What is equipment acquisition and management?
Equipment acquisition and management includes the approaches to renting, purchasing, and maintaining the tools and machinery that are used to develop a product or deliver a service. “Equipment” can also be extended to include technology equipment for program and business operations (e.g., laptops, smartphones, etc.).
Why is it important?
Equipment is an investment, and—depending on the value of the equipment, what it’s used for, or how frequently it needs to be purchased or replaced—it can be a significant investment for an employment social enterprise. Good equipment acquisition and management is important because it:
- Impacts the organization’s ability to do work: For many social enterprises, equipment is needed to perform core business operations, whether that means fleet vehicles, power tools, or manufacturing machines.
- Is critical to team member safety: Especially for service-focused businesses where team members frequently use equipment to perform manual labor, equipment can be critical to team member safety. Ensuring that equipment has been well-maintained and is ready for use can help to avoid injury.
- Contributes to development of skills and competencies: Equipment maintenance can be an important part of team members’ skill development, and organizations should consider ways to incorporate these skills into a team member’s overall progression of increasing responsibilities.
- Helps to manage a large expense or asset: Regardless of whether an organization purchases or leases / rents equipment, it can be a large cash outflow. The return on investment and the trade-off of financial statement impacts should be closely evaluated before commitments are made.
- Can be a strategic component of growth: As an employment social enterprise is growing or considering growth or expansion, paying close attention to evaluating the kind of equipment that is needed and paths to acquire the equipment can impact the feasibility of the organization’s growth options.
- Getting started with the basics
- Identify what types of equipment are most important to the organization: Your most critical activities and organizational processes likely have some equipment supporting them – computers for sending and managing invoices, vehicles for transporting team members to work sites, or tools for completing jobs. Determine what kinds of equipment would be needed to carry out these activities and processes, identifying any important gaps, including those in desired features or functions of existing equipment. Additionally, identify if there is an excess of equipment that does not serve a critical function for the organization, as that equipment may be a greater burden than the value it provides.
- Make sure equipment acquisition is in line with organization needs: Before acquiring equipment, first evaluate whether the equipment aligns with the organization’s needs. Conduct a cost/benefit analysis to determine if the additional equipment will increase earned revenue by more than its cost. If the equipment need is clearly tied to the employment social enterprise’s mission and impact (e.g., furthering skill development for team members), consider whether some or all of the equipment costs can be covered by contributed revenue.
- Keeping momentum with high-performance practices
- Be strategic about renting, leasing, or purchasing equipment: There are a broad range of trade-offs to renting, leasing, or purchasing a piece of equipment. Each option has a different impact on the financials and tax liability for the organization, and in some cases, one option may be better suited for the particular use case or need for the equipment. Create a financial model to understand which option creates more value for the enterprise in the long term in order to optimize the strategic contribution of your equipment.
- Determine the value and full lifecycle of your equipment: Focusing especially on the equipment that the organization has purchased, is of highest value, and/or is most critical to the organization’s operations, it is helpful to ensure there is a clear understanding of that equipment’s value and its lifecycle. Consider conducting some form of an asset audit in order to verify the existence, location, value, and state of these most important pieces of equipment.
- Integrate equipment acquisition and management into long-term planning and impact: For employment social enterprises, equipment can have an impact dimension in addition to implications for finance and operations. High-performing organizations will closely consider how equipment acquisition and management factor into long-term organizational growth, and will also consider how equipment acquisition and management affect the organization’s mission impact.
- Understanding the 5 Stages of Asset Lifecycle Management
- Construction Equipment – Rent, Buy, or Lease?
- Equipment Leasing Guide
- 9 Tips for Making the Right Equipment Purchase
About Emerging Market Enterprises
Emerging Market Enterprises (EME) is an advisory firm based in Washington, DC, that works with startups, scaleups, and intermediaries in the impact ecosystem. EME provides a variety of services to its clients and partners to include market strategy, operations improvement, and leadership coaching.