ICS Magazine

Be Prepared

March 14, 2006
Do you have the space to store all this?

The Boy Scout motto is "Be Prepared," a saying that should also be adapted to service businesses. Be Prepared; two small words that can sometimes represent a very monumental task.

In the cleaning and restoration business, we don't have the luxury of being able to totally control when the work comes in, making it difficult to be prepared in advance with all the proper equipment.

This is especially true for those specializing in property restoration due to water and fire/smoke damage. This work is never scheduled and often comes in bunches making equipment needs inconsistent at best. It is important to have all the equipment you need to get the work done in a timely manner without having large amounts of equipment in storage during the times when business is slow. The options available to the business owner include purchasing and/or renting the necessary equipment. The decision of whether to buy or rent is made on weighing the costs vs. the benefits, and generally involves several factors for consideration.

The first consideration is the frequency of need for the specific equipment. If the equipment is something that will be needed often and generates income each time it is used, then the purchase cost is quickly earned back making owning the equipment a good idea. On the other hand, if the need is relatively infrequent, you must consider the costs of storing the equipment between uses, plus the value of your money being tied up in this stored equipment over a long period of time. In this scenario, renting the equipment for the occasional need makes more sense.

A second factor to consider is availability. When business is booming and you need to rent that extra equipment, it is generally also the case that all of your competition is in the same position. It is at these times that the rental agent's shelves are bare. In the restoration business time is of the essence and having the right equipment available might be the deciding factor in being able to get the work. If you are planning to depend on rented equipment, it would be a wise move to develop a good relationship with the equipment rental company and secure some type of priority with them in advance.

Another factor to consider is the necessary maintenance on specialized equipment. Complex or technical equipment might require specialized mechanical skill to maintain or even to operate. Sometimes this type of equipment like a large specialized desiccant dehumidifier is rented with an operator. Unless you find you need this type of system frequently, it is much more cost effective to rent the unit and operator than to have a unit sitting in your parking lot most of the time with a highly trained operator waiting for business.

Possible equipment obsolescence is another issue that favors renting over buying. Rented equipment is generally of the latest, most-up-to-date model. In cases where technical advances are frequent, having the latest, most efficient models might be a real advantage.

Finally, there are the financial and accounting issues involved with owning or renting equipment. In addition to the cost of operation and maintenance, owned equipment can be depreciated. In the case of rentals, the rent can be taken as a business expense deduction. Another related consideration is cash flow. In the case of rental equipment, you pay only when you use the equipment so costs will generally only occur with related income. Purchase payments have to be made whether the equipment is in use or not. Depending on the specific piece of equipment, there may also be related expenses as well such as insurance.

The key is to "Be Prepared" either with purchased equipment on hand or advance relationships in place with reliable rental agencies. Without the proper equipment at the time it is needed, you cannot be competitive in the cleaning and restoration business. I hope these ideas presented here help you to decide when it is best for you to buy or rent the equipment you need.