There’s a saying, “An idle asset is a red flag.” A red flag meaning your business is in danger and something needs done.

I first realized the power of this statement growing up on a farm in rural Nebraska. We had trucks we used at harvest. This meant they were only being driven for 2-3 months each year. The other 9 or 12 months, they spent sitting in a building generating $0 for the farm. Even worse, they were costing the farm money due to depreciation, storage costs and the inevitable broken parts that always seem to arise when a vehicle sits in storage for too long. These were our idle assets. These were our red flags. The way to fix these red flags was to get them back out on the road making money. This was done in a variety of ways. It was a complete swing from costing the farm money for most of the months throughout the year, to actually gaining the farm money. You should do this in your business as well.

The loathing of idle assets is why we drive cars and have an abundance of food. That’s because farmers wasted money owning horses. They loathed feeding the animals throughout the winter, despite getting any work out of them. So Henry Ford built an automobile and later a tractor. Both replaced the idle assets known as horses. Although cars and tractors still cost money while they aren’t moving, they cost far less than feeding and watering a horse. That’d be like leaving your car’s engine running when you’re not driving anywhere. The animals still require food.

I think by now in this post you know the importance of identifying red flags in your business. Now here’s how to spot them:

Look for Any Asset That’s Not Being Used to Its Fullest Potential

In a smartly run business, everything should be used to its fullest potential. That even means buying computers that are capable but not excessive. This means shopping wisely for computers instead of just ordering everyone MacBook Pro’s.

Think far and wide. For instance, perhaps the company’s parking lot is far too large for the amount of employees you currently have. Consider letting surrounding businesses know that they can rent out part of your parking lot for their business. It’ll bring in additional revenue. When it comes time to redo the parking lot, you’ll be happy to reinvest in the capable parking lot of prosperity.

If something flat out isn’t being used – get rid of it. Sell it and move on. Sentimentality has no place in business. Neither does clutter.

See That Productivity Is Happening as Many Hours per Day as Possible (That’s Usually 24 Hours)

Some businesses only serve breakfast. That can work okay but what about the other 16 hours of the day? Why not expand the businesses offerings and therefore rake in more money. Of course the 80/20 may come into play here. That means that 80% of the profits come from 20% of the efforts, but still, a 20% increase in revenue is nothing to scoff at if you’d like to take on the challenge.

If you’re a brick-and-mortar business who already works your employees hard, make sure you have a good online presence. This way you can make sales 24/7.

Sell, Sell, Sell

If you see any red flags, sell them. They are weighing down your business. You want your business to be a lean, mean, money-making machine. Not a place where employees must look like mice in mazes every time they want to walk across the building.

Or Put Them to Work

As mentioned with the parking lot, if you don’t want to sell items (or can’t), put them to work in other ways. This also includes putting your employees to work. Wasted employee productivity is a sin in business. Make sure you always have something for them to do. After all, human capital is the largest red flag possible.

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William Lipovsky owns the personal finance website First Quarter Finance. His most embarrassing moment was telling a Microsoft executive, "I'll just Google it."

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