A recent conversation with a venture capitalist brought home the financial benefits of having accurate and complete asset information. We discussed various ways to value asset-intensive businesses like refineries, power plants, and manufacturing facilities. Obvious valuation measurements include operational productivity, cash flow and a comparison with similar plants’ sales price. Two additional methods that caught my attention were asset (equipment) value and projected maintenance cost.
“Not having an accurate list of equipment, the equipment’s condition and an accurate history of maintenance cost typically causes me to discount the value of a plant by at least 20%,” stated the investor. “Lack of this information increases the risk of the transaction. Seller’s claims can only be taken seriously when those claims are documented in the maintenance software (SAP, Maximo, etc.).”
Buying or selling a plant doesn’t happen very often. Justifying a plant’s maintenance and IT budgets happen at least once per year! Use the “adds 20% to the value of the plant” comment the next time you have to justify the cost of cleansing your historical data or upgrading your (enterprise asset management) maintenance software.
Steps you can take now:
This number should be consistent with the identifying number in the maintenance software (SAP, Maximo, etc.).
At minimum; define your critical equipment and make sure the equipment information is correct and complete. Be consistent. Develop and maintain an equipment classification methodology and taxonomy.