If you're running a GPS tracking services company, it is likely that you will also be providing hardware to your clients. This leaves you with an important business choice to make. Will you sell the GPS equipment to your clients outright, or will you lease the equipment to them, bundling the price of the equipment into their service contracts? Both options have their merits, and the one you decide to use for your business will be highly dependent on both your business model, and your clients' needs.
Selling GPS equipment
The benefits of selling the GPS tracking equipment outright include the quick infusion of cash into your business. Rather than your business buying the hardware upfront and having your customer pay it off over time, you are able both to cover the cost immediately and earn a profit on the sale.
The downside of selling the GPS hardware this way is that it can be more difficult to convince new clients to spend all the money upfront on outfitting their vehicles with GPS hardware. Another challenge is that there is less possibility of convincing clients to agree to long-term contracts if they already own the hardware. They will be more likely to expect a month-to-month service plan if they already own the hardware. There is less chance of them getting locked into your services for long-term if they own the hardware and can easily switch GPS providers.
Leasing GPS equipment
For many cell phone plans in the United States, the bulk of the cost of hardware is subsidized through the long-term contracts and subscriptions. In this model, the cost of hardware seems cheap or is free upfront, but customers with long-term contracts end up paying for that hardware long after its cost has been covered by the subscription subsidies. This model also works well for leasing GPS equipment to your clients and getting them to commit to longer term contracts. By leasing the equipment to your clients, you can offer the hardware for free or very cheap. Your business will recuperate the costs of that hardware through longer-term service contracts and subscriptions. This makes the initial sale easier to close. Clients sold on the idea of using GPS tracking for their fleets will be willing and able to commit to the monthly service contracts more easily if there isn't also a large upfront cost.
One of the downsides to leasing the equipment to your clients is that the hardware still needs to be paid for. Your business's hardware vendor will probably give you Net-30 repayment terms, but if the equipment is then leased to your clients, the subscriptions will probably not cover the hardware cost upfront. That means your business will have to have more cash on hand to cover the initial hardware costs, and may need to take out loans against the value of the service contracts to cover the hardware cost.
The big benefit of leasing the hardware is that you are able to bundle it in with the rest of the services you provide. Your customers will then have either one monthly or quarterly payment to make, and you will have a consistent, reliable cash flow that your business can depend on.
Whether you decide to lease or sell the GPS hardware for your clients or if you decide to offer both options, Position Logic has most widely compatible platforms, meaning your clients can use a large variety of GPS hardware, and you can offer them the hardware that is best suited for their situation. Visit the GPS tracking device library to browse the selection of compatible devices.
If you are considering starting a GPS tracking business, sign up today for a free demo of Position Logic's GPS platform. During the demo, you will learn how the platform works and how you can use it to grow your own GPS tracking business.