Collaborative Post. When you first set up a business, the start-up costs can be substantial, especially if you are not making any money at first. One of the biggest coats is that of plant, machinery and equipment. You know that you need it to run the business, but in itself, it does not generate any income
Fortunately, there are ways to keep the costs of equipment down. Here are just a few ways in which you can save money on the fixed costs when you are just starting out, or at least defer the payments until you are making some income.
Don’t splurge on gimmicks
If you’re trying to save money on equipment, you should only be buying tools and furniture that you have a practical use for. If you’re a photographer that has been considering buying a drone, consider whether you’re realistically going to have a need for aerial photography. Some photographers are able to make regular use out of such gadgets, whilst others can buy a drone only to let it gather dust.
You should also avoid buying equipment with features beyond your needs. Not only are you likely to pay more for all these unnecessary features, but it’s likely the equipment may be more complicated to use.
A good example would be a state-of-the-art industrial printer with hundreds of printing options. If all you need is regular printing, you’d be better off saving money with a basic commercial office printer rather than something more suitable for a print advertising company.
Used equipment is a lot cheaper than brand new equipment. That said, you do need to be careful of the condition. Equipment that is in poor condition is likely to require more frequent future repairs and won’t reflect as well on your company image.
Fortunately, there is a lot of second-hand business equipment out there that is in good condition. Some used equipment may even be barely used and less than half the price of brand new equipment.
It’s worth always looking out for company closures in your area – these companies are likely to be flogging equipment for cheap, some of which may be practically new. You can also find barely used equipment for sale in auctions that may have been placed there by companies that are scaling back or large companies that may have overstocked on certain equipment such as office chairs and desks.
There may also be companies that specialise in selling used commercial equipment. This could include used office furniture retailers or used construction machinery sellers. Always read reviews on these companies to check they are reputable.
Buy equipment on finance
Buying equipment on finance could be more affordable upfront, even if you pay more in the long run due to interest charges.
Nowadays there are all kinds of loan option available from bank loans to peer-to-peer lending. There are even bad credit business loans for those with a low credit score. It’s worth shopping around to find a loan that suits your needs and applicability.
Seek funding from investors
If you have a solid track record in business and are looking to expand to the next level, you may be able to encourage investors to pour money into your business. This usually comes at the price of offering shares in future profits, however like a loan it could allow you to save money on upfront costs.
There are different types of investment funding including angel investors and crowdfunding. Compare these forms of investment to see which one is right for you.
Hire single use equipment
There’s no point buying equipment that you may only use once. For instance, if you own a cleaning business and have decided to take on a one-off carpet cleaning job, you may be better off hiring a carpet cleaning machine for the occasion rather than buying one, only for it to gather dust.
When choosing an equipment hire company, make sure to read online reviews to get an idea as to the condition of their equipment.
Buy supplies in bulk
When it comes to certain supplies, it may make sense to buy in bulk. For instance, if you’re a bar ordering glasses and beer mats, it could be worth stocking up on loads for the future as glasses will break and beer mats will get destroyed. Often, by buying more, you’ll gain access to bulk deals that could save you a lot of money in the long run.
Just make sure to consider the expiry date of certain perishable supplies like printer ink or food – whilst you may be able to get bulk deals on these goods, there’s no use stocking up if you’re not going to get through them all before the expiry date.
Time your purchase right
You may find that it’s cheaper to buy certain equipment at specific times of the year when the demand for this equipment is lower. There are often lots of great deals in January – most companies aren’t thinking of buying equipment straight after Christmas, and for this very reason commercial equipment suppliers often have to offer more competitive pricing.
Meanwhile, certain equipment may be seasonal and cheaper to buy off-season. For instance, if you’re a farm buying harvesting equipment, you may find that it’s cheaper to buy in winter or spring.
Barter with suppliers
It’s possible that you may be able to negotiate pricing with certain suppliers. This is particularly likely to be the case with used high value equipment. This could help you to make some small savings.
Even if you’re not able to negotiate a discount, you may be able to negotiate payment plans on certain equipment.
Consider delivery costs
You may have to get certain equipment delivered if you’re not sourcing it locally. Heavy equipment may come with a high delivery fee, which is something to factor in if you’re on a budget.
Some equipment meanwhile may need to be installed or even assembled after delivery. There may be cases where you have the option to do installation or assembly yourself, however it’s not worth doing this just to save money if you don’t know what you’re doing.
Consider energy costs
When it comes to machinery, the energy usage is an important factor as it could affect costs in the long run. Generally, most modern machinery is very economical. If you’re buying machinery that’s over ten years old, it may be a different case. Make sure to do your research so that you’re not buying power-guzzling machinery.
Service your machinery
Keeping machinery serviced can also save costs. By detecting problems with machines early, you can get them fixed before the problem gets worse – the repair cost is then likely to be much less.
Some machinery may need to be serviced by an outsourced technician, however there could be other equipment that you and your employees can service.
Know when to repair, when to replace
There are certain times when it’s more financially sensible to repair equipment and other times when it’s more financially sensible to replace it.
Repairing is a good option if the equipment is still relatively new and hasn’t had previous issues. Once recurring faults start to occur, you may want to consider replacing. Always check if your equipment’s warranty if you took one out when purchasing the equipment, as you may be entitled to free repairs or replacements.
There are times when you may want to replace old equipment even if it is still working perfectly. Certain equipment could be outdated and no longer up to today’s demands such as using an old manual cash register rather than a digital POS system.
So, there are some ways that you can keep your expenditure on plant and equipment to a minimum, and spread the costs over its useful life. In summary:
- Buy only what you need
- Consider second-hand items
- Take into account delivery, installation and running costs when choosing your product
- Consider the financing options
- Look after your equipment – keep it serviced and repaired
- Replace equipment when it has served its useful purpose and a new one would be more efficient