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Surplus Asset Management
By Michael Lawrence
So, you’ve identified assets to sell, and redeployment within your company is not an
option. This article will provide an overview of establishing values, selling used
equipment, surplus and overstock items, along with some advice on what sales
channels to use. It will also discuss other important considerations relative to
negotiating, terms, and contracts. This is a huge topic that could take up more time than
you or I have so we’ll focus on the key principles and generic recommendations.
Valuation
The first thing you’re going to want to do is get a feel for what your business assets are
worth. If we are talking about overstocked finished goods that your company sells you
probably have a good feel for what the market will pay. If it’s surplus components you
purchased for MRO, or maybe IC’s for manufacturing circuit boards, you know very well
what you paid, but what you can sell it for is a completely different animal. Likewise if it’s
used equipment that may be 2, 5, or 20 years old, it can be even more challenging to
estimate what a fair price might be. So where do you even start on estimating value?
Certainly you can hire an appraiser who will give you a valuation. If you take this route be
sure and understand what type of appraisal you are getting as there are many different
options, and the costs will vary by type as well. If you simply want a feel for what an item
will sell for there are some basic tools you can use to get started. Try Google or Yahoo to
see if you can find like assets for sale. A search like “Used Widget” or “Widget for sale”
may produce links to similar widgets currently for sale and even the asking prices for
those items.
there may produce similar items for sale.
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completely un-related to what it may sell for. For this reason, on eBay on the left hand
side of your search results, check the box that says “Completed Sales” and run the
search again. You will need to login for this. If you haven’t registered on eBay you can do
so through this link.
take a look at The Book which reports on the price used equipment and machinery is sold for at
auction. Other paid sources include Andale. There are also some general rules of thumb.
These can vary dramatically by industry but once you get a feel for your industry they can help. As
a general rule of thumb, an unused, current item may be worth 70% of the current retail market.
You can start adjusting downward from there based on age, market, condition and logistics
costs. The reality is that values are best obtained from actual sales data or someone that knows
the markets since it varies so much between the type of assets; used network equipment may be
20%, while unused MRO can be only 2%.
If you are entering into any type of negotiated sale, or a situation where you need to put an asking
price on the table, having a sense of value is obviously of great importance. On the other hand, if
you are going to sell your item at auction, then knowing the value is not as important. Unless you
plan on setting a reserve, the only price that is needed is a starting price and if there is some
market for the item, your starting price should be a fraction (i.e. 10%) of the ballpark it might be
worth. You want a starting price that catches people’s attention and gets them bidding on your
item. The more people that start bidding, the higher an item typically sells for. For example, if you
were selling a $100 bill and started an auction at $97 then there probably won’t be many people
that see it as a great deal and it may not get any bids at all. On the other hand if we start that
same auction at $10, you can bet a lot of people are going to jump into the bidding. What’s more,
is that people want to win and many more people continuing to bid past $95 and very likely past
$100. There is some risk that the item could sell for $10 but if it’s properly marketed to the right
parties, the market will drive it up to a fair price, and the auction frenzy will often drive it even
higher. Provided you have advertised this item to the right audience, the auction bidding will then
bring it to what the market is currently willing to pay for it.
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Selecting A Sales Channel, Auction
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