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View Full Version : Playing it Safe VS Never going to take the plunge


dloucks
04-18-2007, 11:43 AM
Hi all. I'm debating two scenerios with starting my business and I wanted to think what the experienced folks thing...

Quick background info that won't change with either scenerio.. I'm scheduled to collect an 18k bonus in august, after taxes and other expenses I expect to have 7-9k to spend as I please. I will get a 2nd payout in February of about 4-5k. I have a good job, that pays well, and I only work Friday Saturday and Sunday. This gives me 4 days a week to work on building a business without NEEDING it to pay what I will call my "standard of living bills" We build a new home on 5 acres last summer and I have quite a bit of debt, which only leaves about 200-300 a month after bills/expenses as "play with money". ....

Ok....Here is scenerio #1 that I call the play it safe scenerio

In August I would use my bonus pay off three seperate debts that would free up 400-500/month in income. With this new-found income I would purchase a new or slightly used k2500 or f250 (god forbid). In February I would use my bonus and any savings to purchase a trailer, blower, trimer, edger and commerical push mower. I would use my income tax return (probably ~4000-5000) to buy trailer/trucks signs and lettering, shirts, lic, insurance, door hangers, new paper ads etc. At that point I would have alot out of pocket, but nothing that is negatively effecting cash flow. As the season gets closer I would buy either a wb with a sulky or a commercial Z on credit. At which point the mower payment would be my only debt, and the only thing negatively effecting cashflow (aside from operating costs). My thinking is that even with 4 days a week to work, and only the mower payment, I should be able to survive the first season or two as I build up clients. If the business comes slow I'll only have the mower payment. If I end up with more business than I expect I'll already have the right equipment for the job. The downside of this plan is that it doesn't get me started until next year, and as everyone knows alot can happen in a year.

Scenerio #2.

I have great credit, and scenerio #2 involves using that credit. In this scenerio I would get a demand note to pay for the trailer, and smaller equipment, I would use dealer financing to pay for the mower and I would have to earn twice as much to pay for the truck payment and mower payment until August when my bonus came. The bonus would pay off the demand note and leave me with a couple thousand to make payments with during the winter months, until my February bonus arrived. With the february bonus I could finish paying off the mower (from the dealer financing) and would leave me with a truck payment only. There is more risk involved here, because I will be taking on debt for this coming winter, without paying off my existing debt...again my current job pays for my existing debt, but the business will have to pay for any debt that I take on this year, which is fine if business takes off fast, but if business is slow I could lose it the first season.

I know there is probably not enough info here for anyone to give me the "perfect" advice. Just looking for thoughts from the experienced pro's on what they would do in a similar situation. My gut tells me that scenerio one is much better, safer and has the potential to earn alot more money...but my pesimistic side says "yeah...sit through another summer and you'll be here asking the same question next year, planning for 2009".

Clear-Cut
04-18-2007, 01:18 PM
i wouldnt want to get MORE in debt than u are...if you can do it buy it cash

zz4guy
04-18-2007, 01:28 PM
Start small. Do a little bit of it all if you can to see what you LIKE TO DO. You can devote your funds and learn about almost any line of work... but if you dont like what you do it is a waste.

I'd say spend the $5k or so on a truck, trailer, advertising, and misc. stuff to get going. Advertise as somebody willing to do general lawn/landscape.

The truck/trailer you'll always need so that is a safe bet. But be careful about buying that $6k commercial mower. You may just find that "mowing all this grass reallys sucks" and have to sell it for a loss.

That's the mistake I made. Anybody want to buy my 48" Woods ZTR? PM me.

Willofalltrades
04-18-2007, 01:42 PM
Experienced... I'm probably not. I have had my business for about two years. I won't even lie I have learned so much. One year is a wealth of knowledge. Plan one sounds good. Take a year to read here, gain knowledge, and develop your business plan so that you have a strong start for 2008. Plus, I may only be 18 but don't blow all your money on this business. Make the business buy the "new mower" and the "new truck". You can use your money to get it started but don't invest to much... maybe keep a little of that bonus to take a cruz or something... gotta enjoy life some time

matt spinniken
04-18-2007, 02:16 PM
Do not get yourself more in the hole, this is personal finance 101. In my opinon it is better to start out with a 21 inch and a used truck than getting alot of nice equipment on credit. Advertise, build your buisness with a 21 or used 36 and then reinvest that money into your buisness. Your company, pocketbook, and experience will all grow.

dloucks
04-18-2007, 02:40 PM
keep a little of that bonus to take a cruz or something... gotta enjoy life some time

Actually that's already figured in...I've set aside 3000 to take the wife and our oldest son (4 years old) to Disney for his birthday in november. That's how that 18k bonus turned into 9K, taxes and vacation took the other 9k.

Well...I think this pretty much decides it for me. I got a call today from a guy that did my excavation last year on the new house, and I think I am going to work for him this summer and put that money aside. I figure I can put aside at least 5000 after taxes before my bonus comes in August. I should be able to put down that 5000 cash on a truck, plus a 5000 trade in on my car....Using 5000 of my bonus money that puts 15k towards a truck (it has to be pretty nice and 4 doors because of the kids) 15k will buy a nice enough truck without a payment. Then the other 2000-4000 of my bonus can go towards paying off one of my debts that will free up another 200 per month. Over the course of next winter I can search for a good used trailer (we have a big trailer manufacturer/dealer here in town that sells their traded in trailers all the time for pretty good prices). By time I get my bonus in February (5000) and my income tax return (4000-5000) I'll have more than enough to buy the rest of the equipment (-large commercial mower). I can advertise early in the season for clean-ups, mulching, edging etc...and take on the mowing jobs slowly. Like someone else said, worst case scenerio I end up with a truck, trailer and lawn care tools that I can use on my own 5 acres....best case scenerio I like what I am doing and I'm sitting with no debt when it comes time to buy a mower (if it becomes time to buy a mower).

The only other thing I have to consider at this point, is that if I buy a truck in August/September, should I try to put it to work pushing snow this winter. I'll check into the liability insurance for my area and determine if it's worth it. In Missouri you just never know if you will get enough snow to even pay for the blade/wear tear on your vehicle...this year it wouuld have made its money back....next year...who knows?

underH2Ovideography
04-18-2007, 02:48 PM
I havent started up my business yet, however, i've got a bachelors degree in business/marketing. i'd say that option a is far superior to b. most businesses fail in the first year because they dont make enough money to cover their initial business expenses. the beauty of this business is that you can start off for next to nothing. one of my buddies started with his parents push mower and weed eater nocking on doors...that was four years ago. it put him through college. he's got a 04 dodge duley, and just bought a house. he's 21 i'd say start off with what you can afford, and as you get more accounts, put more money back into the business(could be putting 10, 20, 30% into a money market account untill you can buy that 6k rider with cash).
good luck buddy

what is it that you do for that kind of money 3days a week?

dloucks
04-18-2007, 02:57 PM
I manager a crew of 8 supervisors and 110 employees....the three days a week is a bit misleading. I go in between 4-5am on those days and get home between 7-9pm.... So even though I get 4 day's off, I'm putting in over 40.