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Whether you own a coffee shop or espresso bar, a Commercial Coffee Machine is hands down one of the most important pieces of equipment you will need for your business.
It is critical to ensure that by having the right machinery can add significative speed and quality to your service. This is why we use La Marzocco’s most of the time. With coffee machine is not different than other things, “we get what we pay for”
Then, the big question is: should you invest and outright buy a coffee machine or find a good rental agreement? It will really depends on your business model and on the capital you are willing to invest when doing your setup.
That is why we decided to put together our analysis for both scenarios, and in which case one would be more suitable over the other.
Buying your own Commercial Coffee Machine
This option is good if you are ready to commit. It will be the best option for those who are willing to invest in their business and are confident that they want to hold on to that machine model for a longer period of time.
Buying means you will have to invest a big sum of money to start with. A cafe/espresso bar selling 25-35kg of coffee per week get away with 2 group multi boiler machine, couple good grinders and a auto-press device for consistency in the shots. A full setup for Coffee Machinery, along with grinders and autopress, may cost around AUD$20,000 on average. This will obviously be one of the main considerations before making the decision.
Over a longer period of time, buying will in many cases be the most cost-effective option compared to renting.
THE TAX EFFECTIVE TRICK ON THIS OPTION:
The initial investment can be deducted in full through depreciation in your tax returns. Also, you can immediatly claim GST credit refund for the amount paid for the machinery.
If you finance the machine, the interest can be tax-deductible as well.
The convenience factor
A second factor to consider will be convenience. When doing a bigger investment such as buying your new Commercial Coffee Machinery, you will want to spend a larger amount of time doing research on models and price. This will ensure you will have the best equipment for your business inside your budget. Remember that coffee machinery is the heart of your business, high quality machinery will provide you high quality output.
You need to ask yourself: do I have the time to spend on this research? if not, find a coffee roaster that shares your vision. Remember that you get what you pay, so good quality coffee and machinery comes with price, however, most of the times quality pays off at the end.
Commercial Coffee Machine Maintenance
When it comes to maintenance, owning your equipment may be a little tricky. You will need to rely on the Coffee Machinery brand guarantee for the first year or two, as long as you can take proper care and maintain your equipment clean and in good shape.
As long as you find a serious provider that isn’t shady or neglectful, maintenance and repairs will be covered by the rental fee and you won’t ever be stuck with broken-down equipment that you simply don’t know what to do with.
Service and maintenance can cost anything from $1,000-$2,000 per year and that will include water filtrage recharge, grinder blades, steam wand rebuits and so on, so add it on your budget if you are buying your own machinery.
Add Intrinsic value for the sale of your business
We had the opportunity to buy, growth and sell 5 of our own cafes in Sydney in the last 10 years and one thing we noticed is that owning coffee machinery had helped us to increase the value of the businesses we were selling.
Say for instance you are paying extra $8 on the top of the price of the kilo of coffee because you are under what they call “FREE ON LOAN” contract with your coffee supplier, and you are selling 40kg of coffee per week, that represents $320 per week or $16,640 per year that could be directly added to your P&L.
Therefore, by saving $16,640 per year and using a multiple of 2x to sell the business, you would probably get extra $33,828 if the business is sold at the market price. You also have the flexibility to sell your business if the buyer have their own coffee supplier, they don’t have tu buy the business with a coffee contract in place.
Make sure you check it with a reliable business broker.
Going for the Rent rout
Specialty coffee machinery, including coffee machinery, finance has been a growing business over the last few years. You can choose the equipment that suits your business best without having to commit to a big outright investment.
The overall cost of renting your Commercial Coffee Machine will be generally bigger than if you buy it, but the advantage is that you don’t need to have the capital to invest.
Also, if you have the capital, you can choose this option and free up some cash flow to maintain your business going.
The Tax Effective Trick is also an option here:
Renting allows you to get tax relief on every payment made. Every payment you make can be deducted from your tax return and receive GST credits, whereas if the coffee machinery is built in into a FREE-ON-LOAN deal, you won’t be able to do so.
The convenience factor
Renting the machine can be a good option if you want to test a piece of equipment before you buy it. Because you are not committing to a long term investment, you can change or upgrade de equipment after the agreement finishes. Some companies like Silver Chef, will even provide you with an exchange option within a running contract.
Commercial Coffee Machine Maintenance
When it comes to service and maintenance, renting comes out ahead by a long shot.
The biggest advantage of renting is that the company which you hire from will maintain and service the machine at no extra cost to you. Also, you may be provided with an exchange option in case the coffee machine cannot be repaired on-site.