Virtually Equipped

To ensure success in professional contracting you need the proper tools. Things like jobsite experience, the ideal crew, the right equipment, a plan of execution and the latest technologies can help companies stay ahead of the construction pack and achieve prosperity.

When it comes to technology, many construction companies are starting to adopt the latest virtual tools to help their crew’s progress. A good example is online connectivity, which allows a contractor to link his or her operations to an Internet community of options and solutions. When it comes to machines, online equipment auctions reach beyond struggling local and regional equipment markets to maximize resale value on a global scale.

No matter what size of business you run, a significant percentage of your total operating cost is wrapped up in equipment. How that investment is managed can make a big difference to your bottom line. One effective option for managing the acquisition and disposal of equipment is using an online auction service. Online auctions offer many advantages that can help you better manage your equipment and increase the return on your investment. Before buying or selling any equipment, it helps to understand the true cost of the equipment you have. Start by estimating the volume of work you expect to do this year. Then monitor each piece of equipment for its total cost. Deciding when to buy or sell equipment will become easier when you can answer these questions:

How much revenue has this piece of equipment generated?

This is an essential benchmark to track for each piece of equipment. Start by documenting the number of hours each piece of equipment has been used and estimate how many hours you are likely to use it over the next few months. For instance, you may have purchased a chipper for a specific project that is now sitting idle. You may also find that other equipment has been used more than you realized and it’s time to consider getting a newer model.

How much money has been spent on this machine?

Track initial cost, repairs and ongoing maintenance for each piece of equipment. Compare the amount of lost revenue due to downtime to the amount of actual revenue each machine generated.

What is your financial threshold for buying, selling or trading a piece of equipment?

When a piece of equipment sits idle with no potential for income, it’s a no-brainer to dispose of it. Tracking revenue and expense per machine on a monthly basis will help you notice when there is a change. If the cost of operating a machine is increasing, it may be time to dispose of the equipment. However, if the equipment is producing revenue for your company, it may be time to upgrade or add a similar piece of equipment.

An online auction can be a more profitable equipment management tool than traditional options such as dealer trade-ins, classified listings and traditional auctions. Sellers can achieve faster and more profitable equipment sales through online auctions since they typically offer lower transaction costs, fees and commissions. In fact, some sellers realize 15 to 20 percent higher returns by using online auctions instead of traditional auctions. Buyers can research, shop and bid without leaving their business in search of equipment.

Logging Online Equipment

Online auctions have been around for several years; however, many construction professionals may not be aware of the advantages to buying and selling online. Here’s a quick overview of what online auctions offer to help you get the most from your investment in equipment.

1. Take Advantage of the Global Marketplace

One of the biggest advantages of an online auction is that equipment is made available to potential buyers from all over the world. This means more competitive bidding and a better price for sellers.

Buyers can realize better, more targeted results in their search for equipment through online auctions. Finding the right piece of equipment at the right price is more feasible when buyers look beyond local dealers and regional auctions. Buyers can compare equipment separated by thousands of miles side by side, at the time and a place most convenient to them. For sellers, an increase in available buyers means an increase in demand. This produces more bids per lot and higher price realizations.

2. Move Your Equipment Faster

Online auctions can get nonproductive used equipment off your books faster. An online auction company can hold auctions more frequently without the risk of inclement weather or other obstacles common to traditional auctions. In addition, one-owner and hosted auctions can be held at the professional’s discretion, with a significant degree of control over price and timing. This means you can turn your equipment into cash within a few weeks. Online auction companies can also help businesses better match equipment purchases to changing business needs.

3. Reduce the Cost of Selling

Sale price is only part of the profitability equation; it also costs money to sell equipment. However, sellers can pocket more of the sale price by going through an online auction instead of a traditional auction. This cost reduction can be realized through:

1. No transportation or carrying charges. Since items can be sold right from the owner’s location, online auctions do not incur transportation costs. In a traditional auction, equipment must travel a considerable distance to the auction site. For a $20,000 backhoe, this cost can easily exceed $500.
2. No make-ready charges. Sellers may not be required to spend additional money cleaning up and painting equipment for auction. This saves the seller refurbishment costs, often done at a premium price.
3. Lower commissions. Whether charging a variable or straight commission, many traditional auction companies must charge more to support their infrastructure. Without the overhead costs of a physical event, online auction companies can offer lower commission rates and save the seller hundreds or even thousands of dollars in commission fees.

4. Buy with Confidence

To ensure that “what you see is what you get,” look for an online auction company that offers guaranteed inspections. The inspections should take place at the seller’s location and be published for all bidders to view. The report should generally include:

1. Visual inspection of key components
2. Equipment-specific wear-related measurements
3. Oil and fluid samples that have been analyzed in a lab, as appropriate

A thorough, guaranteed analysis by a trained professional can sometimes yield a better overall picture of the equipment condition than if the buyer were to personally inspect the equipment onsite. For the buyer, this means access to the information needed to make an informed bid and confidence that the item is represented fairly. Look for an online auction company that will guarantee equipment condition and field questions from buyers.

5. Convenience Is Key

Participants are not required to travel to an online auction and may not even need to be at their computer while the auction is in progress. While traditional auctions often limit bidding to the specified time an item is “on the block,” some online auction companies allow bidders to bid on the item beforehand. During the auction, automated bidding with a predetermined limit can keep a bidder in the lead until bidding reaches that limit without requiring the bidder to attend the auction. This allows you to focus on generating more work for your business.

Whether your equipment investment is large or small, online auctions can help you remain agile in today’s marketplace. The quicker you can turn old equipment into cash or find the perfect piece to meet your growing needs, the better positioned your company will be. Effective equipment management will help you gain a leg up on your finances and your competition.

Mike Groves is senior vice president of North American sales for IronPlanet, based in Pleasanton, Calif.