Every business owner hears the old chestnut about spending money to make money at some point. That often leads entrepreneurs and startups down a road to overspending. For manufacturing concerns, though, buying manufacturing equipment isn’t negotiable.
You need that equipment before you can even launch the business. Once you’re up and running, you will inevitably need replacements for that equipment. The machines wear out, can’t meet production demands, or technology advances enough that not replacing the equipment puts you at a disadvantage.
If you’re preparing to launch a manufacturing business or already run one, keep reading for five factors you must consider when buying machines for factories.
When considering your options for equipment, the cost is one of the big factors. If you sink a lot of capital into equipment or take on debt to pay for it, that has long-term consequences for your cash flow.
Let’s say you’re in the market for a PE pipe extrusion line. You should at least spend a little time comparing equipment costs in terms of new and used equipment. You should also consider whether leasing might get you better terms than buying.
2. The Benefits
You should know exactly what benefits the equipment gives you beyond a vague sense that newer is better. Yes, newer equipment usually works better and faces fewer problems. What else will the equipment provide?
Will it reduce time to completion? Will it boost quality? Will it expand your capabilities into a lucrative side area?
3. Consider Multiple Suppliers
While you might prefer one provider, you should at least inquire with multiple manufacturing equipment providers. While the basic capabilities for the equipment will likely prove the same, you might discover a few valuable bells and whistles with a different provider’s equipment.
4. Don’t Forget Training
New equipment can do a lot for business, but only after your employees can run the equipment as intended. You must consider the training period and how much fall-off in production you’ll face during that training period. It might not change your decision, but it might very well change your timing for the purchase.
5. Sanity Check
Given the scope of the financial investment you face with new factory equipment, you should also factor in a third-party opinion. Look for someone whose judgment you trust, like a mentor with experience in the business.
Explain the purchase, as well as what you expect you’ll get from it. If they think it’s a good idea, you pass the sanity check.
Buying Manufacturing Equipment and You
When it comes to buying manufacturing equipment, you need a very cold mindset. New equipment isn’t a matter of trading out one for another and getting right back to work.
You must factor in the cost, the long-term effects on cash flow, and the training period. You must also weigh these against the benefits. Make sure you can clearly articulate those benefits to a mentor or advisor during your sanity check.
Looking for more business and finance tips? Check out the articles in our Business section.