For capital-intensive businesses, smart capital allocation and management are essential to long-term success.
Businesses who assess the value of their CapEx projects are putting best practices into effect, ensuring they get the best return on their expenditures. Only until the CapEx process is streamlined will every investment count, and this entails concentrating attention and resources on stakeholders who are involved in the review and approval process at every level of decision-making.
Are you, however, considering smaller projects? Are you examining whether they are truly profitable?
Most capital investments are made in smaller projects; however, these are frequently given less attention. Teams occasionally lack the time and expertise necessary to maximize minimal CapEx.
Innovative businesses are doing a great job of understanding the need to streamline the procedures associated with smaller investment initiatives. You should reconsider your approach to normal CapEx or smaller investments that may present a chance for growth if you want to maximize CapEx. Smaller investments improve your ability to locate, oversee, and deliver CapEx value, which is something you cannot ignore.
Pay Attention to Smaller CapEx
Every small capex portfolio has different requirements. When it comes to investments of various sizes, there is no one-size-fits-all strategy. Each of them has aches and pains. For instance, even for businesses with strong governance frameworks in place, what works for larger projects might lead to procedure and bureaucratic overload. When you concentrate on expensive products, you risk missing little bets that could turn out to be profitable.
Smaller CapEx projects are not stress-tested and hence fall subject to “gold plating” (spend on high-end equipment). This has a tremendous impact on the budget and resources available. To make matters worse, organizations become unable to manage projects at all cost levels when they fail to account for lesser investments.
Smaller CapEx investments provide fresh savings, and there are numerous critical measures you need take, as well as internal dynamics you should understand, to reduce costs in specific areas. You may continue to improve and achieve year-over-year savings by focusing on the foundations of a small CapEx planning process.
To make it count, look to the following areas of analyses.
1. Develop a transparent spending view
To maximize smaller investments, you must first understand where monies are allocated within the firm. When you have visibility into the many portfolios you are analyzing, as well as the costs associated with each, you gain insight into opportunities that exist in the little – and frequently overlooked – portfolios.
Explore the granular with these considerations:
- Expenditure by a contractor: general construction, HVAC, electrical, etc.
- Cross-facility unit cost analysis/comparison.
- Project and program performance review.
2. Evaluate cross-program synergies in projects, programs, and facilities
Typically, spend analysis reveals a range of small CapEx improvement opportunities. These often include a wide range of performance improvement areas, like:
- Cross-project knowledge sharing (contractor management, value engineering, quality, and risk management issues).
- Overhead/administrative cost reduction via shared internal management resources, such as procurement and safety.
- Consolidating specific projects to achieve economies of scale.
3. Rethink delivery
When considering the benefits of a cross-facility strategy, keep in mind that it necessitates a significantly different approach to small CapEx expenditure. Find a small CapEx consultant who can assist you manage projects with various asset sizes, large and small, to achieve cost reductions. Corporate real estate and smaller facilities, for example, require a strategy to determine a course of action.
Companies are increasingly looking for partners who can provide a single cross-facility program delivery with all the resources, tools, and track record of sophisticated high-volume multi-site delivery. When investing in CapEx, evaluating the proper partners could aid with cost reductions.
Four key steps to optimize small CapEx investments
To effectively manage high volume and complex portfolios, make sure to find partners that have a range of capabilities. Things like:
- Relevant industry experience and a detailed understanding of industry priorities, trends, and vocabulary.
- Cross-facility small CapEx portfolio management experience.
- Program controls and business intelligence tools capable of managing high-volume, high-variety portfolios.
- Access to leading-edge technologies to foster effective decision-making.
In conclusion…
Look for a small CapEx supplier who can manage projects across all asset classes while realizing the full potential of cost reductions (large and smaller investments). The ideal partner should thrive at managing everything from corporate real estate to minor equipment.
You could be losing money if you fail to consider lesser investments. Caprivi Solutions provides an integrated approach to projects that includes a CapEx management tool that will assist you in identifying opportunities for investment.
