In these tough economic times, every industry in every business sector is feeling the impact of the recession. However, construction business owners and managers are getting more savvy and managing equipment fleets more wisely. From acquisition to liquidation, management teams are making educated decisions regarding best practices for buying and selling equipment that enhance every aspect of the business, including the bottom line.
There are a number of factors that should be considered to successfully buy and sell equipment as you position your business to continue to weather the storm and plan for the future.
Evaluating Existing Construction Equipment
Over time, as equipment is brought in and taken out of the lineup, it is easy for inventory lists to become outdated. First, take an accurate account of all of your equipment assets. Take a fresh look at your inventory, categorize your existing fleet and determine what equipment should stay, what should be sold and what needs to be added. Once that is completed, forecast the kinds of equipment the business will need and for what time duration you will need it. Ask yourself: Does your current inventory put you in the best position to succeed? Do you need to reallocate, upgrade or expand your inventory? These questions will help determine the best route to take when looking to expand or reduce equipment fleets.
If selling equipment is the best route for you, there are a few things that need to be done prior to reaching out to a sales agent, auction house or other sales tool. Machine preparation is the first step no matter how you intend to sell the equipment. However, too much preparation might create suspicion in the buyer's mind and could be detrimental to the sale.
There are standard practices of machine preparation that are industry acceptable and actually result in higher selling prices. These practices include:
- a thorough cleaning of the equipment
- servicing the equipment so that it is operational
- repairing leaks
- replacing broken glass
- re-upholstering ripped seats.
Once the machinery has been prepped, it is ready for inspection. Depending on the method selected to sell the equipment, some sources do not require inspection reports. However, many sources have in-house inspection teams that help sellers complete inspections prior to the sale of the equipment. This is an invaluable tool and something that should be considered when working with a broker, auction house or other selling outlet.
Now That the Machinery Is Ready, How Do I Sell It?
Getting the equipment ready for sale is only half of the process. Now that the equipment is prepped for sale, consider which selling option best fits your situation.
If selling the equipment at auction is the preferred method, then it's important to understand the contractual obligations of each auction house before selecting the right one. This includes knowing and understanding all of the terms and conditions while the machinery is out of your control, whether you are the buyer or seller. Since traditional auctions usually require transporting the equipment to an auction location, know that sometimes there are fees associated with relocating the machinery as well as storage fees on the auction house property. Also, know what happens if repairs need to be made or damage occurs while the equipment is in transit or at the auction location. It is important to understand the terms and contractual agreements up front, because some contracts might be incompatible with the way your company does business.
Online auctions have become increasingly popular as the sales outlet of choice. One reason is the equipment does not leave the seller's control until after the sale is made, payment is received and delivery arrangements are made. This gives the seller peace of mind regarding the safety and security of the equipment and eliminates transportation costs. This is a primary reason that online auction companies offer detailed inspection reports and photos that are posted online for potential buyers to review.
Once the sale is made, how and when is payment made and transportation of the equipment arranged? This varies depending on the terms of sale. Sometimes these terms are negotiable, but many times they are specified in the terms of auction house or broker agreement. A good rule of thumb is that payment is guaranteed and made in full before the equipment is released, with the buyer paying for any transportation costs. Always know the terms and conditions upfront.
Buying New vs. Used Construction Equipment
When it is time to add on to your fleet, it is important to recognize whether new or used is the way to go. While sometimes purchasing new is the best option for a situation, the used equipment market is a viable alternative as a cost-effective way to boost fleets without breaking the bank. Business owners can typically save up to 50 percent off the cost of new construction equipment, which is a great way to reduce overhead and enhance profitability.
It is, however, extremely important to do your due diligence that the used machinery being purchased is in good working condition. Detailed inspection reports are key to helping project the longevity of the construction equipment as these reports go a long way in identifying a machine's strengths and weaknesses.
Whether you are buying or selling equipment, it pays to thoroughly understand the needs of your business, research all of your options and make educated decisions about your equipment inventory. Putting yourself in the best possible position to take advantage of opportunities to buy and sell good, quality equipment benefits your business. Chances are that throughout the buying or selling process, you'll use a combination of these steps that will contribute to a more efficient and profitable business as your projects and equipment needs change.
Construction Business Owner, August 2010
