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  • Writer's picturePaul Seabridge

Balance sheet thinking

The problem with most accountants is that they look at the past – they produce a profit and loss account and you can see how much money you are making (or loosing) and what you can do to reduce tax.

Whilst understanding and manage a business with a P&L is important I see more value managing a business with a balance sheet.

I call this balance sheet thinking.

You need assets

You need those assets to make you money

For example – if you own a property and rent it out that is an example of an asset making you money. You can buy the asset or sell the asset.

In your business you can also own a property and rent it out – that’s not what I’m suggesting but think about all the intellectual property you have in your business – can you turn that into an asset ?

So if you have created a brand have you trade marked it and then you capitalise it on your balance sheet as an intellectual property / intangible asset.

If you have key systems can then we turned into an asset that could be licensed to others ?

This blog is not a whole list of every possible idea of where you can find assets and use them in your business to make money – but it’s a starting point for you to think about how you can build assets.

A quick example :

A concrete business I was involved in had developed a neat breezeblock used for the construction industry. In short their solution was cheaper and more durable than similar concrete blocks and they had their design patented. Firstly that patent became an asset.

Secondly the production process to make these blocks became an asset. What they then did because they only sold to the U.K. they licensed another concrete business in Dubai (construction capital of the world !!) to use their manufacturing process to make blocks that could be sold in The UAE.

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