How to avoid seven plant-closing mistakes
A guide to getting the most from your surplus equipment
There are many mistakes that can cost your company big money!
- Mistake #1: Becoming the victim of a tight deadline
Surplus assets are seldom a high priority. As a result, many companies don’t start planning equipment disposition until the last minute. This means they’re under pressure to sell at give-away prices — a very costly mistake. It’s a simple fact. It takes time to get the highest value for your equipment. And even if you find the right buyers, when you’re out of time you’re also out of negotiating leverage. As a result, companies who let things slide have to choose between accepting rock-bottom prices or missing their deadlines.
The takeaway message: Start disposition planning early. In fact, if you’re even thinking about a plant closure, start planning now!
- Mistake #2: Not thinking through redeployment issues
Knowing when to redeploy your surplus equipment to another facility and when to sell it on the open market, is critical. If you overlook transfer opportunities, your company could waste millions of dollars buying new equipment it already owns. On the other hand, if you redeploy indiscriminately, you could also waste money shipping equipment to facilities that may never use the assets. AND miss out on high cash returns from end-user buyers.
The takeaway message: Make sure that you have a sound process for finding redeployment opportunities and making intelligent redeployment decisions.
- Mistake #3: Getting taken to the cleaners
The moment a plant closure is announced, the phone will start ringing off the hook with calls from used equipment dealers offering to “take the problem off your hands.” When you don’t have a lot of time or people, this can seem like a very attractive deal. But consider this. That dealer may sell the same piece of equipment that he bought from you for a dollar to a different facility within your company for $100,000 or more. Dealers know all the tricks and take advantage of the seller’s lack of knowledge and the need to sell fast.
The takeaway message: Make sure that you know what your equipment is really worth and how to get what its worth!
- Mistake #4: Depending on bottom-up bidding instead of controlling top-down negotiating
An auction can be a good clearance mechanism … for certain asset classes. However, auctions are risky. In an auction, it is the buyer, not the seller, who determines the final sale price. The risk is biggest for high-ticket items. End-user buyers seldom purchase such items at auction, because the auction process does not allow them time to conduct due diligence and to secure purchasing approval. As a result, the equipment with the highest potential value is often snatched up by dealers in an auction – at prices that are just a fraction of what the equipment is really worth.
The takeaway message: Before committing to an auction, make sure this is really the most appropriate sales channel for your equipment.
- Mistake #5: Bulldozing away your money
When a plant needs to be demolished, it’s easy to take the demo contractor’s offer to bulldoze the equipment along with everything else. This may seem like an easy way out, but it could be a huge and costly mistake. You see, the contractor will only pay you for the scrap materials in the equipment, not the value of the equipment itself. This can add up to hundreds of thousands (or sometimes millions) of dollars … and can be the difference between a project that costs you money and a project that puts money back to your company’s bottom line.
The takeaway message: First determine the value of your equipment, then develop an integrated disposition and demolition strategy.
- Mistake #6: Putting your company in legal jeopardy
Watch out! If you’ve decided to sell your manufacturing equipment, but don’t know how to protect your company from liability issues and potential lawsuits, you could be in big trouble. Example 1: Without the right disclaimers in place, you could inadvertently expose the company to lawsuits if the equipment buyer suffers an injury while using the machine. Example 2: If you don’t know the law and don’t have the right notification processes in place, you could fail to report a sale to the appropriate regulatory agency. Example 3: If you don’t have proper financial controls in place, you could put your company at risk for regulatory action and financial audits.
The takeaway message: Have a proven process in place that prevents devastating errors that can do terrible damage to your company.
- Mistake #7: Putting all your eggs in one basket
Chances are you’d never walk up to a roulette wheel and dump your life savings on red five in the hope of winning big. But that’s exactly what you’re doing if you’re relying on a single sales channel such as an auction event. There’s no plan B, and that can have serious consequences – selling your assets for pennies on the dollar and/or missing your project deadline. Forward-thinking companies use multiple “cascading” sales channels. This means they start with redeployment and negotiated sales where they have the most control and will get the best return. As the deadline approaches, they move to clearance channels which trade lower prices for the certainty that all assets will be cleared by the project deadline.
The takeaway message: Use multiple sales channels to ensure that you both maximize returns and hit your deadline.
Want to get the most money for your surplus assets?
Selling surplus equipment is not as easy as it seems. Doing it right can bring huge financial rewards, while doing it wrong can expose your company to risk, liability, and missed deadlines. Because surplus equipment is seldom a core competency, a growing number of companies are turning to EquipNet, the leading provider of proactive surplus asset management services. Your cost is based on EquipNet’s performance. Our compensation model is easy to understand: The more we save you, the more we make. You see, we charge you a pre-agreed percentage of the money you receive from the disposition of your surplus assets. This means that our interests and your interests are identical. You want to get as much as you possibly can for your surplus equipment, and we bring all our expertise and experience to bear to make that happen. If ever there was a win/win business relationship, this is it!
EquipNet’s approach to avoiding costly mistakes
Planning – We help you understand what your disposition options are (including the time, cost, and returns required for each option) so that you can make informed business decisions and not become the victim of a tight deadline.
Redeployment – We provide technology, processes, and services to ensure
that you identify potential transfer opportunities and then make sound redeployment decisions.
Intelligence – We inventory and appraise your equipment so that you understand what you have, what it’s worth, and how to get the highest price.
– EquipNet has the largest online MarketPlace for industrial plants and equipment and the largest sales force in the industry. We can help you find end-user buyers and negotiate sales directly with them at the highest prices.
– Our project management teams make sure that demolition and equipment disposition work in harmony together, whether or not we’re using a vendor from our network of demolition contractors, or one that you have on site.
Covering Your Assets – We put work-flow systems and process controls in place so that the right people in your organisation are notified before an item is redeployed or sold, and we ensure that your terms-of sale are always signed prior to any transaction.
- “Cascading Liquidation”
– It’s our proprietary programme that uses the right marketing strategy for the right asset at the right time. This programme allows you to meet your deadline while maximizing your returns.