TILE TOOL PLANNING FOR 2021 TOOL PURCHASES BROADLY FALL INTO THREE CATEGORIES: TOOLS THAT HAVE WORN OUT THAT NEED TO BE REPLACED; TOOLS THAT NEED TO BE UPGRADED; AND TOOLS THAT REPRESENT A NEW EXPANSION TO A BUSINESS.
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he first category is pretty much a "no brainer" for trade businesses. A worn or inadequate tool can cost a tile installer money — though there are times when it's difficult to set aside a tool you have grown used to and come to rely on. Upgrading tools is a more difficult decision. The most rapid innovation has been happening with cordless power tools, but that innovation has been somewhat uneven. It's true that you can now buy more powerful, longer-lasting, lighter power tools than ever before, but how much of an advantage do they really deliver? The one type of upgrade that is almost certainly worth it is one that delivers either more safety or better accuracy. Safety these days especially includes any exposure to dust or airborne particles, as these have become an increasing health concern. In terms of accuracy, laser levels in particular have continued to evolve. Buying tools so as to either increase the amount of work that can be performed, or to add a new line of business often comes down to a risk assessment. Typically the cost of the tool may only "work" if it can be amortised over more work in a new area than a business currently performs. That means the business owner needs to work up a reasonable projection of how much revenue would
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increase after the purchase of the tool, as well as a measure of the profitability of that work.
TOOL PURCHASE ALTERNATIVES In terms of managing finances for purchases such as tools, there are two varying tracks regarding how to go about this during a time (like the present) when the future is not so much bleak as uncertain. It's quite a normal reaction to respond to this uncertainty by limiting borrowing commitments. That can mean paying down any form of debt, including credit cards, as much as possible. This is a sound, conservative practice for many businesses. The second track is to go in almost the opposite direction. Many businesses see a period of uncertainty as a bad time to take out a business loan. But does that really make sense? If we know that there is going to be a rough patch of six to 12 months sometime in the next 30 to 36 months, but are confident that the market will return to something like 2019 levels afterwards, what is the best way to plan to get through that rough patch? One way is for a business to maximise the total net amount of capital it has at its disposal. That could include, for example, taking out a loan, even though
you do have enough current income to keep up with expenditures. Your business would then have to cope with the extra costs of that capital — and you might never need to really use it. At the moment, though, interest rates on business loans (excluding application and upfront fees) are down to below 4.0% in many cases. That's only a couple of percentage points above inflation. Taking a loan before you absolutely need it does help a business get around one of the vagaries of how financing works. A business can choose to apply for a loan when they are going well, then utilise those funds when things get a bit tougher. But if that same business waits until things are getting tougher, and then applies for a loan, they are quite likely either not to get it, or to find that it is much more expensive. The Swiss (who know a thing or two about banking) have a saying that covers this type of situation: "When it rains, the banks take away your umbrellas”. To determine whether taking out a loan makes real sense, a business really needs to do some "contingency analysis" — which is a fancy way of saying you need to sit down with a spreadsheet, and work out what