More than 650,000 businesses are going to launch this year – and while some have low overhead, most do not. Launching a physical business requires business equipment and tools.
Whether you are in the restaurant business, construction, or just opening up an office building, there are some major purchases you are going to need to make.
But equipment costs can be a huge hurdle to new businesses that don’t yet have the cash to pay for them. So what can you do?
There are a number of ways you lower your equipment cost and save money upfront. Wondering how to do it? Here are three tips to help you save, while still getting the job done.
1. Lower Equipment Costs by Renting
The cheapest option upfront is to rent tools. Business tool rentals can eliminate overhead expenses upfront if there are certain things you only need for short periods of time.
Tool rentals can be had for as little as four hours to a few days. But you can also be leasing tools, which allows you to hold onto them for much longer periods of time, often one or two years, or even longer.
By leasing tools for longer periods of time, you might need to provide a small down payment. But you can often complete a year or two in business, helping to generate enough cash flow to eventually buy your own equipment afterward.
Some lease agreements may allow you to purchase the equipment after the lease agreement is up. But by then, the tools might be a few years old. You’ll have to decide if you want to continue using that equipment or use your funds to buy the latest models.
2. Buy Used Equipment
If renting isn’t an option for you, and you need to buy your own equipment, consider buying used. Whatever industry you are in, there are places where you can purchase the exact items you need.
Offices can outfit their employees with refurbished computers, often only one or two years old. Restaurants can purchase equipment from other businesses that are closing down.
And if you’re handy, you can even purchase broken equipment that only requires some basic equipment maintenance to get it up and running once more.
Buying used equipment might mean that ongoing repairs are more likely. You’ll have to weigh the pros and cons. Constant repairs mean your equipment has downtime. So your revenue-generating potential may be limited.
Used equipment is a great option for some, especially if tools aren’t needed all day every day.
3. Buy New Equipment and Rent Out
The last option not only helps you to save money but to actually earn a return on your investment.
Rather than trying to save money by purchasing lower-quality tools, this strategy helps you to buy the best you can get. Why? Because you don’t need to shoulder the costs on your own.
If you purchase equipment that you don’t use on a daily basis, you can rent it out to others who only need the tool temporarily. This helps other people and businesses and helps you to make money, eventually paying off the tool completely.
This is done commonly in the coffee industry. Many coffee roasting companies purchase large, commercial coffee roasters, that cost well over $20,000. A better roaster helps produce better quality coffee.
But if you’re still a small business, it’s unlikely your roaster will be running 24/7. But there are many other local coffee companies who would probably like to roast their own coffee as well.
So those with machines often rent time to up-and-coming companies who can’t quite afford their own equipment yet.
Of course, this strategy only works for business equipment that you don’t need to use constantly. The other option could be to purchase two pieces of equipment, securing a volume discount.
Then, your company can use one for daily operations while you rent the other one out full-time.
Buying Tools and Taxes
Buying your own business tools and expenses is a necessary part of operating a business. But seeing all of that money leave can be difficult.
But as a new business owner, it’s important to remember that almost all of your expenses are tax-deductible. So even though you might be shelling out a few thousand dollars for that commercial over, you can write it off on your taxes, lowering your taxable income.
The more equipment you buy, the more you get to write off. And hopefully, you won’t have ab big tax bill at the end of the year.
Aside from writing off the initial purchase, business equipment is treated as an asset. That means depreciation.
Equipment depreciation is the fact that your equipment is going to deteriorate over time to the point that it is no longer valuable. This loss in value over time means that you can the value of your depreciation as a loss on your taxes.
Knowing how depreciation works can help you better understand the lifetime cost of owning equipment, which may be less than you originally thought.
As soon as you put a piece of equipment to use in your business, you can start claiming depreciation on your taxes. But if you buy equipment in December, and don’t start using it until January, you can wait to claim depreciation for the year you actually used the equipment.
Almost any type of equipment you own can depreciate for tax purposes. That includes everything from bulldozers to laptop computers and company vehicles and everything in between.
Your depreciation schedule can also help you determine if and when to perform maintenance on your equipment. At some point, your equipment will no longer make any financial sense to continue spending time and money repairing, as the value has reached zero.
At this point, it makes more sense to buy new equipment rather than repair old stuff.
Getting Up and Running
Equipment costs are often hard to swallow for new business owners. That’s why you need to have a plan in place.
What makes the most sense for your business upfront? Can you get by with short-term business equipment rentals or long-term leases? Or do you need to purchase your own?
If you need to buy, consider buying used, or finding ways you can rent out your equipment when not in use.
Looking for more tips on saving money in your business? Head over to our blog now to find other helpful articles.