Seven Steps To Successful Equipment Purchasing

equipment purchasing

Whatever sector your business is operating in, one of the crucial pillars supporting the success of what you do is your equipment purchasing.

Ever heard the saying ‘a bad workman always blames his tools’? Well, while there is certainly some truth in that statement. It’s also the case that having the right tools can enhance the performance of your company.

With a competitive edge, it’s possible to innovate more, drive new business and become more resilient to economic fluctuations.

Conversely, committing to the wrong equipment purchasing regime, often with costly financing contracts attached, can seriously damage your business prospects.

equipment purchasing

That’s why it’s so important not to rush into an equipment purchasing decision. Instead, weigh up your needs, examine the different options, and make a business case for your actions.

Analysing the pros and cons of each route should include looking at what extra profit the equipment will enable you to make.

 

There are many routes to the same destination, including purchasing second hand, or leasing out the items you need. These may or may not be a better deal than an outright equipment purchasing.

So make sure you investigate what each option will do for your bottom line.

 

All this can seem a bit daunting in times of economic instability. The key is creating a credible investment plan that takes into account immediate business needs as well as long-term goals.

equipment purchasing

Major capital investment such as pricey equipment purchase is not an area where you want a quick fix- that is exactly where errors occur and you may end up making costly mistakes that have the potential to cripple your company.

To ensure a positive result, approach equipment purchasing methodically, following these steps to success…

 

#1 Take Stock Of Your Objectives

 

Start by going back to your original business plan and re-acquainting yourself with what you originally set out to achieve. Is the new purchase in line with your mission and objectives?

It could be about upping capacity, increasing the productivity of your business, or ensuring that you’re one step ahead of your competitors.

Ask yourself if there are other ways to achieve the same result and how they stack up cost wise before committing. There are many ways to get a better performance that may be a better fit.

equipment purchasing

Keep your sceptical hat firmly on if you do decide new equipment is the solution – when you start looking into a purchase, you may be faced with aggressive sales tactics and marketing literature.

Take all these claims with a pinch of salt and get a second opinion on anything you need to from contacts within the industry.

 

#2 Sense Check Your Purchase

 

In a lot of cases, the scale of your purchase is one that has the potential to make or break your business, so think about getting a consultancy on board for large investments.

They will be able to independently assess what is needed and take an outsider’s view on your resources, extra requirements and also find the best fit for your tasks.

It can be money well spent if it prevents costly mistakes. The exact nature of this depends on the sector you are operating in. Sometimes a cost-benefit analysis is needed.

Or, if you are a manufacturer, there is a tool called an asset utilisation ratio that takes into account various factors to determine what is a sound investment.

In this way, you’ll be able to determine the best course of action to take.

 

#3 Think Outside The Box

 

We operate today in a truly global marketplace, where every sector is rife with competition. The only way to stay ahead of the game is constantly innovating, coming up with a steady flow of incremental improvements, and responding rapidly to the fluctuations of customer needs.

You must come up with fresh solutions – and better equipment purchasing can be a part of this, expanding your capabilities.

It could mean you offer a broader range of products, expand into related sectors, offer more add-ons or customisation, target niche markets, inform your research and development processes or give you the chance to offer better service- all things which will set your business apart.

Whichever it is, it can also give your company a PR boost. Spreading the message that you are investing in new product and processes can attract more customers by making it clear that they are at the heart of what you do, and that you are interested in responding to their needs.

 

#4 Compare Suppliers and Purchasing Options

 

Use the internet to your advantage to browse a huge selection of suppliers. It’s better to search out specialist companies who will have experience in providing for businesses in your sector.

Trade shows can also be a great way of interacting with the equipment you’re looking for, making supplier contacts and accessing special event discounts.

If you belong to a trade association, that can also be a useful source of information on recommended suppliers.

equipment purchasing

For every sector, there are also resellers offering used equipment, it’s just a matter of tracking down the right contracts.

For example if you need to source cranes, a destination like franna cranes could help. Price should not be the only factor to your decision, even if you are looking to save costs.

Find testimonials from previous customers and look at factors such as after care and what warranties are offered.

 

#5 Assess Training Needs

 

It may not be foremost in your mind when you are considering costs associated with your new equipment outlay, but training is likely to be needed for your staff.

You’ll be thinking of your new equipment in terms of the boost in profits it will eventually bring, but bear in mind that there may well be an initial drop in productivity as staff are familiarised with new processes.

New technology is a learning curve, and everyone learns at different rates – meaning some of your staff are likely to need time to get up to speed and get the best results.

Anticipate these issues ahead of time and factor in the finance required to cover the anticipated discrepancy. Consider how you can carry out training with minimum disruption and loss of service.

 

#6 Understand Your Financing

 

There are many diverse factors which contribute to selecting the right financing option for the purchase you need to make. Each will have pros and cons which need to be carefully analysed, alongside other points such as your business credit score and profitability.

If you choose to purchase outright, then you own the equipment as soon as payment is made. Through a process referred to as amortization, your new assets costs are linked to the revenue it helps to generate. You then write off the expense incrementally over the lifespan of the asset.

On this basis, you may be able to secure financing for more than the cost of purchase, which could help to cover associated costs such as training, installation, servicing and transport.

Another option is leasing the equipment. This can be a good idea if you have an asset in question which is likely to depreciate quickly.

equipment purchasing

Leasing instead of an outright purchase can result in lower monthly payments, which is a consideration if cash flow is likely to be an issue.

The flipside is that you don’t own the equipment, and if you decide you want to purchase, you’ll probably have to wait out your contract term first.

You’d need to then add the purchase price onto the cost of all the lease payments, and the resulting total cost is likely to be much higher than if you had just gone for a purchase in the first place.

Sometimes the lease can be structured so that payments are included as part of your operating costs. A third option is renting.

If you only anticipate needing the equipment for a finite time or you only need it for one project, it may be your best bet. If rented, equipment doesn’t count as a fixed asset, so you can return it at little or no cost.

 

#7 Consider Safety and Sustainability

 

Of course safety is a major consideration in your working environment, so that must extend to your equipment purchasing as well.

Not only must you ensure your supplier gives you safe technology that is installed correctly, but you also need to be sure your employees are trained in safe use and operating in accordance with that.

Workplace health and safety procedure is paramount, and failing to ensure your business and employees are adhering to it means that you may become responsible for costly lawsuits.

There are different guidelines to apply when it comes to use of computers and other office equipment, and also guidelines around furniture – having it adjusted so that the risk of injury and strain is reduced.

equipment purchasing

You should also aim to consider sustainability and the environment when making a new purchase. Making sure anything you buy is energy efficient has the double benefit of saving your company costs and also looking after the planet.

A little homework before purchasing will outline the environmental impact of what you’re buying, and if you are planning to dispose of any old kit, consider ways to do that while minimising the impact on the planet.

NOTE: all images sourced from www.pexels.com. Thank you.

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