By Brian Hall
Where did 2019 go? Seems as if we were just getting the year started and now in many regions, plants are shutting down. From most accounts, it was a busy year. Many states passed infrastructure bills which kept everyone working in their own specialty. To that end, it’s certainly time to start looking at purchases for year-end tax deductions. Section 179 was further expanded this year and now is the time to consider investments for accelerated depreciation. This month, let’s look at some of the pitfalls of shopping for new or used equipment. You are sure to be bombarded with opportunities to purchase machinery, but let’s take a step back and educate ourselves as to what make sense to you. It’s your investment, right? Let’s make sure your money works for you instead of just lining someone else’s pocket.
Look backwards and forwards. How was your year? Did you accomplish the goals you set last January? Great, so what about 2020? Now is the time to aim for where you want to be in 2021. With that in mind, what kind of equipment will you be looking at for next season. Did you find yourself in a bind when it came to tack distribution? Could you use a milling machine or attachment? Some contractors are considering putting on a second or third crew. Whatever the case, now is the time to focus on moving forward at the pace you are comfortable with. Remember, slow and steady wins the race.
Beware of buying what’s on the lot. Good dealers have quite an assortment of machines with different options ready on their yard. But make sure you don’t get caught up in the new and shiny toys. Take a step back and remember what got you where you are today and what will get you to the next step tomorrow. Evaluate what every machine offers versus what holds value to you. Remember, it’s all about total cost of ownership (TCO). When TCO is properly evaluated, your cost per ton tends to be within a manageable level. For example, if you are looking at a machine with a high cost option such as grade control, your total cost of ownership is affected more than let’s say a truck hitch. Grade control saves asphalt and can be transferred to a new machine. A truck hitch, while a worthwhile option, doesn’t make you money, but might save your time. As they say, value is in the eye of the beholder. Look at all options as a single purchase and evaluate whether it adds value to your operation, taking resale value into consideration.
Expand your offerings. In speaking with many contractors recently, many are looking at new asphalt avenues. In many regions, there are programs such as gas taxes that are giving an influx of dollars municipalities must spend on infrastructure. This should motivate the asphalt contractor to spend time with the county engineering staff to see what their upcoming projects are being considered. When you discover what the projects entail, I believe trends will emerge. These trends may point to you looking at new equipment investments such as patching machines, different size paving machines or even (gasp!) concrete equipment. If municipal work isn’t in your wheelhouse, what about site prep or even striping. This way, you can control the job from start to finish and be less reliant on subcontractors.
Go with your gut. In the end, you must remember you have responsibilities to your employees and their families to provide work on a regular basis. There is a lot of new bells and whistles on the lots these days and we all have to work together to find the right solution for your company. The pitfall we must avoid is trying to keep up with the guys down the road. We all have different goals and needs and to try to mirror what you think is going on is a recipe for disaster. Talk to your team and figure out who’s on board with your growth and what they can do to invest in that growth. Your team should not only include your employees, but your suppliers as well. Long term players have your best interest at heart. If it feels wrong, it probably is.
It’s a great time to look at new or used equipment. Interest rates are low and the future certainly looks bright for next season. The cooler weather is also an excellent time to visit your equipment manufacturer to see what is going on where the machine is designed and assembled. My only advice to you is, do your homework. Sit down with your equipment dealer and make them a partner in your business. Ask hard questions and demand straight answers. After all, if you are betting on your future success, why go it alone?
Brian Hall is the territory manager of Mid South Region at VT LeeBoy, Inc. You can contact him at firstname.lastname@example.org
Article sponsored by LeeBoy and Rosco.