Investment in equipment is essential for the successful construction company, but knowing when to buy, rent, lease or borrow can really help to maximize your profits. When weighing the odds on these options, you’re really calculating risk. Buying equipment results in higher profit margins, but overinvesting can mean you actually lose money.
When you are considering obtaining new equipment, you can only make an accurate decision if you have accurate information. By knowing your profit margins, and your future workload as well as any training that will be necessary for workers to use new equipment, you are able to make a more educated decision on whether to buy equipment or find other means of using it temporarily.
If you lease equipment under an operational lease, it is still owned by the company which leases it to you and they are able to claim its depreciation on their taxes. If you lease under a capital lease agreement, you can claim the equipment under your own taxes which may significantly change the profitability of a lease agreement for your company.
Do you have guaranteed contracts? If you have enough work to cover the cost of new machinery, you will maximize your profit margins, but investing in equipment that sits idle in your yard is not a good investment.
Consider the qualifications of your employees—are they able to effectively and safely use the new equipment. Buying equipment that is beyond the skill level of your employees may result in damaged equipment or expensive mistakes that delay a project and cost you money.
How safe is it? Can your crew operate the equipment safely and do you have the requisite safety gear needed to prevent an accident? Your first priority is the safety of workers and adherence to OSHA regulations.
Check your cash flow. You will need money upfront to buy equipment, but this will turn into profit once it’s paid off.
Buying the right equipment at the right time can really level out your profits. Know the facts before making a decision so that you always make the right one.