There are various phrases which will strike fear into the heart of any business owner. One of these is “equipment downtime”. When your day-to-day operations rely on various equipment, not being able to use it can have serious negative repercussions on your bottom line. Unfortunately, this is often an inconvenient fact of business, and something that every CEO has to be prepared for. Here, we’ll go through the necessary steps to deciding whether you should replace or repair a broken piece of equipment.
The first thing you have to think about when it comes to equipment is the cost per hour. Obviously, this isn’t something that you’ll know off by heart. However, if you look at the fixed costs, like the purchase price, interest and depreciation on the equipment, followed by the variable costs like repair and maintenance, it’s easy to figure out the cost per hour since you took ownership of the piece. Once you run through these calculations once, you can apply them to future purchases, anticipating the maintenance and repairs.
It’s also very important to gauge how long a piece of equipment’s downtime will be. Unfortunately, there’s always going to be some guesswork here. The two contributing factors are usually the severity of the damage and the availability of replacement parts. However, you can still make a rough guide for yourself which will help you prepare for any hiccups in the future. Hydraulic hose repair, for example, will take a much shorter time than reparative work on a large commercial vehicle. Consider the worst case scenarios for all your equipment. It may be cost-effective to hire replacements in the short-term.
When you’re having to decide whether to repair or replace something, it’s also a good idea to check out the resale value at the time. If the piece of equipment hasn’t depreciated all that much, it may be more cost-effective to organise and pay for the repairs yourself, and sell the piece on at an auction. You’ll be able to use the profits to upgrade to a better model, and forget about having similar technical difficulties in the future. Once you know what the issue is, get a quote from a reputable dealer without the repairs included. This will give you an idea of whether you should fix or replace it.
The final, and simplest thing you need to consider is the actual cost of repairs. The cost of equipment repairs can differ greatly depending on how old the equipment is, and how extensive the labour requirements are. However, once you pin them down, you’ll have a much clearer idea of whether you should repair or replace them. If the cost of repairs are consistently going to be higher than your monthly payments on a new unit, then replacing it is the most logical choice.
The next time you’re having to deal with technical issues in your business equipment, dig out this post. A little research and cost-effective planning will reduce downtime, and ultimately give you healthier profits.
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