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When 'Used' Makes Economic Sense

The upsides and downsides of the used-equipment market.

From time to time, all of us either expand or reduce our machinery inventory. The question is: What options are out there for us?

Each and every vendor is knocking on our doors, sending e-mails, and trying to sell us their newest and greatest machine. But you may not want to be the first to adopt it, can't currently afford it, or simply aren't sure if your throughput can support the machinery.

On the other hand, what if you have hardware sitting idle? Or have cash-flow issues and need to liquidate assets to stay afloat or acquire a different machine or new technology?

The answer to all these situations might be used equipment. I was intrigued when The Big Picture covered this topic a few months ago (April, page 62), since I've had first-hand experience: in the past year, I bought or sold six pieces of wide-format machinery. Some of it was sold in order to purchase other machinery; some because I wanted to change to a different equipment manufacturer; and some I sold because it was sitting idle and just taking up space. All of these situations are common in the marketplace right now. In fact, the broker who helped me with the sale of my machinery says there are more used machines available now then there ever have been.

But what are the upsides and downsides of the used-equipment market? Below are items to consider, as well as tips on selling and buying used equipment.

Selling it
First thing first: If you are going to sell a unit, consider how you paid for it. If there is a lease, what is your termination fee and can you negotiate a lower early-termination payment? If you paid cash for the machine or if it is paid off, do you really want to sell it? If you have to sell it, what are you willing to sell it for-what is you bottom line? You know how much you paid for it, it has made you money (hopefully), and you have depreciated it on your books-but its value may not be as much as you expect.

The lease scenario is tougher because you may or may not recover enough to pay off your lease, so you may lose money on the transaction. Weigh the remaining monthly payments versus the penalty fees. It might make more sense to get out now versus having the headache of the monthly payments, especially if you don't use the equipment often enough.

Once you have decided your approximate sale price, contact a broker. I have exclusively used Scott Patterson at SP Brokerage (www.spbrokerage.com), but there also are companies such as Wildcat Imaging (www.wildcatimaging.com) and others across the marketplace. Whichever broker you choose should be able to tell you what your machine is worth and its street value. The pricing decision is up to you-go with the street value or raise your price-it all depends on how badly you need to move the machine.

The broker will take a percentage of the sale for their services, but without a broker all you have is eBay (I never suggest) and some organizations that offer classified listings for members, (SGIA, ISA, etc.), as well as classified ads in trade publications or on their websites.

What I like about brokers is that they typically will move the machine fast, plus they take care of everything-packing, rigging, shipping, and so on. All you have to do is prep the unit and unplug it from the wall. The broker prepares and presents the sales contract only when he has received a cash deposit from the buyer showing a commitment to purchase your unit.

This contract should state that you are selling the unit 'as is' with no warranty or guarantee, and cover you against "return" of the unit. Since the buyer is afforded an opportunity to check out the unit in advance-watch it print and check under the hood-the contract should protect you against a buyer coming back with a claim or problem that they were unaware of. If you're not working with a broker, have your attorney draft a quick sales agreement that states that above-mentioned items as well as who pays for packing, shipping, and other sale basics.

Specific points when selling include proof of performance, prepping the machine, getting the machine out the door, and collecting the proceeds. Let's take a look at each:

Proof of performance: No matter who is purchasing the machine, you will need to show that it works. Head test are generally adequate for most buyers, or at least it is enough to justify a flight out to look at your unit. The new buyer may also decide to send out a technician as well to look over the equipment. This is typical and similar to taking a used car to a mechanic for an inspection.

In prep for a visit by a buyer or a technician, I suggest cleaning the machine up a little and making sure the heads are all firing; you may want to change out some filters, but the head test is the deciding factor. Color can be an issue but most buyers understand they can re-profile the unit upon arrival at their facility.

Prepping the machine: Most units that I have moved required a technician to prep the unit for transfer. Choose an OEM-certified tech or a freelance tech (generally they have worked for the manufacturer and are less expensive than OEM techs) for the prep, which should only take one or two days. Additionally, gather together any spare parts and purchase products to prep your unit for transport, such as solvents and head flushing solution.

