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Why Buying That New Machine Is The Right Thing To Do Right Now

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Why am I saying to upgrade and buy now? Well, I’ll tell you why: because if your equipment is behind the times it can’t create the tolerances that today’s engines require.

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So why now? After all, the market is in decline, business is off, times are really tough, right? Blah, blah, blah!

Yes, the market may be experiencing a decline due to the economy, and yes, your business may a little slow. But what are you doing about that? It may be that you just can’t compete because your equipment isn’t able to achieve the results necessary for today’s engines.

So, in essence, we are attempting to accomplish two things when we upgrade: first to ensure we can meet the specifications, and second so we can increase our productivity at the same time. This is called efficiency.

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Buying a new machine is not an overnight decision. You need to be thorough when comparing machines and this column will focus on what you need to do to update your shop.

I am not so naive to assume that you have never bought a machine before. Heck, you’re already in business and you obviously have machines. So please don’t take this as an insult, but do take it as friendly advice on how to acquire the new machine(s) that you know you need.

Your first decision may be the hardest – which machine are you going to replace or add to your shop?

I’m sure you don’t have money just lying around waiting to be spent so you need to be sure you’re spending your hard-earned dollars wisely. And just as with any large purchase you need to invest for the maximum return. Take a look around your shop and ask yourself these questions:

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•  Are there bottlenecks? Where?

•  Why aren’t we getting some jobs?

•  Do we send out work because we don’t have the right machine or one that can’t maintain the tolerances required by an application?

• What kind of work is coming in and why?

• What kind of work is not coming in and why?

• What kind of work do we want to have coming into the shop?

Most of the answers will come to mind immediately. But it’s the ones that take time to sort out, that may be your guide to which machine needs to be replaced or added.

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Let’s face it; machines have probably changed a lot since you last bought one. You need to evaluate all of the features and benefits of those machines before you write a check. In the past, trade shows where you could compare machines side by side were held in various locations throughout the year but now they’re few and far between.

So where can you shop? You can, of course still go to a trade show (if you can wait for one and travel to it). Additionally, most of the major equipment manufacturers have Web sites that allow you to compare features and benefits so you can narrow down your choices.

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Or – here’s a crazy thought – have an equipment salesman come to you. Yes, I said equipment salesman! These hard-working, talented and knowledgeable individuals have been thoroughly trained by the equipment manufacturer to answer your questions and help you choose the right machine. And they’re still around!

Okay, I’ll admit I have a bias, having been an equipment salesman many years ago, but honestly, these salesmen generally have many years of fieldwork under their belts and they’re the people who will be there before and after the sale. You’ll be able to rely on them to be sure your new machine is installed properly and works correctly and to train your employees on how to operate it. Plus, if something does go wrong, the sale rep is your “go to” for warranty service.

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Now, don’t just get on the phone and start inviting every sales rep you can to stop by. Sales reps generally follow a schedule. This is a method of traveling the territory so they can hit all the shops in an order that makes the most use of time, fuel and overnight expenses. Some territories are larger than others so making the best use of time is everything to an equipment rep.

Call first and have them send you a proposal on the machine(s) you have decided to replace or upgrade. Compare the specs and capacities of the machine to be sure it will handle the requirements of your shop. You should also ask to contact a couple of recent buyers of the machine to see how it has performed since it was installed.

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If there are several manufacturers offering similar machines, get information from each of them. But don’t go overboard: if you don’t have time to sort through a half-dozen proposals and meet with all of those reps, maybe you need to pare your list down a little.  A final hint: if you don’t know who your rep is, call the manufacturer to get the contact information.

Once you’ve sorted out the differences between each machine, call the sales reps and have them make an appointment to sit down and talk. This is your chance to ask questions.  Write your questions down so you don’t have to rely on memory – you’re sure to miss something if you do. Your sales rep is not a walking encyclopedia so give him time to get answers if he can’t answer them during the sales call.

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Take a trip to see the machine you want to buy at another shop. Ask that owner about reliability, service and follow up after the sale. Or better yet, go to the factory for a complete demonstration and maybe you can even watch your new machine being built.

These machines aren’t cheap and once you’ve settled on the right one for your shop, you have one more decision to make – leasing or bank funding? Both are attractive and both are available. Leasing is generally done with a 5 year contract and a buyout at the end. The buyout is generally $1 for most leasing companies that carry paper in the automotive aftermarket. I suggest you keep your line of credit at the local bank for the day-to-day running of your business. Use the leasing company’s money to make monthly payments on the machine.

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Tax credits are available under the  IRS’s Tax Code Section 179. The “Investment Tax Credit” rule has been extended to December 2009 and you can write off up to $250,000 on your taxes for 2009. This tax deduction was supposed to expire at the end of 2008, but was granted an extension for this year. As with any tax rule it is always best to talk to your accountant or tax advisor to find out how this will affect your company’s finances.

Once you have all the details about which machine you are going to buy and from whom, you will need to go through the leasing program to know what the down payment is as well as what the monthly payment will be. In some cases the monthly payment can be the key to saying “yes” or “no” on the new machine purchase.

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Say you want to buy a new engine balancer. Most balancers run about $25,000 and a five year payment could be $550. If you charge $150 to $200 for a balance job you will need to do 3 to 4 balance jobs per month to make the payment. Actually, this way your customers are making your payment for you. Every job after that goes toward the shop as labor billed.

If the job you currently do takes four hours to complete and you charge $200 for that job then you are earning $50 per hour. If the new machine can do that same job in one hour you are now making $200 per hour. You just increased your shop’s income potential dramatically. Think about how much more your shop can accomplish (and bill) as a result of the new machine. Remember, efficiency is time and time is money.

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I recommend you talk to your machinist and shop staff to make sure your whole team is on board with the type of machine you are considering. If they’re not, find out why. They may have a legitimate objection that you haven’t thought of or they may just prefer a different manufacturer because their Uncle Kenny used to have one.

Another reason for new equipment is marketing. Yes, marketing. One of the greatest marketing tools you can use against your competition is getting a new machine because you will be doing the very best work, delivering it on time and making a profit on it.

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Plus, now you now get to invite all of your customers to your shop to see your new machine, and you now have one up on the guy down the street. Another idea is to send out a mailer and let them know you have invested in the latest and greatest technologically advanced machine on the market. Include a picture of the new machine and finished work in the mailer. Let your customers know you are serious about earning their business by this commitment.

If you can, and space allows, go ahead and place the new machine in a visible area. This way all of your customers will have a chance to see the machine.

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Have the confidence to invest in YOUR future. Engines are changing, specs are changing. Are you keeping pace with those changes?

Remember – it’s time to buy.

See ya (and your new machine) in the shop!There may be positive tax ramifications if you purchase new equipment (but as with any important financial consideration you should discuss the details with your accountant to be sure you
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