5 Steps to Selling Transport, Plant and Machinery
April 11th, 2017 by Sue O'Reilly
A great part of the challenge when selling used equipment comes from the fact that sales are not a hard science, and many factors are highly subjective. If used equipment sales are not properly managed, the seller can end up receiving much less than what the asset is worth, or may be unable to complete the sale at all.
There are several important steps for carrying out an equipment sale successfully:
- Taking the decision to Sell
- Equipment valuation
- Determining the optimal sales approach
- Contacting potential buyers
- Negotiation and transaction
1. Selling Decision
Used equipment sales should be approached as any business decision, where all factors are weighted to determine what is best for the company. In simple terms, used equipment should be sold when the economic benefit from doing so exceeds the benefit of keeping the unit until the end of its service life.
Pieces of equipment with low utilisation and high ongoing costs are generally the prime candidates for a sales decision. This equipment has a high cost per use, and renting it as needed is often the best decision.
2. Equipment Valuation
Equipment valuation requires a certain degree of financial acumen, since it becomes necessary to consider asset depreciation and current condition. Transportation costs and equipment mobility should also be factored in during the valuation process.
Asset values are always subject to the market and while classifieds can give great assistance to the value of assets being sold, it is also important to note that the prices published are normally asking prices, whereas the right transaction price can be significantly lower.
If equipment valuations are right you will avoid underselling or not selling at all after investing the effort to do so.
3. The Optimal Sales Strategy
The best sales strategy for used equipment is determined by the characteristics of the transaction and the outcome sort on price and timing. For example, the item can be auctioned if selling fast is the top priority, but this approach might not be suitable if the owner is more concerned about selling at the highest price possible, even if it takes some time. The following table provides a useful guideline for determining the best channel depending on the characteristics of the sale:
It is always best to have a reasonable timeframe in mind for the sale of an asset. These are depreciating assets and while prices can fluctuate in the short term they always go down in the medium to long term. A lack of action gives rise to a likely loss of return.
4. Contacting Potential Buyers
There are many channels through which customers may be found, including printed media, the Internet or direct phone calls. It is important to note that sales efforts have a cost, and the best channel to use is determined in great part by your budget and by the sale strategy as described in the chart above. In general, buyers can be separated into three main categories:
- Premium Buyers: These are buyers who need the equipment urgently, and have the cash availability for a purchase. However, they typically are a very small percent of the pool of potential buyers and in the market randomly and always in small numbers.
- Willing Buyers: These buyers are convinced they want the equipment, but are not compelled to purchase it like premium buyers. They again represent only a small portion of potential buyers and will be discerning if in the market.
- Opportunistic Buyers: These buyers are after a great deal and open to multiple options, hence the strongest selling point when dealing with them is price.
Ideally, equipment should be sold to premium or compelled buyers because they are willing to pay the highest prices due to their greater need. However, this market for any given asset may never eventuate. It is important to be aware there is likely competition in the market and your asset might not have the best combination of make, model, age, usage, features as your competition.
5. Negotiation and Transaction
The goal of the negotiation process is reaching a price and payment terms on which both parties agree. Of course, as a seller it is in your best interest to get the highest possible price, but it is necessary to assess the market and what your potential buyers are willing to pay to ensure you get the best out of the market in a reasonable time frame. The following are some questions that must be answered before closing a sale:
- Are you dealing with a premium, willing or opportunistic buyer?
- Should you accept the offer, or is it possible to get a better one?
- If you are not receiving calls, is the asset priced too high or are you using the wrong channel?
Used equipment sales are a business on their own, and the process can be involved, complex and subjective. You may want to go on the journey yourself or use an agent to assist, regardless the best outcome is to exchange the asset for cash in a reasonable timeframe so this money can be used for better ends. To start the process and to not conclude it will ensure losses to the business.
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