Keep in mind that not all machines can be prepped and sit idle until the sale is complete. Our units were running up until the time the tech came in to decommission it; the rigging and packing company came the next day. This was an ideal scenario but a stressful one. I suggest you give yourself time to make the most money out of the unit. And if you have a big job coming up, let your broker know that there may be a delay in the sale-the buyer may be willing to wait up to a month to take possession.

Out the door: If you hired a broker, you don't have to worry about anything-just make sure the machine is decommissioned and the electrician is there to remove the electrical from the wall. If you didn't hire a broker, however, you will need to find a rigging company as well as a crating company (sometimes one company does both). Generally, it's the buyer's responsibility to find a freight company (during negotiations, specify that who pays for packing and transport costs).

I won’t even get into overseas transactions because they are a whole other can of beans. But I did sell two units to international buyers and my brokers made it as easy as if I were selling to a neighboring state. Another reason to use a brokerage company-they make it easy.

Collect your proceeds: All transactions should be cash up-front-the check should clear or the wire transfer accepted before the unit leaves your warehouse or facility. If you are doing the transaction yourself, no matter who you are selling it to, get a deposit of at least 25 to 30 percent before you even consider this to be a serious buyer. If you have a broker, you will not get any of the deposit money, but you will get your final payment two to three days after the sale of your unit.

The buying equation
If you're looking to buy a used unit, typically it's very similar to the points I've already listed but from the other side of the coin:

* First, find a reputable place to find equipment. It may be online, in a classified ad, at an auction, or maybe it's a shop down the street getting rid of a device. All of them need to show you proof of performance. Sellers-depending on the equipment and how urgently they need to sell-may be willing to negotiate on price. Ask for optional equipment, spare parts, tools, ink, and media. Also make sure you get the RIP software that came with the printer, and ask if they have any profiling software.

* Investigate your buying options. You can buy through a broker, but keep in mind that many big manufacturers are offering used equipment for reduced rates when compared to their new units (see April page 64 for a list of used-equipment programs offered by OEMs). Many are updated or refurbished and may come with a warranty, which takes care of a lot of the headaches. Keep in mind, however, that just because you are buying a new or refurbished piece of machinery you can't trust that it will work 100 percent when first installed, or that your installation will go smoothly.

* Always make sure the machine is working to its full potential-considering that this is a used piece of equipment. My refurbished and upgraded equipment still took months to get running to its full potential. So even when you go through very reliable OEMs for your used equipment, it's still possible that you will experience some frustrations, particularly in the early going.

Ask: Does it print to your satisfaction; do the head tests consistently good; how's the bi-directional alignment? Are there any funny noises; is there a maintenance log; how often has the current user performed maintenance (ask the operator or tech, not the owner).

At the selling shop, talk with the people who actually run the device and spend your time learning the "tricks" and "quirks" about this specific unit since all printers have something unique about them. Get as many phone numbers as you can before leaving-cell, business extension, home-because you will have questions when you start it up at your place. I even suggest recording your test drive; there is a lot of info that you can miss that is essential to running these used devices.

Again, if you're using a broker this is the time you make your final offer and negotiate any additional items like parts, ink, and media. Only set your final offer after you have seen or paid someone to inspect the printer. Once the offer is accepted, your broker will present you with options for shipping. Often brokers have a freight service they typically use, and can help secure a rigging company that can load the unit. However, you can do this legwork if you want to be cost conscious or if you broker does not offer these services.

An economy decision
Looking at used equipment is a cost-effective way to enter the market or expand your machinery repertoire. Buying used is nothing to be scared of, but it's cheaper for a reason-it is not new. So don’t expect it to last forever or even print to the original specs.

But you will likely be pleasantly surprised at how easy the process can be. And in this economy, saving or making a couple hundred grand is always something worth considering.

Jonathan Zinsmeyer is president of The Big Print (www.thebigprint.com) in Seattle, one of the first print shops in the industry to adopt flatbed and bio-based printing solutions. His new blog can be found at www.printtalk.wordpress.com.

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