Technology buyer's guide

How to buy office equipment

www.victorgad.com When the head of a now-successful accounting business started his firm, he thought he’d prepared for everything, taking meticulous care to estimate all expenses.

But when it came time to buy all the necessary office equipment, he racked up five figures' worth of debt on computers, fax machines, printers — all of which he put on credit cards. "If I could go back, I would have spent a lot more time planning what I needed, shopping around and working out financial arrangements,” he says, asking that his name not be used. “This crap almost stopped my business before I even opened the doors and I'm still paying for it now."

It’s a common misstep. "There are always extra costs that companies don't really think about until they need to spend the money, and office equipment is a major one," says Alfred Marcus, a professor and small-business expert at the University of Minnesota's Carlson School of Management in Minneapolis. "You need to be very smart because while this equipment will do wonders for your business, the expense goes straight to your overhead.”

The most important guideline when buying equipment, experts say, is to have a plan. This means figuring out exactly how much of a budget you have and determining exactly what you need. When a business is just launching, small-business owners get a loan or use credit cards and they suddenly have quite a load of money burning a hole. A trip to Office Depot or an order of equipment online seems easy and fun.

But the best small-business owners watch their funds closely right from the start, experts say. They recommend that owners do a cost-benefit analysis on every piece of equipment.

"Expense planning is very important for all businesses, but moreso for newer firms," says Pat Tollefson, program manager for the Center for Family Enterprise at the University of St. Thomas. "Know exactly what you need and what you can afford to spend without putting yourself in too much debt."

There are some things that just about every company is going to need, including computers with appropriate software, answering machines or services, fax machines, printers, copiers, mail and package delivery, basic office supplies, desks and other furniture.

An extra expense could include furniture or equipment designed to make the office look more professional. While image is important, small-business experts say filling an office with extra equipment is simply a waste of money. The same also applies to advanced computer systems. The key is to determine exactly what you need your computers to do and find the ones that will do that at the cheapest cost. Bigger isn't always better, especially for a company just starting out.

"You need to make sure you're always getting the best value for your money," says Joy Lipari, manager of product marketing for Xerox. "Most small-business owners aren't very tech savvy. So, it's important to work with somebody who is and can help you find exactly what you need, something that's easy to use, efficient, flexible and doesn't cost a lot."

A helpful hint from Lipari is to look at machines that combine different tasks. There are a lot of them out there. For example, Xerox offers the WorkCentre M15 and M15i, which combine copying, printing, scanning and faxing functions for under $1,000. Others warn that such combination machines might require more repairs, so check around before buying and get a repair contract.

The point is that it's not necessary to fill the office with bigger, flashier gizmos. Just get what you need.

Others recommend working with a company or products you're familiar with. "That's very important to us, which is why we only work with Macs. We know how they work, we don't have problems with them and we know how much they cost," says Cindy Koppelman, owner and president of Minneapolis-based Arthouse, a ten-year old printing firm. "Office equipment is one of those things that small businesses don't want to spend time thinking about. So take some time, do some homework, figure out whom to work with and then just make sure everything works…and that you don't spend too much."

One way to cut costs is to buy used equipment. Lots of times, defunct companies will hold auctions on equipment as they go out of business, providing decent equipment at bargain prices. The same is true with liquidation from major corporations.

If you need to buy new, there are some options, as well. The most obvious is paying cash or using credit cards. While cash leaves you debt free, it can drain money needed for other expenses. Using credit cards frees up that cash. Just be sure to look at interest rates, which can sometimes bury a small-business owner.

Bank loans and leasing are also options. Most banks give general small-business loans that owners can use for whatever they need, including office equipment. Some, such as U.S. Bank,  have specific divisions set up to help companies looking to purchase equipment.

"We have 100 percent financing and we can usually turn a deal around within a day. Plus, the division is set up to work specifically on equipping businesses, so the client is working with someone who understands the needs," says Gary Manney, senior vice president of small-business banking, in Roseville. "There's a benefit in working with a financier who has the resources."

Of course, there are also other loans, including those from the Small Business Administration. And various small business and entrepreneurial associations will sometimes have deals with vendors to help upstart firms get equipment cheaper.

A last piece of expert advice is to remember tax incentives, like deducting all or some of the newly purchased equipment costs from the federal income tax return and checking into possible state tax savings.

"There are a lot of options," Marcus says. "The most important thing is to look at all of them and figure what will work best for you and your company."

Jim Martyka