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Discussion in 'Starting a Lawn Care Business' started by LUIGI, Apr 1, 2003.
when going commercial do you need to have plenty of capitol?
Anytime you have employees, equipment, and business expenses to pay, you need a cash reserve. When dealing with some comm'l properties you need a good cash reserve to keep floating until the checks start coming in.
i always need cash
To start my part time tractor and landscaping business I needed $3,000, and I already had most of the equipment.
Of course you need money to keep your cash flow going tell you start getting some check flowing in. You can't go to a gas station and just get gas and leave can you, no you have to pay for what you get right (lol).
Cash is king. You can't operate without it. You can have profit all day long and be sucking wind because you don't have cash in the bank to pay the bills when they're due.
One rule of thumb is to have 10% working capital in the bank based on your sales. If you do $200,000 in sales, you should be working with a $20,000 float in your account. This will assure you've got enough to cover payroll and bills that come due right at the beginning of the month when you're waiting for your checks to come in.
Another very conseravtive way to go is to never take on a job worth more than what you have in the bank. Could you write the check for that job? Take on a $20,000 install with $5,000 in the bank and you might have trouble unless you've go real favorable credit terms with your vendors and you can turn the job quickly and get paid on time.
The longer you have to wait to get paid, or collect those receivables, the more working captial you'll need.