Purchasing business equipment for your company usually comprises a significant part of your capital expenditure for the year. Most businesses don’t have the budget to purchase hastily and then replace badly chosen equipment later at an additional cost because the first selection was a dud. Therefore, the people in charge of purchasing for the business must confirm the usefulness and validity of statements about equipment before going ahead with the transaction.
Here are 5 factors to think about when buying equipment for a business.
What Are the Business Objectives?
The sales staff from other businesses are only too happy to persuade you to purchase their products. It’s up to you to be concerned with what your business requires. It’s important to avoid being sold something that’s really not needed.
Consider what equipment is required, how it will be used, and what the options are with different brands. Durability over several years of regular use is more important than a heavily discounted product that won’t survive regular commercial use. You don’t want staff to actively look for someone to blame when shoddy equipment breaks on them.
Will the Equipment Create New Opportunities or Deliver a Competitive Advantage?
Is the new equipment going to enable your company to create a product or deliver a service that it couldn’t previously? Is there already a demand for this product or service to cover the cost of the new equipment and profit from its use?
Alternatively, is the equipment sufficiently advanced? Or can the staff, through its use, create a competitive advantage over local, national or international competition that cannot afford to purchase it? Will it provide a unique selling point that is valuable enough?
Does the Equipment Offer New Features?
Sometimes, products get released into the marketplace that goes beyond the norm. These extra features might be worth the upgrade to get them.
For instance, companies can use lockout tagouts to padlock and secure important things like a breaker circuit box or another box with a hollow space to slot a padlock through. Each padlock is individually keyed, is distinctive and has passed the OSHA 1910.147 standard. There are also lockout kits which include ‘Do Not Operate’ tag warnings, plug outlet lockouts, and other security devices to prevent or warn staff and visitors not to tamper with the lock.
Always look to see if there’s something new and better in the marketplace since the last time the equipment was bought. Don’t just automatically purchase the same model again.
Can It Be Bought Used?
To ensure quality and reliability, businesses commonly purchase new equipment to avoid complications later. When there isn't enough cash to make these purchases, companies often seek equipment financing options in order to obtain the required equipment.
Nevertheless, there are some situations where it pays to consider the second-hand options because of the sheer cost of the piece of equipment. For instance, in the construction industry, the equipment can be a six-figure purchase and so there are considerable savings to be had by looking at well-maintained, previously used pieces of machinery instead.
Avoid Losing Focus on Quality
In seeking to stretch the CAPEX budget and get everything that’s required, sometimes the capital expenditure budget just isn’t sufficient to purchase everything. That is to say, without cutting corners on quality. However, cutting corners to satisfy the budget is a mistake because purchasing replacements will blow the budget at a later point.
Consider whether a higher quality item is going to be better than two mid-range or lower quality ones. Discuss the purchase with the department head to see whether this would be an issue or not.
Hopefully, you’ve had some say in the CAPEX budget, but if you discover that the amount available isn’t enough to purchase what’s required and maintain quality, discuss this with upper management. Let them decide whether to lower quality levels on purchases or expand the budget. This avoids it becoming your mistake later.
When making the right decisions, purchasing becomes much easier. Research and preparation are the keys to success.