Tech Buyback Programs for Small Businesses: Are They Worth It?

Small business owners are like everybody else. They want (and sometimes even need) the latest technology. But that's a dangerous game in a world where today's cutting-edge tech is tomorrow's white elephant.

Retailers have responded with buyback programs: agreements that allow consumers to sell back products when they're ready to trade up to a newer model. The amount of money a buyer can expect to get back can vary from less than 5 percent of the original price to up to 50 percent, depending on the type of product, as well as its age and condition.

In theory, buyback programs offer a quick, easy way to unload computers and other high-tech products before they're outdated by newer models.

Mixed Reviews for Buyback Programs

In practice, however, consumer advocates often take a dim view of buyback programs. A February 2011 article on ConsumerReports.org, for example, noted that Best Buy's buyback program comes burdened with restrictions and conditions that drive up the true cost of participation.

As a result, according to the report, buyback programs are "not likely to make good economic sense" for most consumers.

Many analysts agree that selling hand-me-down tech products on eBay or Craigslist is usually a much better deal than a buyback program. "I can see why [ConsumerReports.org] would say buyback programs are a bad deal," says Billy Pidgeon, senior analyst with M2 Research. "I don't see the upside for most consumers outside of a niche early adopter type."

However, Stephen Baker, vice president of industry analysis at NPD Group, a market research firm, says that buybacks aren't always a bad deal for consumers.

"I disagree with Consumer Reports that a buyback program is bad," Baker says. "It is an opportunity to remind you that your product has value. It is really an impetus to trade in older products, and they make it relatively easy."

A Better Deal for Small Businesses?

For businesses, the value proposition of a buyback program might actually be stronger than it is for consumers. Many companies have policies against selling used equipment to employees, and they may be unwilling to sell via online auctions and classified sites. In such cases, a well-structured buyback program can solve the problem of recouping at least some of the costs of upgrading technology products.

"For any business, small or large, buyback programs can be a very good deal where consumer electronics devices will be likely to have a shorter lifespan due to heavy usage," Pidgeon says. "Businesses that need a technological edge on competitors are going to replace devices more often, and buyback programs can mitigate loss and pay forward on the next generation.

"With a buyback program," Pidgeon says, "business owners can resell the same way they buy -- in bulk."

The True Cost of Tech Ownership

Baker says the time and effort required to deal with technology upgrades represent another significant cost for businesses -- one that some critics of buyback programs underestimate, in his opinion.

"What isn't noted in [the ConsumerReports.org article] is the time," Baker says. "They don't value anyone's time or effort. Selling on eBay takes a lot of time; trading in is easier."

Experts agree that the vast majority of small business owners may also not be tech savvy enough to know exactly when to upgrade. As a result, a buyback program can actually provide additional motivation to stay current with the latest technology.

Small businesses that rely on technology also manage assets differently, Baker says. For those that need the latest and greatest products, buyback programs ensure that older products have some value -- especially when the alternative might be putting the older equipment into storage and forgetting about it.

However, there are reasons why buyback programs might not work for small businesses. That's especially true when it comes to the question of whether to buy certain types of equipment in the first place.

"Some businesses might be better doing a leasing deal and trading in [their computer equipment] more often," Baker says.

Who Does the Heavy Lifting?

Home-based workers may also benefit from buyback programs -- although here, too, caveats apply.

"There are two kinds of people who work from home," Baker says. "There are those who telecommute and who often get their equipment from their employer. Then there are those home-based workers who are independent and are more like consumers."

For those in the second group, a familiar question arises: Do they have the time and motivation to sell used equipment on eBay or Craigslist when it's time to replace it?

"I think that Consumer Reports assumes that everyone is going to do the heavy lifting," Baker says, "and I think there is a lot of value to these buyback programs."

Businesses also need to consider whether to pay for service plans and extended warranties, which raise the cost but may also be tax-deductible. While service plans normally benefit the company selling them more than they do consumers, a very small business that depends almost entirely upon one or two key computer systems may value them as an insurance policy against unexpected downtime.

Disposal Made Easy

Finally, buyback programs can also address the growing problem of what to do with end-of-life tech products that aren't worth selling but can't simply be thrown away either. Given new community regulations and issues with recycling and disposing of technology products, many of which contain toxic materials, buyback programs offer a potential solution.

"If you are concerned about recycling, buyback programs [provide a way] to get rid of the product at end of life, and you get money back when you get rid of it," Baker says. "In the end it takes some stuff out of the disposal chain, too."