Sunday, April 5, 2009

Saving money in a down economy (Preventative Maintenance)

Was speaking with my friend James Staton CEO of Debriant’s Office Services. We were discussing business and ethics as we often do and the state of the economy. He lamented over the fact that with businesses pulling back more and more people would reduce if not eliminate their purchases of new equipment to hedge their financial positions in this questionable economy.

During the course of the conversation a truth struck me about Jim’s business. What does most every business have in common in the modern age

  • Computers
  • Printers
  • Fax Machines
  • Type writers (depending on age)

Debrriants specializes in preventative maintenance – extending the life of the equipment you have. The benefit is this defers the need for a cost capital outlay which you would in turn have to capitalize and set up a depreciation schedule on your taxes. You could n practice expense the cost by having the equipment services and repaired without adding a new liability to your business especially if the asset is fully depreciated.

Lets do the math for a second – lets say you bought a $1500 printer that is fully depreciated over the course of 5 years – no more tax deductions due to depreciation, Lets say its life is also 5 years. Through an effective PM program you are able to expense the repairs and lets for the sake of argue say your cost end up for the next 5 years being 1/3 of the original face value. This means toue expensed another $500 give or take. This pushed the life of the machine from 5 to 10 years before a new purchase. This extension of its life also means the net current value of the $1,500 spent is less than it would have been had you spent it in year five.

The best way to think about PM is using your car. You have it serviced every 3-5K miles to reduce wear and extend the life. The same applies to your equipment. A little care goes a long way.

I asked Jim if he would be willing to work with people to help them put PM programs in place in an effort to extend the life of their equipment and save money. He agreed – you can call him at his office to setup a conference and arrange a consultation as follows:

One of the things I respect about Jim is the ethos of his business model is simple – the success of his business is directly proportional to the success and cost savings his company can bring to bear for you.

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