As a fairly new business owner, every new venture and growth opportunity poses unique challenges and requires specific considerations. If you're working in a small-scale construction operation and you have the opportunity to expand for an upcoming project, you might be wondering whether or not it is time to invest in some new equipment. Before you start making capital investments, consider whether you should buy or rent that equipment. Here are a few things to think about.
Does Your Cash Flow Support Ownership?
The current financial position of your company is an important consideration when you're thinking about any kind of expansion or major investment. Think not only about where your company's finances are now, but also where you expect to be in the next couple of years. After all, a major capital investment will tie up a lot of cash that you might have need for in a year or two. Keeping some cash in reserve and renting may make it easier for you to deal with those unexpected expenses.
Renting makes it easier, because you're spreading the cost out in small payments every month. This allows you the opportunity to generate more revenue to offset that payment on a monthly basis. You might even want to consider a rental contract that includes an option to buy the equipment outright in a few years.
How Often Will The Equipment Be Used?
Even when you have cash on hand to buy the equipment outright and the reserves to deal with unexpected expenses, it still may not make sense to buy. If you'll only use the equipment once or twice a year based on your projections, as can be the case with some specialty construction equipment, you might be better off to just rent the machines when you need them.
That way, you're not wasting overhead space and spending maintenance costs on something that's not used often. Balance that demand against the cost of ownership to be sure that you're getting what you need without costing your company more than necessary.
Construction equipment is a high-demand market, and you need to be sure that you're spending your equipment budget wisely. With these two questions, you'll be able to objectively consider your next major equipment investment to determine if you can rent instead of tying up large amounts of capital in an equipment investment. Look for a local equipment rental company who can help you find the equipment you need to grow your business and branch out into new construction projects. For more information click to read other details about commercial rental equipment.