When it comes to the day-to-day operation of your business, how you set up your office or workspace is essential. Your goal is to create a work space that’s well-lit and will keep you as comfortable as possible, with access to business-related tools and equipment that will allow you to stay organized and productive.
As you’ll discover in this chapter, technology plays a tremendous role in creating a well-equipped office on a relatively tight budget. Just a few years ago, for example, if you needed a high-speed laser printer, scanner, copier, and fax machine, these items needed to be purchased separately, at a cost of $400 to $2,000 each. Today, you can walk into any office or electronics superstore and purchase an all-in-one machine for under $300 that’s capable of handling all these functions, in addition to the workload of most small or even mediumsized businesses.
What types of equipment do you need? It varies greatly based on the type of business you run as well as your personal work habits. In general, however, there are some basic pieces of equipment most new business owners need (these are discussed in more detail throughout Part 5):
Computers (desktop, laptop, tablet—and for some people, a sophisticated smartphone)
Software
Fax machine
Laser printer and/or color printer and label printer
Copier
Scanner
Phone
Voice mail
Smartphone with wireless ability (such as an Android, BlackBerry, or Apple iPhone)
Calculator (if the one on your smartphone isn’t sophisticated enough)
Look over this list and consider which items you can’t live without, which products would be nice to have, and which (if any) you don’t need. And note that these days, some of this equipment can be purchased all in one (printer, fax, scanner, copier, for example). When equipping a startup business, you must tread a fine line. Most people race out and purchase the best office equipment possible and often feel the compulsion to buy the latest tools simply because they’re cutting-edge. These entrepreneurs often end up spending way beyond their budgets, only to find that the items they bought aren’t necessary, don’t make them more productive, aren’t compatible with their existing equipment, or contain so many bells and whistles that the equipment is too confusing and time consuming to fully use.
At the other end of the spectrum are those entrepreneurs who try to make do with the bare bones. In an effort to save a few dollars, these business owners sacrifice efficiency and productivity, chugging along with a prehistoric computer, a one-line phone, or an internet connection that moves at a snail’s pace. In short, they’re penny-wise and pound-foolish.
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Save time and money with virtual fax machines. Rather than purchasing a standalone fax machine, online services, such as eFax.com, will forward faxes to your email account and allow you to send faxes directly from your word processor or web browser.
Today’s business climate is so fast-paced, clients won’t do business with you if you can’t keep up. Assess each item, and determine how it could benefit your business. Would you use a color laser copier often enough to make it worth the cost? Or for that occasional color copy, can you head over to Staples or a FedEx Kinko’s? Do you really need the cutting-edge $2,000 laptop from Apple, or would you be just as productive using a $400 iPad when you’re on the go?
Choose what technology and office equipment you absolutely need, then purchase the best quality equipment you can afford. When it comes to purchasing technology, you may be better off spending a bit extra now to ensure the item will last two to three years rather than purchasing something that will quickly become outdated or need to be replaced in just 12 to 18 months.
Cost Cutters
Technology is far less expensive than it was just three to five years ago. For example, you can purchase a powerful, PC-based desktop computer for under $1,000. Even five or six years ago, a similar machine might have cost $3,000 or more. That being said, equipping your business can still be a costly proposition. Fortunately, there are several different avenues you can take to keep the expenses to a minimum.
Financing Plan
If you’re buying expensive equipment, consider having the manufacturers “lend” you money by selling the equipment to you over a period of time.
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How can you keep equipment costs way down? Consider launching from a business incubator, where services, facilities, and equipment are shared among several businesses. Often the incubator provider—a university or a startup or research group—provides most of the equipment for free. (For more on incubators, see Chapter 17.)
There are two types of credit contracts commonly used to finance equipment purchases: the conditional sales contract, in which the purchaser does not receive title to the equipment until it is paid for; and the chattel-mortgage contract, in which the equipment becomes the property of the purchaser on delivery, but the seller holds a mortgage claim against it until the contract amount is fully paid.
There are also lenders who will finance 60 to 80 percent of a new equipment purchase, while you pay down the balance as a down payment. The loan is repaid in monthly installments, usually over one to five years, or the usable life of the equipment. (Make sure the financing period doesn’t extend past the usable life of the equipment; you don’t want to be paying for something you can no longer use.)
By using your equipment suppliers to finance the purchase, you reduce the amount of money you need upfront.
