Maximize Your Investment Returns
One of the most important decisions you can make in running your business is when, and on what, you should invest in. The second part of that decision is how to pay for the investment. These choices can be overwhelming.
Here’s a quick checklist to determine if investing in your business is the right thing to do.
What will change?
Most investments are made to either grow sales or lower costs. Understanding the impact of your investment on your stores sales and costs is the first step in determining the payback on an investment. For example, upgrading your pumps may result in a sales increase both at the pump and in-store. Replacing older equipment may include a new product warranty and provide greater uptime; which means less lost sales and higher customer satisfaction.
If your competition has a ‘modern’ image and your site has dated pumps, how many customers are passing you by?
What other risks exist?
In addition to the straight forward sales benefits, are there other impacts to your business that should be mitigated? Can your site withstand the publicity or charge backs that a payment breach may create? On the environmental side, are there risks that should be mitigated before they become a significant liability to your site? Often called intangibles, these risks are real and could have a significant impact on your businesses value.
What is the cost of waiting?
If you’ve been putting of a project, will waiting longer cost you more? We may be entering an inflationary period, with both interest rates and equipment prices rising. Service technicians are a scarce resource, and the demand for their time will increase significantly over the next couple of years.
How will I pay?
NACS reports that many c-stores earn over 20% return on invested capital (ROIC). Consider if your cash is best spent investing in additional sites and land, or in depreciating equipment. Many companies use financing to effectively improve their ROIC by balancing debt with capital. Equipment financing has the benefit of having fixed interest rates, a benefit that provides certainty on your monthly payments.