As you grow your construction business, you will need to make sure your equipment lines up with the needs of each project. While you might start off taking on a wide variety of work, as you hone your business and become known for a specific niche, your equipment needs also become more specialized. At what point should you pull the trigger and buy the heavy equipment your construction business uses most?
Before you decide to rent or buy heavy equipment for your construction business, ask yourself these five questions:
1. What are you looking to do?
When you are trying to decide whether to rent or buy heavy equipment, think about exactly what you need this piece of equipment for. Are you trying to grow, or do you have a job to do? If this is a one-off job that you simply need to get done now, renting is the way to go. But, if you’re trying to grow your business around a particular type of job, it might be wise to make the investment sooner than later so that you can start to build up equity in the machine.
2. How often will you use the equipment?
If you’re on a path to growth and are considering a purchase, one rule of thumb is: if you’re going to use a piece of equipment more than 65% of the time you should buy it; if less, it might be wise to keep renting to reduce the risk of having equipment sitting around that isn’t being used. Parked equipment is still costing you money—but it’s not making you money!
3. When do you need the equipment?
Timing and availability of equipment is another consideration. If you need something now, it’s often easier to agree to a rental and drive off the lot to your next job. Purchasing equipment outright requires a credit check, probably some financing and more consideration and comparison.
4. Are you financially ready to buy equipment?
Heavy equipment can be a major capital expense in the six figures. Your small business may not be ready to put money down to buy or you may not have built up the financial history for the best financing deal. Look at your books as your equipment usage climbs towards the 65% mark and project the future cashflow you’ll make from the equipment. This will help you understand what you have to put down and how much you’ll have to pay it off over time. You’ll also be able to project your new profit margins as you begin to build up that equity.
5. Are you ready to maintain your own equipment?
Once your construction business owns heavy equipment, you still need to plan for regular maintenance and insurance costs. Some small construction businesses take maintenance on themselves and will simply maintain and replace parts as required. If you work with the right heavy equipment partner, you can also work out an ongoing maintenance and insurance agreement so that you have a planned, set amount you will pay each month to ensure your uptime.
Are you looking to rent or buy heavy equipment for your construction business?
Talk to an expert at Finning. We can help you make the right rent or buy decision for your construction equipment by assessing these five questions with you. Our sales specialists have extensive experience working with the construction industry and can help you define and assess the best equipment rental or purchase options for your business.
Finning is the world's largest Caterpillar dealer, selling, renting and providing parts and service for equipment and engines to customers across diverse industries, including mining, construction, petroleum, forestry and a wide range of power systems applications. We operate in Western Canada, South America, and UK and Ireland.