DP Wilder recommends that months (or years) before any company’s anticipated relocation or expansion they begin to “thin” the assets that are no longer being used or that are being stored. Waiting until the last moment, assuming there is a market for the assets, is quite often rewarded with expense to dispose of them.
“A new office, how wonderful…a new design, new furniture…this is going to be fantastic. We will sell our old furniture and equipment to a dealer and let someone else buy it.” Probably not!
The current trend is for open workspace environments and hard wall office furniture and tall wall cubicles are not in demand. There is a glut of unwanted furniture that is now forcing, once very nice furniture to be thrown into the landfill. Donation of the furniture is not even accepted by many charities any longer because they can’t use it or afford to move it.
What do you do with the $60,000 executive furnishings that may only result in $800 from a used furniture liquidator because all the current trends are towards open workspace without offices. Unless a company is very large with hundreds of cubicles you can’t even dispose of them to a metal recycler for the frame and bracket value unless the “tonnage” meets the minimum of the recycler. It isn’t worth their time to come disassemble, move and process them at 10¢ per pound.
Companies may be able to get paid for the equipment immediately, but this usually requires the liquidator finding a “home” for the equipment before they even pick it up. Some equipment liquidators will be willing to accept assets on a consignment basis and will remove the assets to either free up needed space or to vacate a location for restoration and turn back. Advantages to this are that some value may be realized from older assets which will help offset the cost of moving. Disadvantages are that if it doesn’t sell within a period of time there may be a charge for its disposal. If the assets are technology they can usually be recycled and the recycler will remove them from the liquidator’s warehouse at no charge other than what the liquidator may charge for handling.
Morale to this story:
- Start thinning assets early and often. Trends change and the demand may not be there if waiting for the right moment, which will net zero dollars or cost thousands to dispose of later.
- When analyzing assets for liquidation take the time to do a “Craig’s List”, “eBay”, “Amazon Auction”, etc. price check so you can determine three things; a.) how much of the same or similar equipment is on the market? b.) what prices are being asked for those items? and c.) are there any bids on those items? You may see equipment being offered for a large price, but if no one is bidding on them then the demand isn’t there and the asset is going to continue to depreciate if you hang on to it. Remember that the liquidator has to make money, so plan on being paid much less than similar items are being offered for.
- “The first loss is the best loss.” When the perceived value of an asset is not immediately offered or received the asset may be held in the anticipation of receiving a greater value later. Spending time trying to liquidate the asset initially and then repeatedly, if not sold, increases the cost of liquidation while the asset is continuing to depreciate. Productivity, storage, moving or disposal all have costs.