This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.
Whether you’re running a typical office-based business, a janitorial service, or a custom manufacturing company, the rising cost to purchase and maintain equipment will directly affect you in 2010. While the most efficient way to cut costs is to regularly maintain and service your existing inventory, even the most carefully cared-for pieces will eventually need to be replaced. Here is our quick expert guide to knowing when to buy used, what to look for, and how it can benefit your bottom line for years to come.
An unfortunate casualty of the recession — small business failures — can work in your favor when looking for high-quality, used office, retail, and manufacturing equipment. Auctions, which traditionally haven’t fared well for sellers, can be a viable option for small businesses looking to go used. Ed Castagna, president of Nassau Asset Management, notes that the low prices will require a bit more discernment when making purchasing decisions. “Buyers will need to be careful to note the condition of the item up for bid. Some auctions will require sellers to upgrade the condition of the equipment as a “make ready” requirement for the event, which can also increase the price.”
Those who aren’t finding success on the auction block may discover Craigslist to be a rewarding alternative. Within each local “For Sale” category resides a section just for used business wares, which can include anything from goose neck trailers to angel food cake pans to commercial freezers for a fraction of new retail cost. Adam Kruse, of the St. Louis Hermann London Group, shares a recent experience where someone else’s misfortune became his small business gain. Mr. Kruse found a Craigslist ad for a liquidation company reselling the contents of a Holiday Inn hotel, and he immediately took advantage. “They had hundreds of high quality matching wood desks almost exactly like the ones I found at Target, and they were 15 dollar each.” By purchasing 25 of these units, he spent less in total than he would have for just five of a similar product at retail.
Whether you go the private route, or prefer to do business with a more established company dealing specifically with used business assets, there are some basic tips that can help you determine what makes a good deal:
Despite the growing market for used equipment, many businesses continue to outsource large tasks that require specialty units. Even bulky print jobs may be more economical at your local Kinko’s and can save you the headache of a last-minute breakdown or performance issue. When it’s all said and done, putting hours on your own equipment should only be done when it’s cost-effective. The storage, liability, and maintenance of any used purchase must make absolute financial sense for your business.
While the advantage of purchasing used come tax time won’t be as significant as if you bought new, it’s still a consideration to be taken seriously. Buying before you really need a replacement item may make sense at the end of a very good tax year. Small businesses that foresee replacing an item in the next 6 months and that would like to realize the deduction immediately may want to strike right away on a good end-of-the-year bargain. Speak with your accountant to see if depreciation on used equipment will be of any benefit to your business. (Some companies reserve depreciation for items with a value of over $500 and handle these on a case-by-case basis.)
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