For many companies, especially young start-ups, finances are the biggest problem. In order to offer services or products, technical means are often required. However, these technical means are not always fully utilized. Idleness means that operating resources incur costs without generating revenue. But there are innovative approaches that companies can use to effectively utilize these unused resources in order to increase profitability and avoid unnecessary losses.
Technical investments and automation as a key
Nowadays, it is essential for companies that want to remain competitive to invest in automation and modern technology. CRM automation tools or advanced machines initially cost a lot of money, but they pay off in the long term. Take, for example, a company that invests in a plotter to produce marketing materials.
A good example is the purchase of a plotter by a company that produces marketing materials. A plotter offers a variety of features that are necessary for precise printing work, but it is not in use 24/7. During downtime, however, running costs such as depreciation and maintenance costs are still incurred without the company deriving any direct benefit.
Alternative uses and optimization of profitability
To avoid the problem of downtime and to compensate for the running costs, the company could rent out its plotter when it is not needed. By renting out the machine to other companies, a potential cost burden is turned into an additional source of income. This is particularly advantageous because the plotter remains in regular use and the depreciation is economically utilized. After all, downtime not only means unused potential, but also leads to a faster depreciation of the device.
Efficient use of forklifts and other equipment
In the logistics industry, there are many pieces of equipment that are not always in continuous use. Forklifts are a good example. If a company owns several forklifts, for example, but they are only needed during peak periods in warehouse operations, these machines often sit around unused for days. Not only does downtime result in storage costs, but wear and tear also increases when machines are left without lubrication or maintenance for long periods of time. One solution would be to rent out these forklifts or offer them as part of a sharing program. This way, the unused machines can generate revenue instead of incurring costs. In addition, the company can reduce costs and extend the service life of the equipment by maintaining and replacing parts itself, for example, with intellaparts.com
Long-term savings: do repairs in-house or hire professionals?
When a company repairs equipment in-house, the high cost of outside labor is eliminated, but the expense of replacement parts and labor hours for in-house employees still applies. On average, a replacement part costs $500. With an in-house technician making around $30 per hour and taking about 5 hours to complete an average repair, the total cost is about $650 ($500 for the part and $150 for labor).
If a company hires an outside professional to make the repair, costs can increase significantly. While the part will still cost $500 on average, the average hourly rate for an auto mechanic is around $22.96, according to the Bureau of Labor Statistics. However, specialized repairs can cost significantly more, and the average hourly rate for professional mechanics can range from $80 to $120. Assuming an average rate of $100 per hour, five hours of labor costs $500. The total cost of such a repair is then $1,000.
If the repair is done in-house, the company saves about $350 per incident. With ten repairs per year, the savings add up to about $3,500. In addition to the cost savings, the self-repair offers greater flexibility because the company can get the machines back into operation faster.
Financial strategy: rent, buy or lease?
For companies, especially start-ups, deciding whether to rent, buy or lease equipment is crucial for long-term financial planning. Buying offers the long-term option of owning assets and claiming depreciation for tax purposes. However, it involves a high initial investment. A forklift truck, for example, costs between 25,000 and 50,000 USD, depending on the model. This can be a significant drain on a young company’s capital, so many need to weigh up the purchase carefully.
Who benefits from leasing?
Leasing offers more flexibility and requires lower initial payments. Around 80% of companies in the US use leasing to finance their operating resources, especially when it comes to technical equipment that can quickly become obsolete or incur high maintenance costs. The Equipment Leasing and Finance Association estimates that by 2023, companies will have invested over $2 trillion in leasing and financing, particularly in the technology sector.
Leasing makes particular sense for companies that need to regularly renew their technology or need short-term capital for other investments. A monthly lease payment of $800 for a forklift, for example, frees up capital compared to a purchase.
When is it better to buy?
Buying is especially worthwhile for equipment with a long lifespan. Machines that are used for years are often better bought because they become fully owned after the down payment and offer long-term cost advantages. A company that buys a forklift and uses it for ten years can tie up capital at the end of the term through ownership and depreciate the machine.
Sustainability as a key factor in the decision
There are several government programs in the US that support companies investing in sustainable technologies, particularly in the areas of equipment and green energy. A key element here is the Federal Sustainability Plan, which promotes companies that contribute to the reduction of greenhouse gas emissions and the development of sustainable technologies. This program aims to make the US economy more sustainable by providing incentives for the use of zero-emission technologies, including equipment and infrastructure.
Another program is the tax breaks for sustainable investments introduced by the Inflation Reduction Act. Companies that invest in environmentally friendly machinery or renewable energy can benefit from these tax breaks and receive additional financial support to fund their investments in sustainable technologies.