When Lease Is More
Another way to keep equipment costs down is to lease instead of buy. These days, just about anything can be leased—from computers and heavy machinery to complete offices. The kind of business you’re in and the type of equipment you’re considering are major factors in determining whether to lease or buy.
If you’re starting a one-person business and need just one computer, for instance, it probably makes more sense to buy. On the other hand, if you’re opening an office that will have several employees, and you require a dozen computers, you may want to look into leasing.
According to the Equipment Leasing Association of America (ELA), approximately 80 percent of U.S. companies lease some or all of their equipment, and there are thousands of equipment-leasing firms nationwide catering to that demand. “[Leasing is] an excellent hedge against obsolescence,” explains a spokesperson at the ELA, “especially if you’re leasing something like computer equipment and want to update it constantly.”
Other leasing advantages include: making lower monthly payments than you would have with a loan, getting a fixed financing rate instead of a floating one, benefiting from tax advantages, conserving working capital and avoiding cash-devouring down payments, and gaining immediate access to the most up-to-date business tools. The equipment also shows up on your income statement as a lease expense rather than a purchase. If you purchase it, your balance sheet becomes less liquid.
Package Deal
As you put together an equipment leasing package, consider these issues:
What equipment do you need and for how long?
Do you want to bundle service, supplies, training, and the equipment lease itself into one contract?
Have you anticipated your company’s future needs so you can acquire adequate equipment?
What is the total payment cost?
Also ask the following questions about each leasing source you investigate:
Who will you be dealing with? Is there a separate company financing the lease? (This may not be desirable.)
How long has the company been in business? As a general rule, deal only with financing sources that have been operating at least as many years as the term of your proposed lease.
Do you understand the terms and conditions during and at the end of the lease?
Is casualty insurance (required to cover damage to the equipment) included?
Who pays the personal property tax?
What are the options regarding upgrading and trading in equipment before the lease period expired?
Who is responsible for repairs?
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If your business is small enough that you’re considering renting a shared office space, you might be able to avoid the cost of many pieces of equipment at the start. Shared office space company Regus, for example, has packages that include basic equipment. This can be a good way to see what you actually need if you eventually move to your own, non-shared space.
Leasing also has its downside, however: You’ll pay a higher price over the long term. Another drawback is that leasing commits you to retaining a piece of equipment for a certain time period, which can be problematic if your business is in flux (although some leases do allow for upgrades or pre-lease termination, with a fee).
Every lease decision is unique, so it’s important to study the lease agreement carefully. Compare the costs of leasing to the current interest rate, examining the terms to see if they’re favorable. What’s the lease costing you? What are your immediate and long-term savings? Compare those numbers to the cost of purchasing the same piece of equipment, and you’ll quickly see which is the more profitable route.
Because startups tend to have little or no credit history, leasing equipment is often difficult or even impossible. However, some companies will consider your personal, rather than business, credit history during the approval process.
If you decide to lease, make sure you get a closed-end lease, without a balloon payment at the end. With a closed-end lease, nothing is owed when the lease period ends. When the lease period terminates, you just turn the equipment in and walk away. With an open-end lease, it’s not that simple. If you turn in the equipment at the end of the lease, but it’s worth less than the value established in the contract, then you’re responsible for paying the difference. If you do consider an open-end lease, make sure you’re not open to additional charges, such as wear and tear.
Finally, balloon payments require you to make small monthly payments with a large payment (the balloon) at the end. While this allows you to conserve your cash flow as you’re making those monthly payments, the bad news is, the final balloon payment may be more than the equipment is worth.
There are many different avenues through which you can secure an equipment lease, including:
Banks and bank-affiliated firms that will finance an equipment lease may be difficult to locate, but once found, banks may offer some distinct advantages, including lower costs and better customer service. Find out, however, whether the bank will keep and service the lease transaction after it’s set up.
Equipment dealers and distributors can help you arrange financing using an independent leasing company.
Independent leasing companies can vary in size and scope, offering many financing options.
Captive leasing companies are subsidiaries of equipment manufacturers or other firms.
Broker/packagers represent a small percentage of the leasing market. Much like mortgage or real estate brokers, these companies charge a fee to act as an intermediary between lessors and lessees.
For more information on leasing, the ELFA in Arlington, Virginia (elfaonline.org), and the Business Technology Association (BTA) in Kansas City, Missouri (bta.org), offer member directories. The ELFA allows you to personalize your directory and pay for only the information you need, which could result in paying well under $100 or well over. The BTA offers informative resources and publications to the public for free; however, only subscribing members have access to its membership database.
