Debt Free business

Discussion in 'Starting a Lawn Care Business' started by Hoss4x4, Sep 18, 2011.

  1. muddywater

    muddywater LawnSite Bronze Member
    Posts: 1,813

    I always get a better deal when i pay cash. Alot of times i pay my venders in green cash at the end of the month... One particular vendor saves me 17% when i pay cash.

    Credit card points are a joke imo. It comes to like .1% you get back. I prefer to pay cash and get them to knock the 3% credit card fee off.

    I cant make sense of financing equipment especially less than 30k purchases. Maybe people just are not profitable and dont keep large cash cushions?

    I think paying cash forces you to negotiate your best pricing and forces you to really consider how long it will take to recoup your purchases.

    I have noticed most of the companies that doing well in this economy are debt free companies. Financing just isnt as cool as it used to be.
     
  2. I have plenty of cash on hand. If I need to outlay cash for something I can't finance, I have the cash to do it. I highly doubt your getting 17% off gas, edger blades, shovels, etc. I'm going to buy it why not get something back for it.
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  3. cody890

    cody890 LawnSite Member
    Posts: 20

    I'm debt free and have 3 Dixie Choppers, 3 walk behinds, tons of handhelds, and a 30hp kubota diesel tractor with tons of attachments for it. I use a 20ft. 10k trailer and have a nice sno-way plow for one of my trucks.

    I prefer to add new equipment / upgrade equipment when the money is there. I seem to have a hard enough time finding good, reliable help so I'm not really pushing to expand to 2 crews. But I would like to get my chem license and start offering those services. I would just start off with used equipment and upgrade it over time like I always have. But I'm also not too bad at repairing equipment so that's why that method works well for me.
     
  4. billpiper

    billpiper LawnSite Member
    Posts: 82

    Borrowing money can be helpful. Diamondlandscaping can pay cash, but will borrow, when it is advantageous to him, allows him to hold on to his cash. But he can pay it off if he needs to and won't have to quit making payments if business is off. If the banks call in his loans, as they recently have on many people during this recession, it may be an inconvenience, but it won't shut him down.

    Procut's story is one that shows that owing a lot of money can hurt you, even if you're doing it the right way.

    If you have to borrow money to buy equipment, and you have to have a certain level of business to be able to cover the payments, then you're in trouble if your business doesn't stay at that level.

    The Cash Is King guys may eat a little lighter during a business downturn, but they don't have to worry about the bank coming to get their equipment.

    Money lending has been around as long as money has been around. Borrowing can be good and it can be bad. As Americans, we have had access to easy money for a long time and we're used to getting what we want right away. Look what easy money has done to us in this country.

    By and large, in this industry where many of the companies are small operations, those of us that are debt free are generally more stable and able to handle a down-turn than those of us with debt.
     
  5. muddywater

    muddywater LawnSite Bronze Member
    Posts: 1,813

    Yes I do get 17% back from a certain vendor... 10% off and no sales tax. Another vendor that owns a tree farm I bought some trees the other day and saved 25% because I paid cash. I run a credit card for convenience... not the piddlyass rewards.

    So you don't think you could have saved a few hundred dollars paying cash for the $3k mower?
     
  6. Sure, maybe. But I am growing a lot right now and if I need another larger ticket item that I have to pay cash for, I have it without depleting funds. I didn't say you don't get 17% off, I just doubt it's on small ticket items.
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  7. living Green Property

    living Green Property LawnSite Member
    from PA Erie
    Posts: 68

    This is such a stupid thing there is nothing wrong with going in debt. I just bought 2 exmarks and I got 0% interest why pay cash when they are going to keep the money in it for me? That was awfully nice of exmark.lol Yeah I could have paid cash but now I have that 15 grand in my bank account gaining interest so I am making money off loaning. As long as you have capitol you will be fine. Cash flow is important and you want to make sure you have a nice cushion especially in this business. The lawn care business is feast and famine. Obviously if you can hardly make your loans then you are way to in debt. And if you loan money irresponsibly it will sink you in a hurry, Such as loaning $50,000 at 7% without a single customer. With this economy money is cheap and interest is at an all-time low. Use the banks money to grow your business not yours. Again this is a topic about cash flow not payments. And if you know anything about basic business principals you will agree with me. I know im going to get hate posts saying Im going to go under trust me I am not going any ware.
    Example you have $100,000 and you want to by a rental property the property is $100,000 you can drop cash on it and buy it right out. Or you can put $100,000 down on 5 property’s (20% for each of the 5 property’s $20,000). So now you will have the same income for the 20 years. but in 20 years if you loaned the money how many property’s will you own? 5!! And then you will really be rolling in the cash
     
  8. living Green Property

    living Green Property LawnSite Member
    from PA Erie
    Posts: 68


    Let’s say you take out an $8000 loan at 0% for 36 months and you have to pay a $300 fee. If you would take the loan and invest that $8000 at let’s say 5% for 36months you can do that right now. I got 5% last year with most of my investments. With my calculations that would come out to right around $631 payed to you in intrest so by spending that $300 and loaning money you put $331 in your pocket. Am I the only one on here who runs numbers?
     
  9. living Green Property

    living Green Property LawnSite Member
    from PA Erie
    Posts: 68

    A finance professor told me once the most important piece of equipment a business can own is a calculator a loan calculator, a piece of paper and a pencil. Forget all the fighting everyone gets into which is better a Scag or Exmark. We should be arguing over weather a battery operated or solar operated calculator is better. (I prefer solar be green)lol At the end of the day it’s all about numbers and the company who can manage money the best is going to grow! Quality is important but there are a million people who can mow a lawn nice. But only a few company who can manage a business and run their finances.
     
  10. Puddle of Oil

    Puddle of Oil LawnSite Bronze Member
    Posts: 1,203

    I agree with all of what you said.
     

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