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Step 1. Analysis. Of course the first thing you need to do is to perform market analysis and find potential customers.
There are several factors you need to consider:
А) Regional trends in the national economy — which types of activities are carried out the most actively in your area: road construction, mining, service lines installation or construction of logistics or transport facilities, housing and utilities infrastructure facilities, industrial or agricultural enterprises, townhouse villages, residential buildings etc.
Б) Economic programs offered by the regional and municipal authorities to join a project where special machinery is required.
В) Climate and specific features of your region. They also predetermine demand for certain types of equipment. Somewhere street cleaning machines may be needed (due to heavy snow, for example), somewhere machines for continuous operations connected with hydraulic lines and utilities engineering, somewhere machines for geological works or mining operations, for forest or agricultural industry, for planning and construction of gardens and parks, for sporting grounds and golf courses etc.
In this regard leased equipment is much more advantageous than own equipment because it allows to maneuver depending on the season and demand.
Г) Find potential customers. Call around companies, initially it would be better to call to private companies, and then when you gain experience you can participate in tenders conducted by governmental and municipal authorities. It is quite possible that utility companies or road construction companies may have needs that can be satisfied only by you.
Д) Maybe statistical data will also motivate you. There are over 27 thousand special machinery units registered with the Ministry of Agriculture of the Republic of Kazakhstan without taking into account truck mounted cranes, dump trucks etc. And age of 65-70% of special machines is more than 7 years.
Step 2. Business Plan
You need to prepare appropriate business plan based on analytical data containing description of project implementation stages, correct cost estimation and especially risk estimation. Most probably at this stage you will need assistance from specialist. And it is better if he participates in the project – in this way his responsibility for his calculations will be higher.
Step 3. Selection of Place for Parking Lot.
You need to think about where your special machines will be parked. It is better to have an indoor area and a convenient traffic interchange. This is a good advantage, but of course you will need to add rental payments to your monthly expenses. However, many entrepreneurs keep their front loaders and other equipment right in their yards.
Step 4. Selection of Business Type
А) Purchase of special machines for lease.
Б) Lease of machines for performance of works by yourself.
В) Sublease of leased special machines.
Of course the option with purchase of equipment is more cost intensive, but it is also the most reliable option when it comes to search for work contracts. In this case you need to calculate profits correctly. There are many types of special machines and you may fail to choose the type of equipment that is the most sought-after.
Lease is a more flexible option and it is always oriented towards demand and tasks: whether you need a large backhoe loader or mini excavator will be sufficient, whether you need a grader or compactor etc.
Sublease of leased equipment is a profitable option for construction companies if certain type of equipment is not in use.
Step 5. Registration of Business and Special Machines
Special machines. Today you can register your special machines and equipment in the RoK within 3 hours instead of 15 days as it was a couple of years ago. Services are provided based on one stop principle – documents are considered and special machines are inspected in the same place. Special machines are registered with the regional agricultural departments and the Specialized Public Service Centers. Like with ordinary transport vehicles you need to pay state duty and transport tax. As to insurance, the law does not provide for compulsory insurance of civil liability. And there are certain restrictions on voluntary insurance, one of them – special machines’ age exceeding 13 years.
Business. When it comes to registration of business enterprise (LLP or individual enterprise) you need to assess thoroughly advantages and disadvantages of each type. Registration of LLP involves more bureaucratic procedures, in particular partnership’s charter is required (in two languages: Kazakh and Russian).
Individual enterprises pay less taxes and since they work based on a patent they are allowed not to use cash registers and not to maintain accounting records, it means that they can save on accountant’s salary. LLP has no such options. And administrative sanctions (penalties) imposed on individual enterprises are less strict as compared to LLP. However, in case of debt collection personal property of the owner of individual enterprise may be seized, meanwhile in case with LLP debt must be repaid by organization rather than by its founder.
But with simplified taxation system it is more convenient to work with LLP: maximum amount of quarterly income allowed by the law if simplified taxation system is used is only 10 million tenge, meanwhile this amount for LLP is 25 million tenge.
You need to select the option convenient for you taking into account expected profits and work conditions. In order to be able to switch between different activity types it is better to select and register several codes according to the Common Classifier of Economic Activity at a time.
Step 6. Selection of Equipment
The most popular and sought after equipment as of today:
Experienced owners and lease providers recommend to use special machinery from foreign manufacturers. The following manufacturers of special machines and units for various purposes have been traditionally holding leading positions:
Caterpillar® (Cat brand, USA). The company manufactures (and leases) backhoe loaders, mini loaders, telescopic handlers, excavators, bulldozers, motor graders, front end loaders, asphalt-spreaders, rotary hoes, compactors, recyclers (machines for road pavement regeneration), hydraulic excavators for mining operations.
Komatsu (Komatsu Ltd, Japan). The company manufactures construction and mining equipment: excavators, bulldozers, pipe-laying machines, rigid dump trucks, articulated dump trucks, wheel loaders, backhoe loaders, skid steer loaders, motor graders, mobile crushers, wheel dozers; warehouse equipment: diesel loaders, petrol powered loaders, electric loaders, tyre handlers.
Hitachi (Hitachi Ltd, Japan). The company manufactures mini-excavators, medium sized and large excavators, mining excavators, wheel excavators, special machinery (special models with attachments for performance of certain types of works), wheel loaders, dump trucks, HSC cranes.
Half of special machines in the world are manufactured by these three brands. However, there are certain market niches not occupied by these companies, and you can consider purchasing equipment from other reliable manufacturers. For example, Volvo (Volvo Group, Sweden), South Korean Doosan (Doosan Group), among other things swamp excavator etc.
Step 7. Information About Yourself.
In order to search for work contracts you’ll need to advertise your services. Find suitable web platforms where you can post information about your services by yourself. Personal calls to companies with offers and dissemination of information about yourself through acquaintances are also effective.
If you have funds for commercial advertising, you can post visual advertisements – it is a good method for special machinery: banners on the Internet, ad pages and thematic web sites.
It is not reasonable to create your own web site at the initial stage, you’ll spend much time on its promotion, so it is a waste of time to seat and wait for calls after launching of web site.
It will be useful to visit specialized exhibitions, conferences and forums, where you can find customers or establish fruitful contacts.
And about the most important – employees. In order to operate special machines, you need highly qualified specialists. It is a complicated and critical activity, an employee without necessary experience and skills may ruin your business. Therefore, you need to plan costs connected with shovel operator and other employees having skills necessary to operate special machines at the level of the market rates to prevent losses and numerous lawsuits.
Let's sum it up. Of course, it is a highly competitive area, there may be untimely payments for work and other hidden pitfalls. But there are also lots of striking examples of success in this area. They demonstrate that making money on special machinery is not at a difficult task and that any rational person can do it. All you need is desire and active involvement. In the Republic of Kazakhstan there are all necessary conditions for purchasing reliable Cat special machines and for servicing them.
