When your business grows, and we hope it does so continually, there is a need for more resources to fulfill client expectations and to scale up effectively.
It could be new and upgraded equipment, more employees, a bigger space, or even new and better furniture, especially if you plan on having client meetings at your office.
All the new stuff costs money. There are several financial houses that are in the business of offering SME loans for business needs like yours. However, the catch is that you need the extra resources that you get for growing your business.
The dilemma now is, should you make a permanent investment or take things on rent? Should your employees be freelancers, or on contract?
Let’s look at the pros and cons of each, and let you decide for yourself.
Equipment As you grow, your business needs new computers, better networking technology or other machinery. Is it worth leasing or will you use your SME loan?
Benefits of leasing
-Get the latest equipment
-No down payment
-Keep up with competition with sophisticated technology
Flipside of leasing:
-You pay more
-You pay even when you don’t use the equipment
Benefits of buying
-It’s simpler than leasing
-You control the maintenance schedule
-There are tax benefits
Flipside of buying
-Large down payment
-You have to live with obsolete equipment for longer
Employees Do you have regular work for your employees or would a freelancer model work better for you?
Benefits of outsourcing
-Freelancers are cheaper since you pay only for the duration of the project
-You can hire an expert only for the duration of the project
-Freelancers in other countries can work while you sleep, saving you time
Flipside of outsourcing
-No quality control
-Low chance of collaboration
-Lack of camaraderie with other team members
Benefits of hiring
-Hired employees are more loyal since they have invested time and energy in your business idea
-Better team collaboration
-Better cost to employee ratio
Flipside of hiring
-You have to pay employees even when there is no work
-Faster turnarounds look bad for your business
Space When you grow, you might see a need for new office space. Maybe you just outgrew it, or you need nicer, better spaces to work from. Here’s how you decide whether you should lease or purchase.
Benefits of leasing office space
-You can get an office in a good, prime location
-No maintenance or legal headaches of ownership
-Money is not tied-up in real estate
Flipside of leasing office space
-Fluctuating and rising costs with every lease renewal
-After all the years of paying rent, you don’t own the property
-The hassle of looking for new locations in case the landlord doesn’t renew the lease
Benefits of buying office space
-Fixed costs, year on year with a long-term mortgage
-Get tax deductions on the mortgage interest, property taxes, etc.
-Source for income through leasing extra space
-Property appreciation and option for retirement
Flipside of buying office space
-No flexibility for growth or easy change of location
-Large down payment
-Long duration loan
Furniture When you started your enterprise, you might have been ok with second-hand or hand-me-down furniture. However, as the business grew, you need new, better furniture. But should you make a large investment by buying it all, or do you rent it?
Benefits of leasing furniture
-You can get fancy looking, trendy furniture
-It costs significantly less to rent
-You can change and upgrade regularly
Flipside of leasing furniture
-Eventually you end up paying more
-All those years of paying rent, and you don’t own anything
-It shows up as liability on your finances
Benefits of buying furniture
-It works out cheaper in the long run
-Get tax deductions on outright purchase of office furniture
-It belongs to you to sell, lease, upsize or downsize
-It shows up as assets in your finances
Flipside of buying furniture
-Large down payment
-You can’t change it for many years to come
Study the pros and cons, and make a choice depending on your needs and spending capacity.