Register free!

The Green Industry's Resource Center



Reply
 
Thread Tools   Display Modes
  #31  
Old 09-10-2007, 06:27 PM
fitzg2md fitzg2md is offline
LawnSite Member
 
Join Date: Dec 2006
Location: Virginia
Posts: 156
In the end, cash is always king.
Reply With Quote
  #32  
Old 09-10-2007, 08:14 PM
Lawnworks Lawnworks is offline
LawnSite Fanatic
 
Join Date: Jan 2000
Location: usa
Posts: 5,409
Quote:
Originally Posted by fitzg2md View Post
fairway - couldnt agree more. Come on guys, the point of any business is to make money. If spending an extra 5k will give you the opportunity to take on alot more work, then its a good idea. You do however need to have a good handle on the cashflow situation of your business.

Lets take buying a new truck for example. Lets say its 20k to make the math easy. If you are offered a 0% loan or the option to pay with cash (you happen to have the money in the bank just waiting), what is the best option. Well, I would argue to finance it. Let say you put it in a simple savings account that has a good return. Like ING..gets about 5.0% per year. Thats an extra 1000 in your pocket the first year. Drag that out to 5 years, and youve made a nice little sum simplly because you were able to use your money. Invest it in a money market and the return may be even better than 5.0%.

Now heres the key...that 20k in the bank is not money that you want to spend freely. It is already accounted for. If you NEED it really bad, then it is there to use, but you should know that you are now getting into trouble. You have spent that money twice (once to buy truck and once for other thing). Bad idea. What would you have done if the 20k wasnt there? Find another option right? So do that instead from the start. Cant look at it as "well, i have 20k in the bank"...you do, but its offset by your liability of the truck.

With a little discipline a 0% loan can be a real good thing. But if you cant afford a new 20k truck who cares what the % rate is! Thats irrelevent.
I would argue that there is a 0% price and a cash price... the interest is factored into the price of the truck. And hopefully if you are buying a 20k truck w/ cash... you have 100k in the bank. I am not saying credit is a bad thing. I am just saying life w/ out debt is much more enjoyable. I can't wait to have my house paid off in 2.5 years and be completely debt free. It is just a feeling of freedom. Granted I know when you are trying to grow a business it is hard to be debt free.
Reply With Quote
  #33  
Old 09-10-2007, 08:33 PM
maintenanceguy maintenanceguy is offline
LawnSite Member
 
Join Date: Jan 2006
Location: NJ
Posts: 156
Having credit is good. Being in debt is bad. Being able to get the parts you need at a supplier and pay in 30 days is very convenient. Paying $20,000 for a $10,000 mower because you financed is a waste of money.

The value of equipment depriciates much faster than it's useful life. A mower with 80% of it's life left will likely only cost you 60% of what a new mower would cost. Good used equipment is a smart investment, probably smarter than new.
__________________
Reply With Quote
  #34  
Old 09-10-2007, 08:57 PM
Lawnworks Lawnworks is offline
LawnSite Fanatic
 
Join Date: Jan 2000
Location: usa
Posts: 5,409
Quote:
Originally Posted by maintenanceguy View Post
Having credit is good. Being in debt is bad. Being able to get the parts you need at a supplier and pay in 30 days is very convenient. Paying $20,000 for a $10,000 mower because you financed is a waste of money.

The value of equipment depriciates much faster than it's useful life. A mower with 80% of it's life left will likely only cost you 60% of what a new mower would cost. Good used equipment is a smart investment, probably smarter than new.
I agree. I run up 7k balance on my credit cards each month... but they get paid each month. I also have credit lines at suppliers.... it is nice but the trick is paying everything off every month.

I also agree w/ you on used equipment. I have found that I can score some great deals w/ the punch line "cash money right now." My deals that I have paid cash for included, '04 Scag 450 hours - $4500, 03 Dingo tx425 400 hours - $5000, 2000 Cat 248 2000 hours - $4500.

I have also find if you pay cash on used equipment and buy it right you can use it virtually for free... selll it for about for you have in it. I actually bought a package deal of mowers and other equipment for $8500 on Labor Day... I sold it on Saturday for $12,500. Quick profit thanks to cash.
Reply With Quote
  #35  
Old 09-10-2007, 09:11 PM
fitzg2md fitzg2md is offline
LawnSite Member
 
Join Date: Dec 2006
Location: Virginia
Posts: 156
Lawnworks - I totally agree with you about the freedom of living without debt hanging over your head! Its a great feeling! I guess Im kinda speaking more from the perspective of my business and not as much from my personal finances. I know in small businesses it can be hard to seperate the two completely, but I try very hard. I also would have to agree that you can get some great deals by having a stack of cash in your hands!

Starting out from scratch without being able to afford good equiptment is tough...in any business. Your only real option is tighten your belt (alot) and buy something well used, and work really hard. Then upgrade asap. This will also help you to only grow your equiptment if you NEED it. otherwise its just sitting there and depreciating. May need to pass up some good jobs that you are just not properly equipt for, but such is life. The first few years can be the most trying...

(ps - wow, i need to go back to third grade and learn how to spell! )
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump





Powered by vBulletin® Version 3.8.6
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.
Copyright ©1998 - 2012, LawnSite.comô - Moose River Media
All times are GMT -4. The time now is 09:29 PM.

Page generated in 0.08235 seconds with 9 queries