One of the first things you may be doing as a new startup is investing in equipment and other fixed assets to support your new business. This step may prove to be difficult especially when you are about to spend hard earned capital on equipment even though you have not started selling yet. However, as it is also a necessary step to get your business up and running you may need to consider the following matters to help you with your decision.

1. Stick to your list

If you have already prepared a business plan then you would have also determined the assets you would need. Make sure that you put these assets in a list and categorize them between those which are critical for your business and those which are “nice to have”. For example, a multi-purpose high value printing machine may be nice to have but all you need to start your business is a low cost printer/scanner. So put each item in the relevant category and start purchasing only those which are critical. As you grow your business, you can start buying those nice to have items.

2. Quality over price

It may be tempting to buy the cheapest item to save on cost but it may not always be the wisest decision. Consider the quality of the item you are buying and the cost of its maintenance. A low quality item may need constant repairs which could slow down your production or services. This may in turn become more costly over the long run. It may also require to be replaced sooner than planned. That would mean that you would be required to re-invest in the same equipment in a shorter time span which in turn may have an impact on your future cash flows. Buying high quality equipment may save you from such drawbacks but always remember that high quality items do not necessarily mean very expensive items. You will need to find a balance.

3. New versus used assets

Consider whether you need to buy new equipment when there are plenty of second hand items in good condition available. Good quality second hand equipment may serve your purpose and may cost you half the amount you had initially planned. However, always also consider points 1 & 2 above along with this option.

Layla Alqassab
Head of Finance, Benefit Bahrain

For more information:
www.benefit.bh