COVID-19 has forced South African businesses to cut down on costs in an attempt to remain liquid over the long term.
The most resilient companies, however, have mostly been those who spent wisely on the right assets – meaning the old adage of “you have to spend money to make money” remains relevant.
Discover more advice from RentWorks on:
- Protecting your most valuable assets in a pandemic.
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- The impact of COVID-19 on IFRS 16 leasing compliance.
According to RentWorks CEO Kuben Rayan, however, many companies are wary of taking decisive action on spending at the moment, particularly amidst widespread company closures and retrenchments.
This has led to them either choosing to take a wait-and-see attitude or simply keeping their heads down in the hopes that matters will miraculously figure themselves out.
Rayan believes the key to future growth and success is by being disruptive.
“We’d rather think through this and disrupt ourselves, lest someone else disrupts us,” Rayan said.
“If we do get disrupted – by a competitor or something else – we are going to become irrelevant, which is going to be further exacerbated by the current macro-economic factors,” he said.
This means that the legacy ways of doing business are no longer an option.
Minimising risk through efficiency
Rayan notes that businesses will also have to carefully consider what assets they require to grow, particularly from a technological perspective.
Additionally, businesses must find ways to minimise further financial instability by optimising their cash to generate income.
To this end, Rayan explains that financing assets is a sound business option, as customers can utilise these in the production of income.
The benefit of this is that the assets keep a residual value and the burden of paying for the balance of the remaining asset value is spread out over time.
“Essentially, you are only paying for the value that you utilise,” Rayan said.
This means businesses can utilise the assets without having to outlay a huge amount of capital and deploy any remaining cash reserves into other critical areas.
“The bottom line is that capital is spent in the most revenue efficient manner, allowing for growth to follow,” he said.
Moving forward smartly
Rayan notes that RentWorks differs from other asset financing entities, such as banks, in that it offers an operating rental payment model – with a focus on efficiency in asset portfolios across procurement, funding, management, and disposal,
By handling the lifecycle management aspect, including e-waste recycling, RentWorks ensures operational efficiency in addition to financial efficiency for businesses.
“First-mover advantage, whichever route businesses decide to take as a path to recover, it is essential to move forward smartly or risk being left behind as the real recovery from COVID-19 begins,” Rayan concluded.