Economy: When It’s Time to Be Innovative, The Innovators Get Going!!!
- Apr 28, 2009
Is the bottom of the market approaching? Is it already there, and we have been submerged for too long to avoid the effects of the storm, and for too long we have been drifting just off the bottom without realizing we could navigate to improved waters?
As the residential market preceded the commercial market decline, it now seems evident that the residential market, in all but the most depressed locations, is evidencing an uptick in the sales of existing homes. What does this mean? It is in my viewpoint the first and necessary step of infusing some money into the hands of the consumer; it also supports a belief that the economy is about to become active once again.
The innovators have already “got going”. These are the individuals that saw opportunity to position their companies in a downturn, to take advantage of a slow but gradual recovery, assisted by the effects of economic stimulus provided by our government. I do believe we are now exiting from that period of time that bred shock, dismay and inertia. Now we realize we are in a very different environment and we need to take actions that adapt to this new “norm” and these calculated strategies can actually realize growth and profits, as we emerge from recession.
In most instances, companies have curtailed unprofitable operations, streamlined their expense structure, and now are poised to be more nimble and innovative.
I read with interest today at how Playboy’s shares are trading for about 5% of their pricing of just over a decade ago. However, a close look at the company’s assets identifies that the Playboy mansion alone is probably worth 25 times its recorded book value. This offers great asset value to someone looking to buy this company or for the company to realize that gain.
In the 1990’s, during the last “great” recession, my company at the time was asked to address a relocation analysis for a transportation company, whose restricted means of access was affecting the company’s ability to operate, and more seriously was affecting company profitability. Through this single real estate exercise we noticed that many of their national locations had, over time, become inner-city rather than transportation friendly, and the conclusion resulted in their having the ability to sell the existing properties at way above book value, and relocate to less expensive, more operationally efficient new locations.
This is again a great time to evaluate your real estate, which is probably an undervalued asset on your balance sheet, affording you an opportunity to increase your earnings by the potential for sale, and secure the added benefit of increased earnings as profitability of operations recovers, and just like the transportation company, potentially create a more modern and efficient base of operations.