistical subcontracting. The first two changes, from handmade to semi-automation and then to mass production, are explained above. The last stage of logistical subcontracting involves the company moving from self-production to managing the production by outsourced sub-contractors. Why would they do this? Well, there are a lot of advantages to this, including lowered fixed production costs, no need to manage a production workforce, competitive tendering advantages, and multi-location production points to save on transportation of stock to various markets. This process is widely used by many multinationals when they have an established brand name and sufficient demand for a product. For instance, Dell and Apple Inc. have no production facilities; it’s all subcontracted to contract manufacturers, and Foster’s beer for the European market is all manufactured by the Heineken Brewery Group.

This phase shift involves large-scale asset disposals when production facilities become redundant as the company shifts to multi-point production management and remote quality control. The company can save a lot of resources and money through shifting to this stage. Companies like McDonald's and P&G have been using this process for many years.

Although only a handful of companies ever grow to this stage, when you do reach it, it’s the envy of the industry, and you should feel proud to dispose of your plant and machinery this way. This positive process of disposing production plant and equipment has helped create an industry specifically devoted to helping clients sell used machinery using various methods and processes. Brooks Matheson has the skills and resources to help manage this task smoothly, quickly and discretely.

Contact us today for more information on how we can help you maximize the value of your surplus assets.