The Acquisition Decision
May 1, 2006
Your bid on a large project for a valued client has just been accepted, and now you are concerned with the resources available to complete the work. One of the questions going through your mind most likely pertains to the equipment you have available for use. Should you acquire another gun or maybe consider this your opportunity to upgrade your RTK unit? Regardless of what instruments are chosen, the bigger dilemma for many firms is choosing a method of acquisition.
Many people opt to purchase new equipment with a large cash outlay, while others consider the option of renting their instruments. There are good arguments for each option, but which one is right for you? You may think the answer is obvious, but you shouldn't jump to any conclusions until you review all the pros and cons and assess the costs and benefits in dollar values.
Linda Pudder, director of operations at Galileo Instruments, a GPS equipment dealer located in Orange County, Calif., says her clients usually start at the same place in their decision-making. "We specialize in both GPS equipment sales and rentals, so we understand how business owners come to both decisions. Regardless of the situation, they seem to start out with the same considerations. For example, the questions they pose to themselves are, "Will our projected workload support long-term use of the equipment or is the increase in business only temporary?' "Will our productivity be enhanced by new technology or should we stay with what we know and are already trained on?' "If we acquire the equipment, how easy will it be to maintain and ensure its continued operation?'"
Evaluating the options to own or rent equipment should address the questions you have and provide you with a solution. Let the following Q and A segment help guide you in choosing to rent or own.
What instrument will be best for your applications?If you know you'll be doing certain jobs repeatedly, eg., ALTA or topographic surveys, there is an inclination to own the equipment. However, if you are trying to meet a sudden influx in work, the rental option could help you ramp up your resources to get you through your busy season.
Greg Borchard, owner of Borchard Surveying & Mapping in San Clemente, Calif., considers L1 GPS to be indispensable on many of the jobs he does. "I have to use GPS. I can accomplish in four hours what might take days with conventional surveying [equipment]," he says. Borchard runs a smaller firm that always has a steady flow of boundary jobs and aerial control jobs. However, quite often there is a sudden increase in his workload that spurs the need for additional instruments. He chooses to rent additional Thales L1 ProMark2 receivers since he is familiar with how they operate and likes the user friendliness of the software included with the system.
Pete Stankovich, president of MP Surveyors Inc. in Irvine, Calif., says, "Survey equipment must be reliable for field work in a variety of environmental conditions." As a larger firm in Orange County, MP Surveyors takes on varying types of jobs. Having the right instrument in the field is crucial to keeping its operations running efficiently. When Stankovich makes the decision to acquire a new instrument for his fleet of equipment, his motivation lies in the instrument's reliability and reputation. "Choosing this optimal equipment is largely based on the manufacturer's reputation within the industry," he explains.
What is the training time expected for learning the new equipment?If you are in need of new technology to increase your overall productivity in the near future, purchasing a system that your crews can be properly trained on-quickly-is a logical choice. If you'd like to gradually introduce yourself to new equipment, renting a system will allow you to familiarize yourself with the new technology for only a minimal financial commitment.
In Borchard's case, he will sometimes contract out his static GPS work to fellow surveyors but prefers that they use the ProMark2 system. "I really like the reports Ashtech Solutions creates from the processed data so that when I have to present support for my work on paper, it's always consistent. If necessary, I'll do a 50/50 training session with the guys-50% in the field and 50% on Saturday. I'll also run with one of them in the field at the beginning to make sure they are using the receivers correctly."
Stankovich places a high priority on training his crews on new equipment as well. "Training is usually budgeted within the acquisition cost based on the estimated time needed to complete the training," he says. Needless to say, training should always be factored into the decision to purchase or rent surveying equipment.
What about the system becoming obsolete?Advances in surveying equipment are occuring all the time. In order to compete you have to be thinking one step ahead of your competitor. As a consumer, the concern that your technology will be current for only a short time is very common. And when the ticket price for the technology you want qualifies it as a capital investment, you'd like to think it will remain the latest model for years to come. But chances are, there will be something more advanced six months or so after your purchase. If it is important that your firm employ the latest technology regularly, renting equipment long-term at a discounted price is a viable option. This will allow you to stay current with the latest equipment without making a large cash outlay every few months.
"The fear of becoming obsolete with the equipment in a way lights a fire under me to stay current," Borchard says. "I don't want to get too far behind. It's important to stay current, stay competitive." It's clear Borchard believes that moving ahead with technology is worth the hard costs involved. Stankovich, however, approaches this matter from a different point of view. "Technology within the surveying industry is fast-paced," he says. "Enhancements to equipment happen frequently. However, the decision to purchase new equipment falls solely on our present/future business needs and client demands."
What will maintenance of the equipment entail?As an owner, your warranty will guarantee support and repairs for anywhere from 90 days to one year. Once that period has expired, the responsibility of keeping your machine in good shape falls completely on you. At times, finding a place qualified to repair high-tech equipment (besides the manufacturer) may prove to be trying. More often than not the repair company you do find will provide a rental to keep you from having any downtime while your unit is out for repair. If you choose to rent your equipment rather than own, the rental company should save you from any repair headaches by assuming the responsibility as part of the rental contract.
Pudder explains, "I've had customers call me, rather panicked, inquiring about options for repairing equipment that has suddenly gone out of commission. By taking advantage of our rental program while we manage the process of repairing their instrument, they barely miss a beat."
What about the rent-to-own option?It's evident that many situations are more conducive to either renting or owning; however, you may be able to take advantage of both options with rent-to-own programs offered by your local equipment dealer that provides both sales and rental services. "Several of our customers have taken advantage of the rent-to-own program we offer," Pudder explains. "The possibility of applying a portion of the rental fees to the final purchase price work out to be logical for those who are still on the fence even after analyzing all the options."
Chuck Willess, owner of Gold Coast Surveying in Vista, Calif., was able to acquire new surveying equipment through a rent-to-own program that applied 90 percent of his rental fees accrued within a certain time frame to the purchase price of the system. "No matter what the job calls for, equipment rental is always a factor to consider," he says. "Luckily, with the recent advances in technology with regards to core station networks, specifically throughout the San Diego and Orange County regions, the need for both a base station and a rover receiver is becoming a thing of the past. With the convenience of such a network, single rover receiver rentals may be worthwhile if the logistics of transporting the unit are well thought-out and the price is right."
Analyzing Costs and BenefitsOnce you've considered which option will lend itself best from an equipment point of view, the next step is to analyze the costs and benefits of renting and owning in monetary terms. The commonly used cost/benefit analysis can indicate where each decision will lead financially. You can review the two scenarios presented on the previous pages to see how two different surveying firms came to the right decision for their situations. For the sake of simplicity, the analyses look only at the tangible costs and benefits of owning and renting new equipment. When conducting your own cost/benefit analysis, the intangible aspects and any specific factors individual to your business should be included.
Before writing out a check or sending in a lease agreement for new equipment, surveyors and surveying firms should weigh their options wisely. They could discover that becoming a proud new owner of the latest surveying equipment just might be the answer for the success of their business-or the second best alternative.