Small business owners often rush to buy new equipment. We see something shiny that promises to save time or boost production, and we pull out the credit card. But hasty equipment purchases can drain your bank account and may not deliver the benefits you expect. Ask these five questions before buying any new equipment for your business.
1. Do we really need this right now?
The most important question is often the simplest. Many equipment purchases happen on impulse or from fear of missing out.
Think about your current workload and immediate business needs. Could you manage fine for another six months with what you have? Is this purchase solving an actual problem you face today, or are you buying based on what might happen in the future?
Be honest about whether the purchase is truly needed now or if it can wait. Sometimes the best decision is to delay until your business grows enough to justify the expense.
If your current equipment still works but is inefficient, calculate exactly how much time or money you’re losing by not upgrading. This gives you a clear picture of the true cost of waiting.
2. What’s the full cost of ownership?
The price tag is just the beginning. Equipment costs more than what you pay on day one.
Calculate these additional costs:
- Delivery and installation
- Training staff to use it
- Regular maintenance and repairs
- Insurance
- Energy consumption
- Software updates or subscriptions
- Future upgrades
Many business owners focus only on the purchase price and get surprised by these ongoing costs. A cheaper machine might cost more in the long run if it needs frequent repairs or uses more electricity.
Also consider the cost of downtime. How much would it cost your business if this equipment breaks down for a day or a week?
3. How will this equipment pay for itself?
Every business purchase should either make you money or save you money. Before buying, calculate exactly how the equipment will pay for itself.
Will it:
- Reduce labor costs?
- Increase production capacity?
- Improve product quality?
- Allow you to offer new services?
- Reduce waste or errors?
Calculate how long it will take for these benefits to cover the cost of the equipment. This is your payback period. A good rule of thumb: if the payback period is longer than half the expected life of the equipment, think twice.
Don’t rely on the salesperson’s promises about returns on investment. Do your own math based on your specific business situation.
4. Should we buy new, used, or lease?
New equipment comes with warranties and the latest features, but costs more. Used equipment saves money upfront but might need repairs sooner. Leasing requires less cash but you don’t own anything at the end.
For equipment that becomes outdated quickly (like computers), leasing might make sense. For equipment with a long useful life (like certain manufacturing machines), buying often works out better.
If you’re considering used equipment, factor in:
- Remaining useful life
- Availability of parts
- Energy efficiency compared to newer models
- Compatibility with your other systems
Sometimes renting equipment for occasional use makes more sense than buying. Or you might start by renting to test if the equipment truly benefits your business before committing to a purchase.
5. What’s our Plan B if this doesn’t work out?
Always have a backup plan. Sometimes equipment doesn’t perform as expected or your business needs change.
Ask yourself:
- Can we sell this equipment if it doesn’t work for us?
- What’s the resale value likely to be?
- Are there smaller alternatives we could try first?
- What if sales don’t increase as expected after this purchase?
Having contingency plans prevents a single equipment purchase from threatening your business stability.
Talk to other business owners who use similar equipment. Ask about their experience, problems they’ve encountered, and whether they’d make the same purchase again.
Final thoughts
Equipment purchases can help your business grow, but they can also create financial strain when not carefully considered. By asking these five questions, you’ll make smarter decisions that truly benefit your business.
Remember: the goal isn’t to have the newest or best equipment. The goal is to have the right equipment that helps your business succeed.
Take your time with these decisions. A day or week of extra research before purchasing can save years of financial strain from a poor equipment choice.