SSE London
Sound Investments
The decision to buy or rent a sound system for your venue is not just about money; there’s a host of other factors to take into account. SSE London specialises in supplying and installing sound equipment and systems in nightclubs, performance venues, restaurants and bars.
Operations Director, Emma Barwell sets out the pros and cons of both purchase and rental for what is definitely one of a club’s most important assets.
To buy or not to buy, that is the question. And the answer isn’t necessarily all about whether you’ve got the cash to hand. Whether you’re looking for a Dancefloor system -come- Stage PA to host live performances, or a fully-installed background music system which extends from the lobby to the loo, renting might just be a better option than purchasing.
If you buy a system outright then you have something to show on your balance sheet as an asset and you can claim asset tax relief (although that will be much less next year when the Budget changes come into effect) . If you buy the kit using a loan, then that will also show up as a liability on the balance sheet, so the benefit of the asset is reduced.
Residual Value
Although systems are expensive, what residual value do they have after 3 years? Selling off – on Ebay or otherwise - is unlikely to see you getting more than 10-15% back on what you paid for the gear, and will possibly be less than what you have the asset showing for on your balance sheet. The advantage of contract rental is that 100% of what you’re spending is tax deductible - so, although you won’t have an asset, you won’t have a big lump sum outlay to add to all the other costs of setting up the new venue, or any loan liabilities.
Apart from the obvious financial concerns, what about the stuff that your accountant can’t tell you. Let’s start with the question of what to buy. Any of you that have visited a big trade show like PLASA will have seen the dizzying range of high-end professional audio gear on offer, most of it new to the market in the last year. All the reputable manufacturers will help you design a system using their own products and the services of a preferred installer, or you can work with an independent adviser to come up with a specification. You’ll be offered a range of incentives or deals on equipment, but how will you judge whether you really are getting the best value for money, or choosing the best system for your purpose? Speak to at least 3 different installation companies, and you’ll get 3 different opinions. Are you really buying the best you can afford?
Future Proofing
Technology follows trends, even in the audio market, and there’s usually an industry-wide consensus on the ‘it’ system at any one time. Purchasing this will allow you to steal a march on your competition and to win brownie points with your customers by having the new to-die-for brand. But there are practical considerations. Most venues are in the design stage when the sound system has to be specified, which means having to work from blueprints. The reality can often turn out to be quite different from the plan; many projects have design changes as the building work progresses. The impact of such changes can be more easily absorbed by the specifications for a rental system, which are more adaptable.
Look into the longer-term future and consider what will happen 24 months down the line. With the speed of development in technology, which is currently racing ahead at a breathtaking rate, last year’s kit is exactly that. A flexible rental agreement can enable you to upgrade your system regularly so that it stays at the top of its game both technologically and in terms of fashion. Should the concept of your club alter – for example, those live nights you were doing just once or twice a month start to become a regular event – then your requirements for your sound system might also change. Maybe your venue expands, or moves to another location. In such circumstances, there is much more versatility in the rented system.
Choice versus Quality
If you set out to buy your system, starting with a blank sheet in terms of design, you’ll have a much wider choice in terms of what you buy and how much you pay for it. No question about it, there are great deals on offer from manufacturers. Renting a system might narrow down the range of brands you can choose from, but almost certainly allows you to end up being able to afford a better-quality system.
A good long-term rental agreement will offer you the best possible rate for your system, backed up by the best possible knowledge of its operational technology, which is always available to you. Buying a system will of course obtain you a new manufacturer’s warranty, but you are reliant on the back-up from your installation provider to support that warranty (and you) when things go wrong or problems occur. These support services are rarely available 24/7 or over a weekend, and you need to think about how you can work round a problem over a busy weekend until that engineer arrives. Having a maintenance engineer on staff will minimise any potential disruption to business but it does mean an extra employee and all the costs associated with that.
On Call
A good rental company will have engineers available on call to respond to problems that occur outside of standard business hours. Just as importantly, they will have a large pool of emergency spare parts and replacement equipment to keep your system running whether it can be repaired on site or not. Companies like SSE hold rental stock specially for this purpose, and have in-house service departments which turn round repairs and get the equipment back on site very quickly. We also have the capacity to build custom storage and racking solutions tailored for your venue which take into account all the environmental factors contributing to the problem.
Don’t forget, you can have the best of both worlds. Buy part of the equipment you need – for example, the background music system for the venue, which will be fully installed and remain part of the fabric of the venue. Rent in the rest as and when you need it – for example, a beefy PA when the venue hosts a live band. Do your buying and renting from the same company and negotiate a better deal, as well as reaping the benefits of integrated technology, not to mention back-up and support.
Rent now, buy later
Or indeed rent your sound system at the outset, and buy it at a later date. Any good rental company will give you an option to buy the system within a set period. At SSE London, we can even build an option-to-buy into the rental contract which takes account of the rental money already paid.
Depressing Depreciation
Whether you buy your system or rent it, you will need to consider your options should circumstances really change and you have to get rid of it. How will you liquidate this particular asset? Where will you go to sell it, and who will you sell it to? In the first instance, it’s quite difficult to assess the worth of a used sound system. I speak to many people who have a quite inflated idea of what their gear is worth, not realising that the speed of technological innovation dates their expensive purchases really fast. You could probably shift some amplifiers or DJ mixers on Ebay but you’re unlikely to get fair value for a complete system, especially as most potential purchasers want the comfort factor of a warranty, even if it’s only for 3 months. In this respect, the rental user has a big advantage as he can easily renew, replace, roll-over or reduce the size of his system.
At SSE, we’ve been selling and renting sound equipment for 30 years, taking on more than 60 new rental contracts with clubs and live music venues in London when we acquired Tarsin Entertainment in 2006. Our experience tells us that rental is the optimum way to go for the majority of proprietors, working as they do in a trend-oriented industry. Rather surprisingly, the audio business is also fast-moving and trend-oriented. Combine the two effects, and a venue can find itself sorely and rather unjustly penalised as the fashionable customers move on to the next new dancefloor in town, boasting the very latest entertainment technology.
London Operations Director
SSE Audio Group
