New or used?
An important way of reducing risk when starting up a new business is to keep costs as low as possible. One way of doing this is to do your homework on the price and availability of used vehicles and equipment before you rush into buying something brand new. Just make sure that whatever you buy is reliable; faulty equipment that stops your business from producing can lose you money and credibility.
When considering a used vehicle, first get the Automobile Association (AA) to do a full technical check-up on it. They will tell you if it is worth the asking price, and alert you to any technical problems that might cost you money later. To further reduce the risk involved in a used-vehicle purchase, you can also buy insurance from the AA that will cover the cost of major mechanical failure. Visit the AA website
for more information.
Finding the right kind of finance
A useful shortcut to comparing the cost of vehicle finance from different banks is through the website of Bankmonitor
. The Automobile Association
also offers a service of helping you find a vehicle; they also offer arrange financing for new and used vehicles.
Insuring against theft and lost earnings
Insuring your vehicles is essential, as the success of your business often relies on them, and it is unlikely that you would have the cash reserves to replace a stolen or damaged vehicle. If you are insuring for the first time, you may find it useful to talk to an insurance broker. They deal with a range of insurance companies, so should be able to advise you on a variety of options (and prices).
Losing a vehicle also means lost earnings - you might lose income if you can't deliver by the promised date or time. You need to assess the risk of this, and talk to a broker or insurance company. They will also be able to help you consider insuring against lost earnings.
Keeping your asset on the road
Don't expect your vehicles to go on forever without being serviced, even though there never seems to be a good time to do it - the vehicle is either too busy or there doesn't seem to be the money. Just plan well in advance, based on how many kilometres the vehicle will do. Diarise the workshop booking so that you can plan around it, even if you need to move it back a day or two when the time arrives. Here are some useful tips:
- Use a workshop or mechanic that you can take the vehicle back to if anything's not right after the service, and make sure they understand that you might be losing revenue if the vehicle is not operational.
- If necessary, use a workshop that is accredited by the Automobile Association; this will give you the opportunity to raise any complaints directly with the AA if you don't get satisfactory service from the supplier.
- Breakdowns or accidents can happen at any time, but you can reduce the impact these have on your business by having a back-up service. The Automobile Association offers businesses a breakdown and towing service (with various useful add-on arrangements like legal advice) that is, to an extent, an insurance policy against down-time.
After spending many thousands of rands on a vehicle, make sure it is operated with care. An advanced driving course for the driver of the vehicle may be well worth the cost, especially if they are driving it all day.
Planning to replace
Your vehicles won't last forever, and you need to plan to replace them. This planning must find its way into your business accounts (where the value of the vehicle will be amortised - reduced as its value decreases) but you also need to be putting some money aside each year for the new vehicle, even just to get a good-sized deposit down.