Construction businesses are often an altogether different prospect from the normal business structure. Bulky one-off projects and transactions tend to be the way the industry works, and for smaller contractors, this makes it difficult to ensure a constant stream of work. As a business in the construction sector, it is often essential that you contribute plant and machinery to the jobs you do, which can help save on labor while providing specialized results. Unless you own these vehicles and machines within your business, you may need to hire them on a job-by-job basis.
These costs can quickly mount up, and on low margin projects this can swallow a major chunk of your take. For this reason, and a whole host of others, many businesses choose to invest in their own machinery and equipment whenever possible. This prevents the need for future hire costs and keeps any money spent within the business, to the benefit of the work it can do. But what is the true scope of the benefits to be had by these businesses, and should construction firms actively choose to invest their money in machinery?
If you run a construction business, you will often be expected to have the appropriate heavy equipment and machinery at your disposal. Contractors need certain equipment to make their job feasible, while other items will contribute toward making the job much easier. If your business doesn’t own these items, you will need to find alternative working methods, or source hired equipment, at a daily or weekly hire rate. Over the course of a lengthy project, these costs can start to seriously mount up – particularly if you are hiring a wide range of different equipment or a few large vehicles.
In comparison to hiring or leasing equipment, buying outright is always cheaper. Of course, this involves a cash investment upfront, and that is the barrier to overcome if you want to buy machinery for use in your business. However, this saves on the costs you will pay over time, and most importantly you retain exclusive ownership.
If you choose to hire equipment, you are paying for a proportion of the capital cost, plus the hire company’s margin. They get to make money on equipment time after time after time, whereas you pay for a single use. For this reason, investing your money in equipment and machinery is a worthwhile way to devote your resources, saving on this “disposable” hire expenditure in favor of capital expenditure on an asset your business can own, use and sell.
Claim up to $26,000 per W2 Employee
- Billions of dollars in funding available
- Funds are available to U.S. Businesses NOW
- This is not a loan. These tax credits do not need to be repaid
Most businesses strive to achieve growth, and investing in your equipment and machinery is one way of making that possible. Having more equipment at your disposal makes it possible to take on larger projects, or to complete existing projects in a quicker timescale. This helps make it easier to grow your capacity, while also saving on the associated equipment hire costs. For those looking to scale, all that’s left is to find more jobs to fill that capacity.
When you are running a new business, or a small business, it is too easy to draw money from the business for personal spending. You close a big project, so you buy yourself a new car. This type of thinking is highly damaging to your business prospects, particularly in capital intensive industries like construction. Investing in your machinery is investing in your future business performance, and this keeps the profits within the confines of your business. Buying business assets is better than paying down personal expenses, and will help you grow and increase the scale of your business.
Even if you own equipment already, investing in newer, more powerful equipment can add to the efficiency of your work. More efficient work means you can complete jobs in a quicker time period, which has a positive knock-on effect on the total number of jobs you can do. For this reason, you should be looking to constantly invest in your kit if you want to grow your construction business and make it easier to complete projects.
Another important reason for choosing to invest in equipment, machinery and tools is the potential for tax savings. Anything bought by your business for business use can be offset against taxable income, and in many circumstances there may be additional tax reliefs and incentives on offer for particular types of investment. Thus it is always an option for businesses to invest their money, rather than distributing their profits. Given the possible tax savings, this may also work out to be a more efficient allocation of your resources.
One thing to bear in mind is that the equipment you own is your responsibility. That means you need to foot the bill for maintenance and repair as required, if you want to keep your equipment in top condition. This shouldn’t be underestimated as a potential expense, particularly where vehicles are concerned. Buying new, as opposed to used tools, will help you save on the expense and hassle of frequent maintenance, although you will pay an upfront premium for the privilege.
There are few sectors of the construction industry that are still entirely manual. Tools, machines and vehicles are now a standard part of what is involved in building anything, and contractors and construction companies are expected to provide their own tools for the job. In some cases, this may require hiring equipment on a day-to-day basis, which can be particularly costly. For those who want to invest in the long-term now, buying machinery and equipment is a wise choice. This means that value is retained within your business, helping to make future jobs easier and more efficient.
Furthermore, by replacing the need to hire or lease equipment for specific construction jobs, buying equipment now can also make the ongoing costs of your trade into a much more manageable burden. Particularly given the often stop-start nature of work in this industry, that is one positive reason many construction businesses choose to invest in their tools and resources.
