With 2020 throwing curveballs left, right and center, Aussie businesses and the wider economy have had to adapt. And, in the capital equipment game, that adaptation has turned many businesses to the machinery hire game.
It’s no secret that COVID-19 had a huge impact on capital equipment buyer behaviour. Tradeshows and dig days were cancelled or postponed, so buyers flocked to the online space to get what they needed for their projects. But as trade tensions get tighter, stock shortages continue and shipping delays get longer, savvy capital equipment businesses are turning towards the hire game to maintain cash flow and steady the supply/demand imbalance.
If you’re thinking of expanding into the hire game, there are a few things to consider before taking the leap. Most notably: how hire differs from standard machinery sales, not just in business activity itself, but also how to best protect your assets and your bottom line. Read on to find out 4 things you should do before expanding into hire.
1. Do Your Research For Machinery Hire
You’ve got the sales side of the business downpat, but the hire side is a different ballgame. There are lots of things to consider, including your ideal customer, which equipment to hire out, and plenty more. So, you’ll want to do your research on:
- Which equipment you have that is in high demand locally (for example, excavator hire is almost always in demand)
- Whether you want to offer wet hire, dry hire, or both (and what that means for your business plan)
- If short term or long-term hire is more suited to your business
- Are you going to hire the equipment with or without attachments?
- How much your competition is charging, what customers are willing to pay i.e. what your price point should be
- Are there any other components of hire that your customers need that you could provide?
2. Make Sure You, Your Customers & Your Hire Equipment Are Covered
In the hire business, you’re opening yourself up to more customers, but also to the potential for things to go wrong. That is, in the case of dry hire: non-employees operating and interacting with your equipment. This means you need the correct insurance to ensure you, your employees, and your business are covered should a problem occur.
3. Properly Maintain Your Hire Equipment
To follow on from the second point, you want to make sure your hire equipment is in tip-top condition to avoid things like an accident or equipment breakdown. The best way to do this is to have your machines cleared by a reputable service technician prior to hiring out your equipment. Then, ask the technician to write up a service schedule for your fleet on an ongoing basis. This gives you an idea of when your machinery is due for a service between hire projects.
4. Get A Depreciation Schedule for Your Hire Fleet
If you’re going to use your new or used equipment to put into your hire fleet, then you’ll want to either get a new (or update your existing) depreciation schedule. This will ensure your fleet is properly valued for tax purposes, which will help your bottom line and ultimately your tax bill! Make sure you talk to your accountant or a qualified professional about setting this up so you’re good from the get-go.
Are you thinking about moving into the hire machinery game? Or perhaps you’ve done so already? If so, leave a comment below and let us know about your journey into capital equipment hire.