Purchasing Manufacturing Equipment

Choosing the right equipment is critical to the success of your business, no matter what manufacturing industry you belong to. Unfortunately, manufacturing equipment tends to be expensive. That means when you are making purchasing decisions it is critical to do your due diligence in order to prevent making catastrophic and expensive choices.

At times, it might make sense to purchase used manufacturing equipment from Surplus Net, instead of spending a fortune on new machines. There are obviously factors that need to be considered, so let's discuss them below to help you make those critical decisions for your company.

1. What Benefits Will This Purchase Provide To Our Company?

When you are purchasing equipment for your business, it is important to have a focused and clear understanding of what your expectations are. Do you need to purchase machinery to increase your production capacity? Will this investment increase your profits? Will the quality of your finished product be increased? If you can't answer these questions, then likely the purchase is more of a want than it is a need.

When purchasing manufacturing equipment and machines, they must always provide your business with value. In the manufacturing industry, there is not any room to indulge in purchases for bragging rights. It is essential to know exactly what equipment you need and the reason why you want to purchase it.

2. Do You Need Outside Advice?

It is common for many entrepreneurs to mistakenly believe they know everything about their businesses. At times you can become completely entrenched inside your own business that you cannot truly see the issues and problems before you because you are right in the middle of them. Whenever you are considering making a major purchase, it may be worth hiring a consultant. They are completely independent and will be able to weigh all of the options that are available to you without emotion playing a role.

3. What Will Be The Consequences Of Your Purchase?

Your business is completely interconnected. Therefore any investment you make can have an impact on your entire business. If you end up stretching yourself too thin by investing too much money in equipment, it could result in your company having cash flow problems. Purchasing manufacturing equipment might result in you not needing as many employees any longer. In that case, affected staff could be moved into other positions inside your company, or they might be redundant. That could affect the morale of your workers and have unanticipated financial implications such as having to make redundancy payments. This is why it is critical to look at the overall picture whenever you are making major purchasing decisions It is not always as simple as it appears.

4. What Will The Transition Period Be Like?

The reason for purchasing equipment for your business is to hopefully lower costs, increase productivity, and ultimately increase your company's overall profitability. However, initially, your productivity could slow down as your workers become accustomed to and learn how to use the new equipment. Be sure to budget for that as well as any training that will be necessary. Many businesses rely on and expect to see instant productivity increases. However, reality can be completely different.

5. How Are You Planning To Finance Your New Purchase?

There are many different manufacturing equipment financing options that are available to you. They each have their own pros and cons that need to be considered.

Purchasing – This is the first option that most companies consider when they are planning to purchase equipment. Make sure you consider that as the equipment owner you will be the one who is responsible for all repairs and maintenance that are needed in the future. Also, keep in mind that over the course of its lifespan the value of the equipment will continue to decrease. So this additional cost also needs to be factored in.

Leasing - Initially, leasing equipment can be a very appealing option since the payments will usually be lower than if you were to purchase the equipment. Leases are contracts, so you usually are locked in for a certain period of time. In the future, that could cost you some flexibility. Although you may have smaller payments, you do not own the equipment. Therefore, leasing could end up being an expensive option for you.

Renting – Renting can be a good choice for older equipment that might become obsolete once you are finished using it. It can also be the ideal solution to solve a short term problem when you have one specific task or order that you need to complete.