Business is a fine balancing act. Making smart financial decisions in business can sometimes feel like you’re juggling more balls than You need to spend enough so that you’re producing great products and services. However, you don’t want to overspend and reduce your profit margins. In the early days of running your own company, it can be even trickier as you don’t have much money for overhead costs. You need to turn a profit to give yourself money to work with. For this reason, it’s important to make smart financial decisions and look for ways you can keep costs down. One way to do this is to weigh up the cost of purchasing things for your business or renting them. There are a number of elements in your company that you will need to weigh up these balances on. Here are some examples.
Equipment
When you purchase a piece of equipment, this can take a big dent out of your overall funds. If you rent, you have to pay a fee to the company you’re renting from each week, month or year- but it could give you access to great equipment without a large upfront cost. Sometimes it can be worth renting initially. This gives you a chance to get your business up and running. When you’re earning enough profit, go out and purchase the equipment you need. Depending on the business you run, it could be anything from a digger to a professional printer to a commercial coffee machine. Just be aware that once you do buy the item, you will be responsible for maintenance and repairs. When you’re renting (providing you haven’t caused damage) the company you’re renting from may fix or replace the items you’re renting for free. This is because they belong to them, not you.
Your Office
Your office is another area where you will need to weigh up the pros and cons of renting vs. purchasing. Renting an office can be expensive, and your rent will always be an ongoing cost which will take a chunk out of your profits. You do get the option of being able to move to a new office more easily if you need to upgrade, although you can’t make any major modifications to the space.
Purchasing your own premises, however, means you can tailor or customize it for your business. Hire a contract labor company and have them turn your vision into reality. While this will be costly upfront, you’ll have no rent to pay. And you always have the option of selling to raise cash if the situation ever calls for it.
Outsourcing
A similar principle is outsourcing vs keeping in-house. When you keep areas of your business in-house, you have to hire workers, ensure everything is being done to a good standard, purchase equipment and make sure your office is big enough for your team. However, when you outsource, you can employ a third party company to tackle entire areas of your business. You know things will be done to the best standard and you’re not responsible for their employees, health, and safety. However, there is a fee for this which will come out of your profits. Often, the best choice for many businesses is to outsource some areas while keeping others in-house. Work out what’s best for your company.
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