A Capital Idea
It appears that the economy has turned around and growth opportunities appear better than they have been in years. Our annual State of the Industry survey, which we reported on in the February issue of Roofing Contractor, bears this out. If you haven’t seen the results, check them out online at www.roofingcontractor.com.
Along with the feeling that the economy is beginning to pick up steam comes the notion that it may once again be time to reinvent processes and procedures around your shop. Many roofing contractors find themselves moving out of the desperate days of lowering headcount and reining in expenses however and wherever possible. I believe many roofing contractors should seriously consider new capital investments to improve and sustain their business.
The kind of capital investments roofing contractors are likely to make this year may include new computerized metal fabricating machinery, truck-mounted cranes and other fleet equipment, computer/business processing systems, and others. In addition to prospects for improved work flow, there are several other things that make the timing right for capital investment, including attractive finance rates and the prospect for greatly improved productivity.
If the timing is right in your business for a capital expansion, the prevailing low finance rates will bring the overall cost in at historic lows. I know what you are thinking: “What financing?” True, it is not as easy to finance capital improvements as it once was, but if you shop around you can find funding and it is cheap. The after-sale service on financing may be just as important as what you will need on your new capital improvement, so compare service, not just price.
Also, as business improves and the demand for some capital equipment rises, prices will rise and availability will become an issue. Your old equipment may not only be in need of more repairs and subject to more downtime than new equipment, but it may never have operated as efficiently as today’s more technologically advanced equipment. Of course regular investments in computer software and hardware are needed to keep both the back end and front end of nearly any roofing business. I might add that the resale market for fleet and some other capital equipment is strong, so trading up may not be as expensive as you think.
Any capital expenditure should be made with due caution and only after studying all available options. Does the need exist now and in the future? How will the added capacity impact the rest of the production cycle? How much new work will be required not only to pay for the investment, but for the investment to pay dividends back to the enterprise?
Capital improvements, by their very nature, are long-term propositions. No matter what you buy, you will be living with it for a long time. That makes your initial investment, the time to study all available options, extremely valuable.
Last, but not least, check with your accountant to find out what the impact of a capital investment will be on your tax exposure. Benefits from Section 179 of the Internal Revenue Code are in place for 2012 and may be reduced in coming years. As the economy continues to improve, tax benefits to spur economic growth may be diminished or disappear altogether.
Of all the things you gamble on in 2012, such as hiring on new crews or taking on a demanding new client; the capital investment you make this year may be the one thing that improves your competitive footing and sustains your enterprise well into the future.