If a billionaire business tycoon could give you one piece of excellent business advice that explained how he grew his businesses from day one, would it be of use to you? Would you pay attention to what he has to say? If so, here are the simple words of wisdom he wanted the world to hear: “If it appreciates, buy it. If it depreciates, lease it.” – Billionaire Oil Baron J. Paul Getty
Let’s delve into that a little further and see how it applies to the technology sector. There are extremely few assets that a company can purchase that will increase in value over their lifetime. The same is true of all manufacturing equipment, machinery and vehicles. Even the furniture and fit-out of your company office premises will need periodically updating and replacing. But it is in the IT and Communications technology space that the pace of change and improvement has increased the most and continues to do so relentlessly. This is the main reason that CTECH’s simple low-cost monthly subscription makes so much sense. You only need pay for what you use, and you are guaranteed to always be on the latest software release, without the time-consuming hassle of needing to manage your own technology upgrades or pay high maintenance costs, it is all rolled into the same straight forward monthly fee.
- Paul Getty also explained that it is the use of, not the ownership of an asset that is important to a business. In order to grow any business, all they need is access to the latest resources, production methods and tools. Owning the asset is irrelevant. That is exactly the case too for communications technology, nowadays there really is no need to ever own it anymore, just consume it like a normal utility.
An alternative way to look at the buy/lease decision process is to compare it to your payroll. You don’t pay your employees 3 years in advance, so why pay for your assets in this way? Employees are paid monthly, therefore spreading the cost. The cost of all assets should be spread over the life expectancy of the asset.
In summary, do not tie up your capital in expenditure on assets that are going to become out of date and depreciate in value. Retaining obsolete assets only means that your company working practices will become less competitive over time in your market and allow your competitors to have an advantage over you because they are using their financial reserves wisely to always ensure they are at the forefront of the latest technology, production methods and services.