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Turning off your computer at night, on average, can save you more than $100 a year, and using more energy-efficient lights can reduce your lighting costs by two-thirds. However, certain types of fluorescent lights cause added eye strain, so if you’ll be spending 8 to 12 hours per day in a work space with minimal natural light, you might want to splurge on lighting that won’t give you a headache or cause added eye stress over time.
Wise Buys
If your calculations show that buying makes more sense for you, you’ve still got some decisions to make. First and foremost, where to buy?
Buying New Equipment
The same piece of new equipment that costs $400 at one store can cost $1,000 at another. It all depends on where you go. Here are some of the most common sources for new equipment, with a look at the pros and cons of each.
Superstores. Office or electronics superstores usually offer competitive retail prices because they buy from manufacturers in volume. Most superstores offer delivery, installation, and ongoing service contracts for the equipment they sell. However, you’re unlikely to find knowledgeable salespeople at superstores, and the prices will almost always be higher than shopping online. It is convenient, however, to walk into a store and walk out with your purchase a few minutes later. You can see and touch the products before buying—and if you decide to wait and buy online, you’ll know what you are getting.
Specialty stores. Small electronics stores and office equipment retailers are likely to offer more assistance in putting together a package of products. Salespeople will typically be more knowledgeable than at superstores, and service will be more personal. Some even offer service plans. On the downside, prices go up accordingly. Unfortunately, many of these smaller, independently owned and operated specialty stores are going out of business because they can’t compete with online vendors or the superstores.
Dealer direct sales. Many manufacturers choose this option as a way of maintaining their service-oriented reputation. On the plus side, you’ll get assistance from highly knowledgeable salespeople who can help you put together the right system of products. You may also get delivery, installation, and training at no extra cost. Many entrepreneurs swear by this method of buying. The downside: Since you’re dealing with one manufacturer, you won’t get to compare brands. Apple is the perfect example of a major computer company that has its own chain of retail stores, plus sells directly to consumers online. If you go this route, make sure you’ve thoroughly researched all the competitor manufacturers so you’ve come to a solid decision about which to go with.
E-tailers. Without incurring the overhead of a brick-and-mortar store, online equipment sellers are able to offer brand names at much lower prices than retail stores. To shop efficiently online, you must know exactly what you want to purchase (make and model numbers, for example), then shop around for the best prices and the most reputable online dealers. Use price-comparison websites, such as Nextag (nextag.com), to compare multiple vendors and their prices, and you could wind up saving 20 to 60 percent off your purchase. Shopping online also works for office supplies, such as toner or ink cartridges. A toner cartridge for a brand-name laser printer might sell at Staples or Office Max for $89 but be available online for $29 (or less).
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If you purchase all your equipment from a single supplier, you may be able to negotiate volume discounts, free shipping, and other extras. Be aware, though, that purchasing from a single vendor also limits your options. For example, the merchant you choose for your computer system may not offer the brand of printer you want, or you could run into a problem if your sole vendor winds up going out of business.
No matter what source you buy your equipment from, be sure to investigate the type of service and support you’ll get before you whip out your wallet. A tempting price may seem like a compelling reason to forgo solid service when you buy, but it won’t seem like such a good deal when the equipment grinds to a halt in the middle of an urgent project. . . and the vendor is nowhere to be found.
In terms of computers, many businesses are considering Apple as a good alternative to traditional PC-based systems. With the AppleCare program, at any time, you can visit an Apple Store or call Apple’s toll-free number and quickly receive technical support by a knowledgeable expert. In addition, most repairs and replacement equipment are covered for three years. This is something Dell, Acer, HP, Lenovo, and other PC-based computer manufacturers have begun to offer mostly as an add-on services (for an annual or monthly fee).
To get the most from your equipment vendors, it’s important to lay the proper groundwork and let them know you’re a valuable customer. One way to do this is to make sure you send in the service registration card that comes with the product. Contact the vendor before problems arise to ask for all the relevant telephone and tech support websites, so you know what to do if disaster strikes. Maintain contact with the vendor by asking questions as they come up and giving the vendor any comments or ideas that might improve the product. This identifies you as an active user and builds your relationship with the vendor.
Before you buy, prioritize what’s important to your company; then get the answers to these questions:
How long does the warranty last?
Does the vendor offer a money-back guarantee? Many computer peripherals, for instance, come with 30-day money-back guarantees. Use this time to make sure the item works with the rest of your system.
