With technology changing at a dramatic pace, entrepreneurs may assume that buying the newest products available is the best option. But that's not always the case. It's important to assess your needs first in order to decide whether new, used or refurbished equipment is the best choice. For example, will the purchase you are contemplating go to help you deal with a temporary increase in demand? Or are you facing longer-term needs?
The most obvious benefit of buying new equipment or technology is that you're keeping pace with technological change. New equipment sharpens your competitive edge and enables you to run a more productive company. New purchases typically come with the best warranty and customer-service plans. You're less likely to experience downtime or repairs, and if you do, you have the reassurance of a guarantee.
But buying new equipment is also your costliest option. Before you make that important investment, be sure you carefully evaluate your short-term and long-term needs, including the need for financing. You may also have to budget over and above the initial estimate, including training and downtime.
This is the least expensive option and will cost you a small percentage of the original price. Typically, you scan the marketplace for the lowest cost, and then the equipment or technology is shipped to you without a rebuild, warranty or support of any kind.
You are responsible for carefully checking the condition of the equipment, which isn't always easy. You might consider hiring a technician or specialist to help you assess its viability for your business. A second opinion is invaluable.
If you're buying used equipment, keep in mind that you will have to convince your financial institution that it's a viable purchase and will improve your productivity.
Refurbished or remanufactured
Refurbished or remanufactured equipment is often a good alternative, particularly for businesses that are just getting started or are looking to expand. This equipment is usually fully disassembled, repaired, upgraded and reassembled. Not only is the cost lower than with new equipment, but warranty and customer-service support may be included. Another advantage of fully refurbished or remanufactured equipment is its increased reliability compared to used equipment. This type of purchase allows you to keep pace with technological change without investing top dollars.
If you choose this option, make sure you know your expectations for the performance of the equipment. For example, if you're looking at your production requirements, keep in mind that there may be some risk - such as downtime - involved. You need to know how much risk you're willing to take. While a lower price may be attractive, downtime isn't.
When you buy refurbished or remanufactured equipment, double-check that you're not buying brokered or used machinery without servicing or warranties. Some dealers may offer what is called "minimal remanufacture," meaning the equipment has simply been cleaned and repaired. This may not include a warranty .
Whether you buy new, used or refurbished, it's crucial that your equipment or technology meet safety standards, and that you conduct due diligence. In manufacturing, for example, you would look at welding tools, production lines, furnaces, machine tools, power presses and lifting equipment to ensure that they meet the safety requirements of your industry. In building and construction, you would check that power tools, ladders, hammers, drills and knives comply with noise, electrical and other safety regulations. Even in an office environment, your computer and office equipment should be designed ergonomically to prevent personal injury to those using it.
The best route for ensuring that your equipment meets safety standards is to have it checked out by a qualified technician. If you're looking for help with due diligence, you might consider checking with industry organizations that publish regulations. The Canadian Centre for Occupational Health and Safety offers information on workplace hazards and safety requirements, as well as provincial, territorial and federal safety legislation.
Financing and consulting
Once you've chosen the right equipment acquisition option for your business, be sure you look for the appropriate financing. BDC can help you buy new, used or refurbished equipment to increase your productivity, remain competitive and improve and automate your production line. In some cases, you can get additional financing for up to 25 per cent of the cost of the purchase to cover installation and training costs. You may also be able to defer principal payment for several months after the equipment is installed and performing optimally.
You might also consider looking at the bigger picture: Where does this purchase fit into your operational or production-line strategy? Will it really help increase your productivity or meet increased demand? Here again, outside advice can help you make the most of your investment. BDC Consulting offers services to help your company find ways to eliminate waste and reduce costs. This will help you make the most of the equipment purchase. Financing can be made available to cover these consulting fees.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.