A resale percentage needs a route to the next owner

A financial model can express an asset's future value in a single cell. The real process may require inspection, repair, transport, storage and a buyer whose work fits the equipment. If those steps are absent from the planning assumption, the percentage can describe a possible sale price while overstating what the company could actually realise. I approach this as a strategy question as well as an asset question. When a proposed market is attractive partly because equipment appears to retain its value, the route to that value belongs in the investment decision.

Move from a quoted value to an economic process

Comparable transactions are useful only to the extent that their differences are understood. Two refrigerated trailers may differ in configuration, condition, service history and suitability for the buyer's intended work. A headline price does not explain those differences. Nor does it necessarily show who paid to prepare and move the asset. I want specialists to describe the observation behind the number, including what is known and what remains uncertain. Strategy should not turn a convenient comparable into a universal rule simply because a programme model needs one assumption to complete its calculation.

The initial Kavreni proposal used 42% of original invoice value as a resale assumption for a refrigerated-trailer programme. The model supported a 240-vehicle rollout and ₹9.4 crore of projected contribution over three years. Examination of comparable disposals and the associated costs led us to use 27% as the net planning assumption for that case. Finance rebuilt the model, and projected contribution fell to ₹3.1 crore. These were planning results under stated assumptions. They were not earned income, a realised loss or a valuation applied retrospectively to the company's existing loan portfolio.

The word net carried substantial work. It required attention to refurbishment, transport and selling costs rather than simply subtracting an arbitrary safety margin from the headline percentage. Time also mattered. An asset waiting for an appropriate buyer can create costs even if the eventual sale price is respectable. The relevant period and obligations depend on the case, so I would not replace one unexamined percentage with a general rule for every equipment type. The aim is to make the economic process visible enough that the proposed return can be judged on a defensible basis.

Asset specialists and risk colleagues retain their own responsibilities in this work. I do not ask a strategy analyst to certify condition from a spreadsheet or to decide an individual lending value. My role is to connect the evidence they provide with the scale and timing of the proposed programme. If the business case changes materially under a better-supported assumption, management should see that change before approving the commitment. Keeping responsibilities distinct makes the discussion stronger. It allows a specialist to challenge an input without being treated as personally responsible for finding a way to preserve the original growth forecast.

Let the changed assumption change the proposal

There is pressure to absorb a revised assumption without changing the decision. Teams may have spent months developing a dealer relationship or describing the segment as a priority. They can be tempted to improve another input until the original result reappears. Sometimes new evidence genuinely supports a different input. The important question is whether the change has its own basis or merely repairs the presentation. I want revisions explained independently, so the approval paper does not become an exercise in preserving a preferred answer through a sequence of offsetting assumptions nobody has examined together.

Our business-development colleagues were concerned that the lower modelled contribution would end the opportunity after substantial preparatory work. I recommended a 24-vehicle pilot rather than the full 240-vehicle rollout. That alternative retained a way to learn about the segment while reducing the initial commitment. It also gave up volume and did not resolve every economic question. Management needed to understand both consequences. A smaller programme should not be presented as though it delivers the same commercial benefit with less risk; its learning value and operating cost need to justify it on their own terms.

The revised case also needed a clear connection between evidence and decision. If the principal uncertainty concerns eventual disposal, a pilot focused only on application processing will not answer it. There may still be useful early questions about service availability, equipment use or customer demand, but those should be named separately. I want the company to know which findings could support a next step and which would leave the central assumption unresolved. Otherwise, a smooth launch can be used as evidence for a financial outcome that the programme has not yet had time to observe.

An alternative could also be to decline the segment. Strategy should not assume that every interesting opportunity deserves a pilot. Experiments consume management attention, support capacity and money, and some questions cannot be answered cheaply enough to justify them. In our case, management judged that the smaller programme could provide useful operational evidence while keeping the longer-term uncertainty visible. That was a specific choice. The investment paper should preserve why the learning was worth pursuing, so later reviewers can examine whether the programme actually delivered the evidence that justified its cost.

Choose what an early experiment can establish

An early review can show whether equipment reaches the intended customers, whether service is available and whether the operating process works under the agreed conditions. It cannot create years of resale experience within a few months. I want review dates attached to questions rather than used as a single ceremonial milestone at which the programme is declared successful. Different questions may require different periods and sources. A responsible decision can proceed with uncertainty, but it should not erase that uncertainty by assigning a short deadline to a result that needs longer observation.

The evidence plan should also consider what happens if the market changes during the experiment. A temporary shortage of used equipment could raise observed prices; a service disruption could depress them. Neither observation should automatically become the new permanent assumption. Specialists need to explain the context and how comparable it is to the conditions the company expects. The purpose is not to predict every future event. It is to prevent a convenient recent outcome from being treated as an enduring property of the asset, especially when the next commitment would be much larger than the experiment.

For a board, the central questions are understandable without technical valuation expertise. What makes the asset useful to another owner? Which costs sit between the quoted price and net proceeds? How sensitive is the programme to that assumption? What can the proposed trial establish, and what will remain unknown at the next approval point? Directors should expect management to bring qualified evidence and retain the authority of the relevant functions. They should not be asked to approve a growth case whose return depends on a resale percentage that nobody can explain beyond its location in the model.

The useful lesson from our trailer proposal was the willingness to let a better assumption produce a different decision. The model became less attractive, and the programme became smaller. Neither change was a failure of strategy. They made the commitment more consistent with what the company could support. An asset's future value is not merely a number waiting to be recovered. It depends on a practical route to another owner and a set of conditions that deserve examination. When that route becomes clearer, the investment decision should be allowed to change with it.