Capital investing: think it through first

Over a century ago, before automobiles and electricity, nothing moved faster than a man on a horse.

Over a century ago, before automobiles and electricity, nothing moved faster than a man on a horse. Back then, if you stole a man’s horse they could, would and did, hang you without much fanfare. Leaving a man stranded afoot in the hostile wilderness that was our fledgling America was akin to a death sentence, and the people of that era treated it accordingly. A horse was most people’s most valuable asset. It counted for more than just about anything they owned, because it could be used for working, riding, traveling and more. Likewise a good firearm, knives of any variety and other tools of the day were cherished possessions and were passed down from one generation to the next. Fast forward 150 years or so … Most people in the U.S.A. today don’t own horses for work, but they own at least one vehicle and myriad other things. 

Many of the things we purchase today are disposable and/or quickly outdated. The industrial revolution has made ‘things’ cheaper, easier to acquire and readily available. Quality counts for little in the short term. Because of this phenomenon, many in the trades don’t appreciate the almost dazzling array of labor saving products in the present marketplace.

Today, the trades have access to, and utilize, a wide array of tools and equipment to make jobs easier, better or faster. Time is money it is said, and anything which can save time (provided the thing’s cost makes sense) is perceived as valuable. Some of you ancients out there might remember using a cold chisel and hand sledge (sometimes called a ‘lump’ hammer) to cut cast iron soil pipe.  How happy were you when the cast iron snapper came out? That one tool increased productivity by at least a factor of eight or more! The perceived value of that tool was readily apparent when you could cut a piece of soil pipe in a few seconds as opposed to as many as 10 minutes. That doesn’t even begin to quantify the wear and tear on the journeyman (or more than likely the apprentice). It didn’t take much figuring to see that the investment in such a tool would return itself many times over.

When you find a tool that fits a real need perfectly, you know it. If, for example, you work on a lot of commercial buildings that have pre-cast concrete walls and you need to run piping through the verticals, how cool is it to have a core drill? Oh sure, you could farm it out, but there comes a time when doing that costs you more than the investment in the core drill, and you will have immediate access to the tool instead of scheduling a core driller to come in. Purchasing a core drill and bits is a major investment, but if you are consistently coring holes through concrete, the investment pays dividends.

Tools that make you faster make you money. Today we have new electronic devices for line location, leak detection, sewer line stoppage and line integrity, water line joining and any number of other handy-dandy things. Just like that cast iron snapper, these new tools cost money. Whether or not you make the investment in them depends on several factors, the least of which is ‘curb appeal’ if you get my meaning. We all want that new Mustang when a Focus will do the same job.

In today’s economic climate, investing in anything that does not have a tangible, immediate return is just not smart business. It is up to you, the business owner, to evaluate each capital expenditure and to project the rate of return on that expenditure. Investing in ‘cool’ doesn’t pay dividends as well as investing in ‘practical.’

Vehicles are a perfect example of this dictum. When you buy a truck or trucks, what are your criteria? Do you get the vehicle(s) that will give you the most utility; have the best service record; are the most versatile? Or do you go for the flash; distinctive paint jobs; power everything; neat wheels? Since vehicles are probably your most expensive capital investment, it pays to take the time and invest the effort to determine exactly what your present needs are and what you project them to be in the future. Keep in mind that even though vehicles are your most expensive investment, the payback on that investment is probably the longest of any capital investment except real estate (a building).

When you need to invest in your company, make sure you do your homework. The time you spend on research and investigation of a new vehicle or piece of equipment is time well spent. No one needs to tell you how hard it is to make money today, when you spend it on improving your company, spend it wisely and dearly.

The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at[email protected].

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