Three Questions to Ask Before Investing in New Business Equipment
Before you buy new equipment
Before you rush to the nearest supplier looking for new equipment, you should first evaluate whether or not you are making a good investment with your time, money and labor costs. Below are some questions to consider before making the jump to purchase new equipment.
What is it costing you?
Obviously, you know that the new machine will come with a price tag. But you also need to look at additional costs that may be incurred from the purchase. One of the most common kinds of costs that are overlooked are applicable taxes. Depending on where you are purchasing your equipment, you may be taxed more than once. These extra fees can add up and create quite a dent in your bottom line.
There will also be maintenance costs, of course. But what about your old machine? Is it useless now? Disposing of your old equipment is essentially throwing away money you had spent in the past. Examine whether or not the new machine will require maintenance. Try to figure out if any free maintenance or instructions can be secured with your equipment purchase.
Will you have to make another purchase like this soon again due to technological obsolescence? Understanding the cost of your new equipment means understanding the technology currently available and the market for it.
What benefits are you receiving from the new equipment
Now that you have an idea of the costs that you will incur, now it is time to examine the potential upside to the new equipment. If the purchase will increase efficiency, you should know about how much efficiency will be increased.
You should think about whether the equipment is scale-able and whether it can perform more functions for you more efficiently. If you can run it along side older equipment, it may be an added benefit to keep the older equipment around for an easier transition.
Of course, if you are trying to expand into a new area or industry, don’t be afraid to talk to other customers and competitors to see what their experiences were like with the products.
Finally, examine state and local incentives to purchasing the equipment. Many territories offer tax benefits to companies who use equipment that is environmentally friendly. This added benefit is often overlooked and can get you more than what you bargained for initially.
How do you plan to receive the equipment?
There needs to be a plan in place for the receipt of the equipment. If it is large and needs to be transported over a long distance, perhaps the best method of transportation may be truck or train. It’s also important to outline who will be inspecting the equipment before and after transit.
You should also have a plan in place for training and distribution of the equipment once it arrives. Too often people let the new equipment sit around and get damaged while they find a proper place to store it. Take the initiative and make a dedicated location where it can be delivered.
Should you make the final purchase?
Whether or not you make the purchase depends on cost-benefit analysis. If after looking over all of the factors of your business, you decide to purchase, then accept the risk. However, if you find that your current equipment doesn’t need replacing, or if you underestimated the total costs, or if you think the technology might improve, it may be better to hold off on buying that shiny new equipment until a better opportunity presents itself.