How to Improve Returns in a Capital Intensive Industry
Capital intensive industries often struggle to find a level of stability beyond satisfactory. By restructuring your portfolio, there is capital to gain. Many investors are abandoning industries that were once the cornerstones of financial security for new, more stable opportunities.
Capex and Cost Base
Capital intensive industries often forget how important having a firm foundation is to the bottom line. Working with damaged or outdated equipment can consume more assets than buying new. If the opportunity arises to transition from old capital to new, then even companies barely skimming by may think about the overall time and capital cost of using outdated equipment.
Industry with a Smile
Gaining revenue with low associated monetary cost should be one of the top resources sought after by industry. According to recent studies, over 20% of revenue can be attributed to service. More and more businesses are aiming to decrease the amount of actual equipment in exchange for providing services such as software. The reason is, service industries have far less overhead and a much more flexible inventory which can be more fluidly exchanged.
Identifying where the lion’s share of profit is, and what it is comprised of, gives investors insight into how a business is functioning. By mapping potential avenues, businesses can restructure to make the most of today’s diverse economy. It is not feasible to continue with the same business plan if profits match costs.
To read more on this topic, please visit: www.industryweek.com.