Every company that has ever been in business is trying to receive the highest return on investment whether you are talking about stocks or kitchen spoons. Return on investment plays a huge part in how well your bottom line does. Without a reasonable return on investment, you are unable to put food on your table.
In the construction business you want to see returns on investments from many different assets. You want to see a return on your machines, your people and your time spent on projects. All of this adds up to create a construction business.
Hopefully you know your people well enough to know they are committed to your company and want to give you a return on your investment in hiring them. Hopefully the time it takes for you to complete the project is on schedule so you do not spend any more money than you have to. Hopefully your machines run long enough for you to see them through multiple projects and they make you money as well.
At the end of the day, your employees run the company and do the work but your machines are your lifeline. If your machines do not work then it becomes impossible to work on a job. Everything from a backhoe to a dump truck must work up to its potential or else you are bleeding money.
Questions to Ask
When you are thinking of purchasing new equipment because the dinosaurs sitting in your equipment yard have run out of steam, there are questions you should ask yourself before you even start doing your research to give yourself direction of what you are actually looking to get out of your new machines and whether it will create a worthy return on investment.
First, you need to ask yourself if your machines can be fixed, for a fraction of the cost, or if they cannot be? Just because they have served you for five years, have a little rust and a lot of dirt on them does not mean you have to pony up and buy something new and shiny. Sometimes biting your lip and not having the latest and greatest will put the most money in your pocket in time.
Another question you should ask yourself is, what make and model do I need in order to complete my company’s work? The size of the projects you do, the number of projects you do and the types of projects you do all are indicators of the make and model of the machine you need to buy. If you are laying pipe for major commercial buildings then you will want a larger excavator than if you are just using it to dig for individual residential homes.
This next question is one of the most important ones you can ask yourself because it directly relates to money. Should you buy a new or a used machine? When thinking about this you should always assume that a new machine will give you a longer lifespan than a used machine. With that said, does the difference in usage time warrant the higher price? That is a question your accountants should be able to figure out with depreciation formulas or you can figure it out by looking at records and seeing how long your typical machines have lasted within your company in the past.
Keep in Mind
When you go to purchase your next machine keep these questions in mind to help improve your return on investment for your machines. There really is no better feeling than being able to drive by something you helped to build. Keep your return on investment high with your lifeline, your machines, and you will be chugging along for years to come.
By Brian Connor
Brian Connor has written for many construction blogs and wants to make people aware of the importance of return on investment within the field. He also wants to make people aware of materials handling equipment Utah.