Well that's what the EC's say - here's a taste of what your banker will/might say: Keep your inventory at the absolute minimum - it costs you and nothing has moved yet. Re 30 day accounts - lets see 50 clients with 15 to 20k extensions = a million dollar line of credit and it's costing you $7k a month in interest just to cover their credit extension. With EC's in the warehouse now you will be dealing with shrinkage and misplaced inventory just like the big orange - take a look at how much that costs those fellas every year on one of their annual statements. Also now your insurance goes up. Separate people answering the phone in the back vs counter staff, you will be dealing with increased staff overhead because the one can't help out the other and the orders phoned need to be communicated to the counter staff so they know what to give who = more people overhead.
Make sure the big equipment you rent out generates sufficient income to cover actual costs of ownership, here's an example. Big widget costs $5000.00 new. You buy 1, how much do you need to rent it out for: 5k depreciated linearly over 5 years (rental life) = 1k per year. Annual service costs $300.00 Cost of labor on goods sold (rented) at say an hour every time you rent it (15 mins getting it loaded, same for unloading, filling out forms exacting payment) times the number of times it's rented, say 1 times a week = 52 hours of time per year at $15 per hour = $780 per year. Insurance on rental unit for theft or destruction = $50 per thousand per annum = $250. Interest on money borrowed to buy the widget @ 8% = 400 per year. Non labor administrative costs = 250 per year. One repair for damaged piece (not customer fault) = $350. Did I forget anything? We are now up to 1000 + 300 + 780 + 250 + 400 + 250 + 350 = 3330 per annum in operating costs alone, no principal has been paid back and no profit has baan made. $3330 + 1000 per year in returned principal (complete repayment over the life of the unit) plus 1000 per year profit (modest 20% margin) makes 5330 per year or $102.50 per rental. Just my 0.02. Good luck Ann
