Business is still very much about maintaining one?s bottom line, very much an argument about profit and loss, and about keeping overhead down while growing revenue. Many small businesses and bright-eyed entrepreneurs forgot this and collapsed quickly when the recession hit, unable to conserve their losses from investing too much in overhead.
Many were buoyed by all the talk about leveraging social media to increase their customer reach and subsequently, revenue, forgetting to note how much business equipment and software was costing them. As a result, when many chose to cut corners by letting employees go, instead of taking a closer look at their IT spend, it still led to business closure.
Unsurprisingly, software and equipment vendors were blamed for hawking increasingly expensive products to unsuspecting, less IT-savvy business owners. It did not help that new industry developments and customer needs grew almost monthly, necessitating the need for updates and new equipment and negating any positive return on investment.
Now, however, things are looking up again with the growing reliability of the crowd and vast offerings by different software and equipment developers customising products specifically for business needs beyond basic enterprise resource planning (ERP) processes. This time, business owners and upper management should consider equipment rental as a very viable option to keep overheads low while allowing for future flexibility based on changing business needs.
Tip 1: Pay-as-you-go model is clearer for bookkeeping
When you pay a lump sum for your software or equipment, it is easy to tell yourself that the product will eventually pay for itself. So you pay for a one-year contract and a few months in, you realise this software is not for you but because business is going so well, it has probably paid for itself. You go back to the vendor to ask for an upgrade or more customised product. And it starts all over again. This can be easily remedied: insist on a pay-as-you-go model. Not only can you keep monthly accounts clear, the onus is now on the provider to perform because without a contract, you can take your business elsewhere with zero or minimal losses. Budgeting ? the bane of every entrepreneur ? is also easier to chart with your monthly spend all figured out.
Tip 2: Avoid loans or external funding
When you pay for equipment or software on a monthly basis, there is less stress on your finances ? particularly vital when you are a start-up ? because of no major borrowings to pay for high equipment costs. Need an office? Rent it. Need extra computers for a special project? Rent them. No matter how attractive a product may seem, no matter how justifiable it may be to your business, it is still better to rent first, and if it works, to consider purchasing it. Need a specific application or additional space on your server? Buy it for the next month only. Chances are, you might not need it after the project, but if you do, you know it works. Too many entrepreneurs enter the business industry ready to spend on what are considered essential business tools, and end up doling out huge amounts of cash on hire-purchase agreements.
Tip 3: Trust is key
With so many providers and vendors hawking the best and latest products for your business, it is important to maintain trust in your vendor. Buying a product outright absolves your vendor from responsibility and as such, after-sales service costs can eat up a huge part of your budget. When signing rental software or equipment rental agreements, peruse the after-sales service section and ensure there are no contracts, so you can easily move to a more suitable product and cut your losses when an application fails you one too many times. In time, you will find vendors whom you can trust to fix problems, increase server and equipment capabilities, install upgrades quickly, or rent more software from them or their trusted network of affiliates. Some vendors are keyed in to particular industries so when your business grows enough, they have grown in tandem with you and can develop applications specifically for your business, ensuring optimal cost efficiency.
The article was written by Danny Williamson, who specializes in rental equipment management software solutions. Danny likes writing informative articles during his free time.