Subcontractors: Do You Lease Your Construction Equipment?

Subcontractors: Do You Lease Your Construction Equipment?

The construction industry has been compared to a rollercoaster. Moving fast, riding high, dropping low, turning unexpectedly and surprising you at just about every corner make this comparison more than a metaphor. It highlights the need to be flexible when it comes to your company’s offerings, and one of the ways to accomplish this is by leasing equipment.

Take a look at the heavy civil industry. Some contractors riding the wave of the early 2000’s construction boom purchased equipment galore. When the downturn of 2008 came, several years of slow recovery made some businesses go bankrupt. Other small- and mid-sized companies who weren’t as deeply invested in their assets were able to stay afloat despite hardships. Today’s economy is stronger, but a major challenge remains: how to rein in overhead costs to encroach too deep into profits.

Purchasing assets leaves you with one big cost burden: upkeep. If your company uses air compressors, for instance, money spent on servicing the motor, replacing valves and handling emergency repairs can add up quickly. These charges are difficult to forecast for, and especially with older assets, downtime affects your ability to deliver your services on-time. Leasing equipment, on the other hand, gives you access to the newest models, oftentimes increasing your employees’ productivity. And although it may seem like a minor point, newer assets also improve your business’ image, an important aspect of your branding and marketing efforts.

Responsible money management and access to credit are essential for a sustainable business. The best financial controllers can advise you in regards to a healthy debt ratio, but at the very least, you should study some of the additional differences between purchasing and leasing equipment. Making expensive purchases outright requires you to have a credit score beyond the reach of many new business owners, therefore leasing is not only a great way to seize new opportunities, for some, it may be the only option.

Contractors who follow trends are a step ahead of the pack. When you see the industry leaning in a specific direction, respond. Start with smaller jobs to build your reputation, and use leased equipment to leverage your ability to handle whatever aspect of the job is in demand.

People pay good money to ride rollercoasters. You fortunately get to live the adrenaline rush without even having to buy an entrance ticket to a theme park. By doing everything in your power to build a strong business, you can continue to grow your market share and sustain profits.