Buy or Rent: An Entrepreneur’s Guide to Securing Workspace, Workers and Equipment: Part Two
As noted in the first part of our series, a fundamental challenge facing entrepreneurs when they’re starting up is deciding whether to buy or rent essential resources like office space, a human workforce, and other necessities. Last time we took a good hard look at where to set up shop, and whether to employ or contract out human resources. Today, let’s drill down another level and take a look at two more essential categories: office equipment and technology.
From Staplers to Copiers: Office Equipment
Whether you’re just starting a business or trying to grow one, furnishing and equipping an office can be overwhelming. Securing an office space can be fairly straightforward, but there are many different considerations when it comes to making your business productive.
First, it’s important to identify what equipment you really need. Consider the day-to-day tasks that you and your team needs in order to get work done, while keeping your budget in mind. Do you need multiple printers, copiers, and fax machines, or will small-ticket, multifunctional equipment and cloud-based workarounds solve the issue? If your enterprise is particularly image-conscious, pay due consideration to the rooms and spaces that customers and client will see.
Secondly, consider the advantages and disadvantages of leasing, which is a cheaper option in the short term. Leasing equipment allows your team to adapt to new technology quicker, is tax deductible, and removes the burden of maintenance. On the negative side, leasing becomes costlier over time, donates no equity to your entrepreneurial venture, and offers limited product availability.
Finally, it’s time to consider the advantages and disadvantages of buying office equipment. Advantages include the ability to sell or modify equipment as needed, tax incentives under Section 179 of the IRS tax code, and no need to deal with pesky contracts or agreements. On the flip side, the initial costs for buying equipment are exponentially higher than leasing. Upgrading equipment to keep up with technological advances is also not as easy or cost effective as leasing. Maintenance can also be costly over time.
Whether you’re considering leasing office equipment or have the wherewithal to buy your own equipment outright, you’ll find that each option comes with considerably different pros and cons.
Securing Your Tech
Regardless of the nature of your entrepreneurial enterprise, it will more than likely require up-to-date technology. This is a complex issue that many entrepreneurs don’t have time to manage, so this is another area where leasing equipment may be more prudent than buying.
That said, there are certainly advantages to buying tech equipment. First, it’s easier than leasing; again, no pesky contracts and you can modify the equipment or software if you have the skills. You also get to determine the maintenance schedule, and the equipment is deductible under Section 179 of the IRS tax code. On the other hand, the initial cash outlay for needed equipment can be significant, which can be problematic if you don’t have significant start-up capital. You’ll also eventually be stuck with outdated equipment no matter how cutting-edge your technology is when you purchase it.
Leasing, meanwhile, remains an attractive option for many entrepreneurs. With a lease, you pass the burden of obsolescence on to the equipment leasing company. It’s also far more cost-efficient; you pay nothing up front, and you’ll have predictable monthly expenses, which will help you with both cash flow and forecasting. You’ll also be better enabled to keep up with your competitors without draining your financial resources. However, there are a few downsides to leasing. First, you’ll end up paying more for your equipment in the long run, and secondly, you’re obligated to keep paying even if you stop using the equipment, which can happen if your business changes.
Regardless of your decision, it’s a good idea to schedule an IT consultant to come in every month or so to fix glitches and perform updates.