What Are Your Real Assets and Liabilities?

One important aspect of consulting is sitting with organizations and making sure they have a robust understanding of their assets and liabilities. Assets are typically considered through the lens of value: personal assets are what contribute to an individual’s wealth, whereas a company’s assets are anything that brings value to the company. Occasionally assets can provide intangible value to your organization that can be difficult to account for; however, it is important to make sure that your business has assets that make a direct impact on your bottom line.

Liabilities can be more difficult. With liabilities, your organization is obligated to other individuals or businesses either for goods or services into the future. Left unchecked, liabilities can be a drain on your organization. They place stress on your future flexibility and profitability by dragging you down in the present. Occasionally, there are instances where liabilities are important to your business—but this is rare. What any well-run organization wants to ensure is that they are protecting their future profitability by limiting their liabilities as much as possible.

Any well-run business will have more assets than they have liabilities. Accordingly, responsible businesses will attempt to offload their liabilities and increase their assets when given the opportunity. Often times, it will be easy to assess which aspects of your organization add value, and which take value away, but be careful. We have seen many organizations struggle to understand where their assets and liabilities are—and it can cripple them in long term.

Read this all one more time. Did you notice that I was talking about the people you surround yourself in business? If not, you may want to think about who is surrounding you now. Our rule of working with clients is that you get rid of your liabilities and keep your assets—no matter whether they are value-adds or personnel. Many organizations forget that their employees actually contribute to their assets and liabilities, but it is important to remember that they can not only be your biggest resource, but they can also affect public perception. In a literal sense, the time and resources you put into training employees and building their skills is something you want to witness a return on investment.

Similarly, personnel can be an enormous liability to your organization. There are only so many hours in a day, and if you are spending yours covering for others or cleaning up their mistakes, you aren’t able to contribute in a meaningful way. Furthermore, in recent years, it has been a common practice to tolerate poor performance from employees given the state of the job market. But it's important to remember that present-day personnel liabilities also affect the future of your organization. You want to make sure that your decisions today do not end up costing you time and resources down the road.

So whenever there comes a time that you need to strengthen your business, remember how to take stock of your assets and lose your liabilities. You’ll save your future self from some trouble.