EWS Group MoversSuite (223 × 62 px) (1)

Moving Words – Asset Utilization

Written by Timothy Brady.

“One of the great responsibilities that I have is to manage my assets wisely, so that they create value.” – Alice Walton

First, let’s define Asset Utilization:

To determine how well a company is using its available assets (anything adds monetary value to your operation) to generate revenue and profit. Or, another definition: utilizing the asset to its greatest potential to generate revenue to a level that pays for the cost of the asset plus a profit.

There are a number of different types of assets that are measured in asset utilization calculations. As a mover, your assets include any real property, trucks and trailers, forklifts, yard mules, employees, contractors and your Accounts Receivables. So how do you, as a business owner, figure your asset utilization?

One: Determine what assets you have which are revenue-producing. For example, consider Real Estate Assets. This relates to real property, whereby a property is often valued by how much income it brings a business in terms of rent. This could include warehouse space rental income or outside storage and parking rental income. In the moving business this would include SIT and permanent storage of customers’ household items, as well as records storage or any other means by which your company rents out space which generates revenue.

Then there are your tractors, trailers and other pieces of equipment related to your moving business. This would also include pads, dollies, straps, ramps and packing material, as they are all items (assets) which provide the means to produce revenue (utilization).

And don’t forget your Accounts Receivables, because they represent your cash flow – and how quickly or slowly they’re paid determines your cash flow asset utilization.

Make a detailed list of these assets, along with their current dollar values. The more assets you include, the more complicated – but accurate – your asset utilization will be.

Two
: Hypothetically, calculate how much revenue each of your assets can produce. This involves going over your list of assets and deciding, based on previous use, how much revenue in a best-case scenario these assets could produce together. At this point, you’ll calculate projected potential using specific knowledge about the assets on your list, from the peak use of your tractors/trailers and drivers within the HOS rules, to the maximum use of a warehouse, to receiving payments on your receivables in the minimum amount of time – or anything else related to 100 percent utilization of your business’s assets.

Three: Next determine the difference between your best-case scenario asset values compared to the current actual, existing revenues or hauling figures. The ultimate goal of doing an asset utilization calculation is to compare the hypothetical numbers from Step Two with the ones that correspond to the past functioning of your carrier. In technical terms, the formula for asset utilization involves dividing the first number by the second. You’ll come up with a percentage of utilization that shows how efficient your business actually is.

Four: The purpose asset utilization calculations determine where improvements are needed within the business processes. Once you have your final percentage in each area, you then start to work on developing a detailed plan so you can generate greater returns, greater revenue or greater production based on correcting existing inefficiencies. Asset utilization can be a very powerful force for creating a more efficient operation by employing this type of analysis.

“Honesty and integrity are by far the most important assets of an entrepreneur.” – Zig Ziglar

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