No matter how big or small your business is, at some point in time you’ll have to make a big purchase for your business. When the time comes, there are a lot of points to consider, but these four questions should be at the top of your list.
How will this big purchase fulfill the needs of my small business?
Obviously, as a small business owner, you’re making your money go as far as it can. So when a big purchase comes up, you may think the answer to this question is obvious, but it’s still an important question to answer. Make sure that the big purchase you’re about to make is worth the investment. This means that it should help you make more money than it will cost you.
You should also evaluate how long the purchase will last. Will you need to make the same purchase next year or will it last a couple of years? If it is something that is only going to last a short time, then it might not be worth the investment. Make sure that your big purchase is going to be worth the time, energy and money that you’re about to spend on it.
After you’ve answered this question you can move on and determine how to purchase your new business tool.
How will I pay for this item?
Once you’ve determined that you need to make a big purchase for your business, the real question is where will the money come from to pay for it?
In the best case scenario, you would be able to save for your big purchase and then pay cash for it. However, big purchases usually pop up before you’re 100 percent ready. In that case, you still have a few options for payments.
The first option is to put your new purchase on a credit card. This isn’t a terrible option, but we don’t recommend putting purchases that you don’t have the cash for on a credit card. If you do, you will have to make payments on it while paying interest, at an extremely high rate. You can get better interest rates through a business, or even personal loan.
Which leads up to the next option: loans. Securing a business loan from a financial institution is a great way to get the money for your big purchase. You should meet with several different lenders to determine which loan is going to be right for you and your business before you make a decision. If you can’t get a business loan, talk to your bank about a personal loan.
When you are factoring in the costs of your big purchase, you’ll want to make your own payment plan. Make sure your payment plan matches the lender’s required payments. With a small business, your funds often fluctuate, so make sure that you can afford your payments, even in the low months. Don’t get something out of your budget, or you will pay for it later.
Will my vendor be there for me after the purchase?
When you’re making a big purchase, you’re probably going to meet a lot of vendors who are determined to sell you his or her products. They may schmooze you now in order to make the sale, but what is their goal long-term? Big purchases usually are something you’re going to be using on a daily basis. You want a vendor who is going to be there for you when you’re using the product, not just for the sale of it.
You should also consider the following things when choosing a vendor:
- Best Price (obviously)
- Customer Service and Support
- High-Quality Products
- Delivery Times (Can they get the product to you by the time you’ll need it?)
- Can they help you recycle or get rid of the equipment your big purchase is replacing?
A vendor can make or break a purchase, and even your relationship with a company. Make sure your vendor will look out for you and will do everything they can to help you.
What costs are hiding in this big purchase?
The dollar amount listed on a website, or what a salesperson is telling you, isn’t always an accurate representation of how much an item is going to cost you. With bigger business purchases, there are a lot of hidden costs. These costs aren’t always up front either. They can come into play down the road.
Some costs you should consider at the time of purchase are:
- Shipping and Delivery
- Training Classes
All of these things could increase the cost of your big purchase, so make sure that you can fit them into your budget. If you can’t, then you’ll either need to find a new vendor or negotiate the costs down.
One of the biggest mistakes small business owners make when they are making a big purchase is not budgeting for routine (or surprise) maintenance costs. This is where your purchase can end up costing you a lot more. Talk to your vendor about what they handle maintenance. Will you be responsible for all the costs? Is there a warranty on your item?
The more you know up front the better decision you can make and with a big purchase, you can never to be too informed.
Frequently Asked Questions
1. How will this big purchase fulfill the needs of my small business?
Ensure the purchase adds value by evaluating its ability to generate profit and its longevity. Assess whether it justifies the investment of time, energy, and money.
2. How will I pay for this item?
Consider saving or explore financing options like business loans or credit cards. Craft a payment plan aligned with your budget and revenue fluctuations.
3. Will my vendor be there for me after the purchase?
Prioritize vendors offering competitive prices, excellent customer service, quality products, prompt delivery, and ongoing support post-purchase.
4. What costs are hiding in this big purchase?
Consider hidden expenses like shipping, installation, taxes, and training. Budget for routine or unexpected maintenance costs and inquire about warranties or vendor maintenance.
5. How should I choose between vendors?
Evaluate vendors based on pricing, reliability, customer service, product quality, delivery timelines, and their commitment to assisting with equipment disposal or recycling.