Does the vendor charge a restocking fee? Even when a company offers a money-back guarantee, the company may charge a restocking fee of up to 20 percent of the product’s cost on returns. Some states prohibit such charges if merchandise is defective.
What fees, if any, does the vendor charge for technical support?
How easy is it to reach technical support? Try calling before you buy the product to see how long you’re put on hold and whether the company returns calls. Many companies outsource their technical support overseas, so you should also make sure you can understand the support personnel.
What hours is technical support available? Be aware of time zones. If you’re in California and your East Coast vendor shuts down at 5 P.M., you could be out an afternoon’s work if your computer breaks down after 2 P.M. California time.
How quickly can the vendor fix problems? What are the repair costs and time frames (on-site repair, 24-hour turnaround, etc.)? Who pays shipping costs if items need to be returned to the manufacturer for repair during the warranty period?
Does the vendor offer any value-added services?
Buying Used Equipment
If new equipment is out of your price range, buying used equipment can be an excellent cost-cutter. But with technology changing so rapidly, you’ll want to make sure you’re buying used equipment that will meet your needs now and in the future. Some older computers, for example, won’t run the current Windows or Mac operating system, or the current versions of software you may absolutely need.
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InterSchola (interschola.com) sells used equipment from an unlikely source: school districts. The company works with public and private school systems to help them sell their surplus equipment using an online auction sales model. You can often find amazing deals on used computers and office equipment. And, the group also has eBay sellers.
There are several sources for buying used. Asset remarketers, for example, work with equipment leasing companies to resell repossessed office equipment through a network of dealers and wholesalers—and sometimes directly to business owners. The prices are a fraction of the cost of buying or leasing brand-new equipment.
It is also simpler buying repossessed equipment through an asset remarketer than going to a bankruptcy auction. As in most auctions, the asset remarketing company accepts bids—but that is where the similarities end. Asset remarketers keep equipment in warehouses, which buyers visit at their convenience as they would a discount office equipment retailer. Often, the remarketer has a price sheet showing the equipment’s original price and its approximate resale value. Use this price sheet as a guideline in making your offer.
Lemon Alert
Whether you’re buying used equipment from an individual or a business, take these steps to make sure you don’t get stuck with a lemon.
Know the market. Do some research before you make an offer. Read the classifieds to learn the going rates for the item(s) you want. Notice how quickly items move. Is it a seller’s market, or do you see the same ads run again and again?
Try before you buy. Just as you would with new equipment, it’s essential to “test drive” used equipment. Run diagnostic tests; make sure all the parts are working; ask about any problems. (Sometimes, an item may still be still worth buying, even with the cost of repairs.)
Bring a buddy. If you’re a novice, it helps to take a more experienced friend or colleague with you when you test the equipment. He or she can ask questions you may not think of and pinpoint problems you might miss.
Don’t buy if you don’t feel comfortable. Never let anyone talk you into a purchase or make you feel guilty. If you don’t feel good about it, walk away.
Leasing companies and asset remarketers must resell equipment at a fair market price, so three bids are usually required. But you’ll want to move quickly to “win” the bid.
If you want to buy, make an offer to the asset remarketing firm, which then sends it to the leasing company’s asset recovery manager. Some asset remarketers may require a $100 deposit when the leasing company accepts the bid; you’ll then need to pay with cash, certified funds, or cashier’s check within a few days.
While finding asset remarketing companies is as easy as calling a local repossession company, be careful to find a reputable company. While some states regulate asset remarketing or repossession firms, there are unscrupulous remarketers in many states who hang out their shingle, pocket consumers’ deposits, and then disappear. The safest way to find an honest asset remarketer is to call a leasing company’s asset recovery manager and ask for the name of a local firm. Some leasing companies prefer to sell to end users directly, and they may ask for a description of the equipment you want to purchase.
In addition to asset remarketers and leasing companies, you can also buy used equipment from individuals (look in the local classifieds) or check online for used equipment retailers in your area. Also, be sure to check popular used equipment websites like Craigslist.org or Freecycle.com. Another great resource for finding affordable equipment are auction sites, such as eBay (ebay.com), Bid4Assets (bid4assets.com), Liquidation.com, and DellAuction.com, which allows you to buy used and refurbished computers, peripherals, and software of any brand. The resale of used equipment is becoming more common, so in most cities, you’ll have several sources to choose from.