How well do you really understand your asset portfolio?
Exactly how do you define value? And how does that value apply to your asset portfolio? Do you actually know the current and potential value of your assets? We talk to Andrew Hamilton and Shari Lawrence from Social Scaffolding about using asset mapping to answer these questions.
When was the last time you conducted a strategic review of your assets so that you really understood the value they held?
Developing a greater understanding of your organisation’s assets will greatly assist in better strategic planning, and an asset mapping process is the best way to gain that understanding.
What is asset mapping?
Asset mapping is the documenting of your asset portfolio and how best to maximise its value.
“Asset mapping is a review of your organisation’s physical assets, their current and potential use, as well as monetary value to the organisation. Orgnisations use asset mapping to determine if the assets could be used in a more productive, efficient and/or profitable ways,” says Andrew Hamilton, Social Scaffolding Director.
“Many organisations have under-utilised assets which could include property, or even car fleets. These assets are usually on the organisation’s balance sheet but are not necessarily generating income, or being used in a way that maximises revenue for the organsiation.
“It could be that the asset has been gifted to them or bought for a good price – and now that asset is worth a significant amount of money and might be able to creat a revenue stream.
“For example, an organisation might sell a building, buy in a cheaper location and have better facilities, or they could sell it and reinvest the sale proceeds into service delivery or alternative property assets such as affordable housing for its clients,” he says.
Andrew tells us that he has seen a number of organisations go through this process in order to meet the changing needs of their clients.
During our discussions, it often becomes apparent that organisations undertake a strategic review and map their assets, leading to property assets being sold with sale proceeds reinvested into core operational business.
“It’s an opportunity that many more organisations are undertaking,” Andrew says.
Shari Lawrence is a Principal Consultant at Social Scaffolding and adds to Andrew’s comments.
“The assets may not have been part of a strategic review for many years, so the organisation may not really understand what their potential might be,” she says.
“Or it could be that the organisation needs to inject money into service delivery to respond to the changing needs of their clients. A way to achieve this may be to sell or repurpose some of their assets. It may be possible to use the assets for different purposes and actually generate an income from them.”
More than just property
“I had an interesting example today where an organisation has a fleet of vehicles they’re considering the value of,” says Andrew.
“Lots of organisations apply for grants and community funds and they get fleets of vehicles and busses and company cars for example. But then the company cars may sit in the car park for long periods, and in some organisations they’re not being used on weekends.
“So, these are potentially under-utilised assets. They could be used to deliver more services to clients and value to the organisation.
“Whereas in the past organisations may not have thought about the alternative use of these vehicles, now the clever organisations are considering how to use all of their assets more effectively,” he says.
“They could sell the cars if they’re not getting good use from them, or they could find ways to use them more effectively.”
Potential value versus valuation
So, here’s an interesting nuance: the potential value of your assets versus the value determined by a valuation.
It really is quite important to understand the difference between the two, and to know when each kind of valuevis most important and useful.
Shari tells us that a valuation is usually a more formal process than identifying the potential value.
“To conduct a valuation for property you need to be a qualified and registered valuer. There’s a process and a methodology in doing that,” says Shari.
“If the organisation owns property, they’ll have a value attributed to these properties on their balance sheet based on the valuation.
“By contrast, assessing the potential value is a process to determine what value might be possible from the assets.
“There are all sorts of things to consider in relation to the potential value. For example, if we’re talking about under-utilised land, there’s potential that the land could have a higher or better use which represents a greater value,” she says.
“It might be that the building that’s on the site was constructed 40 years ago. The building was fit for purpose at the time, but now it’s not. There’s potential value in either knocking it down and starting again, refurbishing it or selling it. This is just on e example and there are a myriad of different options.”
What would prompt an organisation to look at asset mapping?
Shari tells us that an organisation should be mapping their assets particularly during any strategic review.
“It might be for instance, prompted by a change of policy such as NDIS that requires the organisation to look at how they’re going to adapt to the new operating environment,” she says.
“Where organisations have previously built up a portfolio of properties over a number of years, they may now need to free up some of the capital that’s locked in those assets and use it to build an NDIS appropriate service.”
Of course, in our current environment, there is another situation where asset mapping will be a crucial exercise: when considering a merger or acquisition (see earlier article: How mergers and acquisitions can support quality services)
If your organisation is considering the merger and acquisition process, you’re going to need to know the value of your assets upfront for open and informed negotiations to take place.
If you need help mapping your assets
The CSIA have partnered with Social Scaffolding to offer members an asset mapping service.
“Community service organisations are in the business of service delivery and property assets help them to facilitate this,” says Andrew.
“They are not typically in the business of asset ownership solely for capital appreciation and income generation, as you might find in an investment fund.
“Property assets may therefore have a higher value to organisations than merely balance sheet value linked to their utilisation.
“But we’re now in an environment where property is being viewed in a more commercial sense,” he says.
“Quantifying these elements is often the challenging part, and the reason that Social Scaffolding has developed the asset mapping product and partnered with the CSIA.”
Social Scaffolding have developed a three-tier offering to support community service organisations in mapping their assets.