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Going once, twice, going online
1 Oct, 2008 By: Mike Groves Landscape ManagementNo matter what size business you run, a significant percentage of your total operating cost is wrapped up in equipment. How that investment is managed can make a big difference to your bottom line.
 Green industry professionals can tap online auctions to sell old and/or under-used equipment. |
One effective option for managing the acquisition and disposal of equipment is using an online auction service. Online auctions offer many advantages that can help you better manage your equipment — and increase your related returns on investments.
An online auction can be a more-profitable equipment management tool than traditional options such as dealer trade-ins, classified listings and traditional auctions. Sellers can achieve faster and more profitable equipment sales through online auctions because they typically offer lower transaction costs, fees and commissions. Some sellers realize up to 20% higher returns by using online auctions instead of traditional auctions. Buyers can research, shop and bid without leaving their businesses in search of equipment.
Online auctions have been around for several years. Here's a quick overview of how they work:
1. Be part of a global marketplace. One of the biggest advantages of an online auction is that equipment is made available to potential buyers from all over the world. This means more competitive bidding and a better price for sellers.
Buyers can realize better, more-targeted results in their searches for equipment through online auctions. Finding the right piece of equipment at the right price is more feasible when buyers look beyond local dealers and regional auctions. Buyers can compare equipment separated by thousands of miles side-by-side, at the time and place most convenient to them.
For sellers, an increase in available buyers means an increase in demand. This produces more bids per lot and higher price realizations.
2. Move your equipment more quickly. Online auctions can get nonproductive, used equipment off your books faster. An online auction company can hold auctions more frequently without the risk of inclement weather or other obstacles common to traditional auctions.
In addition, one-owner and hosted auctions can be held at the landscape professional's discretion, with a significant degree of control over price and timing. This means you can turn your equipment into cash within four to six weeks.
Online auction companies also can help businesses better match equipment purchases to changing business needs. If your business wins a bid for a project that requires you to quickly add several pieces of equipment, for example, an online auction company instantly can show you a wide range of options. However, if your business changes unexpectedly and equipment needs to be sold quickly, online auctions can move the items within a few weeks, accessing potential buyers from around the globe.
3. Reduce the cost of selling. Sale price is only part of the profitability equation: It also costs money to sell equipment. However, sellers can pocket more of the sale price by going through an online auction instead of a traditional auction. This cost reduction can be realized through:
No transportation or carrying charges. Because items can be sold right from the owner's location, online auctions do not incur transportation costs. In a traditional auction, equipment must travel an average distance of 250 miles to the auction site. For a $20,000 backhoe, this cost can easily exceed $500.
No make-ready charges. Sellers might not be required to spend additional money cleaning and painting equipment for auction. This saves the seller refurbishment costs, often done at a premium price.
Lower commissions. Whether charging a variable or straight commission, many traditional auction companies average about 9% commission. If you were selling a $10,000 used skid steer loader at a 9% rate, you'd pay an additional $900 in commission. Without the overhead costs of a physical event, online auction companies can offer lower commission rates and save the seller hundreds or even thousands of dollars in commission fees.
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