Your business needs new equipment. What are the next steps?

One of the most important decisions you will make as a small-to-medium-sized business owner is how best to capitalise on technological advances. You aim to grow your profits, bolster your value proposition and expand your business as a whole. Procuring the right assets for your particular business operations and daily usage requirements is just as important a consideration as the supplier from whom the assets will be procured, their price tag, and how they should be financed.

Is top-of-range necessary?

The nature of your business will ultimately determine the type of assets you require, and the  specifications of those assets. While one business may need cutting-edge IT hardware and software to introduce efficiencies, another will require capital items which assist with increased production or to introduce new product lines. ‘Even within these categories, those procuring new assets will need to carefully consider the nature of the equipment they require,’ says Kuben Rayan, CEO of RentWorks. ‘There’s a fine balance to be struck between procuring state-of-the-art equipment to assist with streamlining operations and securing a competitive edge in the industry, and obtaining an asset which is over-capitalised and ultimately, underutilised.’

What is the real value proposition?

‘Once you have decided on the nature of the assets your business requires, and the specs which will assist you to optimally achieve your operational targets, the next step will be to carefully consider from whom the assets will be procured,’ says Rayan. ‘While good value can be appreciated, businesses are often tempted to procure the best-priced asset without looking at the full value proposition being offered by a particular supplier’. Is there any after-sales service being offered, and is there assistance with set-up and maintenance? Are solutions given to deal with the costs and obligations relating to the retirement of the assets, and are any real guarantees or warrantees given?

Getting down to the numbers

Most often, assets which are positioned to grow a business are acquired at a significant cost. According to Rayan, one of the key considerations, and indeed one of the challenges which most organisations face is how best to finance those assets which are needed to move the business forward.

Aside from cost and financing, there are other considerations around the financial aspects of asset acquisition.  These include: the business drivers for the acquisition, the terms and conditions offered on any financing agreement, the impacts of the acquisition on the company’s financial statements and implications for insurance. These and further commercial aspects of asset procurement will be discussed in greater detail in the second and third articles in this three-part series.