Free advice from a billionaire businessman
Would you consider a billionaire business tycoon to be somebody that could provide you with excellent business advice? If he could give you one piece of advice that explained how he grew he businesses from day one would you listen? So hear are the words of wisdom he wanted the world to hear :-
There are extremely few assets that a company can purchase that will increase in value over their lifetime. All technology such as IT software and hardware continually develop and improve. The same is true of all manufacturing equipment, machinery and vehicles. Even the furniture and fit-out of your premises will need regularly updating and replacing.
J. Paul Getty went on to explain that it is the use of, not the ownership of an asset that is important to a business. In order to grow a business all they need is access to the latest resources, production methods and tools. Owning the asset is irrelevant.
An alternative way to look at the process is to compare it to your payroll. You don’t pay your employees 3 years in advance, so why pay for your assets in this way? Employees are paid monthly, therefore spreading the cost. The cost of all assets should be spread over the life expectancy of the asset.
In summary do not tie up your capital in expenditure on assets that are going to become out of date and depreciate in value. Retaining obsolete assets will only mean your working practises become less competitive in your market and allow your competitors to have an advantage over you because they are using finance to always ensure they are at the forefront of the latest technology, production methods and services.
In the current economic climate this advice is more relevant than ever. Retaining cash within the business and fixing monthly over heads will allow you to not only forecast more effectively but give your business as much stability as possible. Leasing also facilitates investment internally to maintain the competitive edge within your industry without large capital expenditure.
Contact Baker Leasing today to learn more about how we use the teachings of the billionaire J. Paul Getty to help business reach their potential, grow and develop every day.
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