% of money put toward equipment

Discussion in 'Lawn Mowing' started by alexschultz1, Jan 12, 2011.

  1. alexschultz1

    alexschultz1 LawnSite Bronze Member
    Posts: 1,555

    im trying to justify buying a new mower, the monthly payments are $150 per month, which brings my total cost of running my business to $900 a month to pay off loans for my equipment. i make around $5000 a month w/o subtracting any expenses, which mean i am paying almost 20% of my monthly paycheck only for equipment. does this sound high? or is it average for what everyone else is paying
     
  2. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    Your TOTAL (personal plus business) debt load shouldn't exceed 30% of your net - pre-tax - income. It does sound like you're in excess of that already. What are you buying that requires you to run up $900 a month in installments on a $5,000 gross? You could buy a nice work truck, a 60" ZTR and a 36" walkbehind plus hand helds for that much money.

    I'm presuming you're a solo based on your stated gross income. If you have someone helping you pay bills (wife, girlfriend, whatever) then include their income in your calculations.
     
  3. JDUtah

    JDUtah LawnSite Silver Member
    from UT
    Posts: 2,636

    I pay 0% of income on debt. That is the number you should be at. If YOU want to make money and not give it to Mr banker.
     
  4. alexschultz1

    alexschultz1 LawnSite Bronze Member
    Posts: 1,555

    i forgot to mention that i started my business 5 months ago, and my intentions of buying the new mower will be to maximize profit and add the ability to maintain more properties. everyone has a different story at how they got into the business but i just want to make sure im not getting in way over my head and end up having the company devour itself in debt.
     
  5. gasracer

    gasracer LawnSite Bronze Member
    Posts: 1,049

    Maybe you should have bought the right machine to maximize your time to start with. You can't buy equipment expecting to gain more business.
    As my business grew over the past 3 yeas I purchased the machine or equipment needed for the new jobs that have come along. You have to justify cost vs use of everything.
     
  6. Agape

    Agape LawnSite Bronze Member
    Posts: 1,645

    I agree, if you want to be hurting in the winters, finance every thing!
    I pay cash for everything and although I don't have the shiniest stuff to mow with, I can relax in the winter.(still stressful).

    Go ahead and buy a REALLY nice one so I can pick it up cheap when u go under.
     
  7. ok4me2xlr8

    ok4me2xlr8 LawnSite Member
    Posts: 188

    Dude for mine I pay 372 per month ins. and all, and I have nice equipment you are not doing something right if that is just for equipment. I only mean this if this is just mowing equipment which it seems that is all you do.
     
  8. alexschultz1

    alexschultz1 LawnSite Bronze Member
    Posts: 1,555

    nope, its for all my expenses. truck, trailer, storage, and mowers.
     
  9. Patriot Services

    Patriot Services LawnSite Fanatic
    Posts: 12,678

    Sounds like a necessary expense. No reliable mower=no business.
    Posted via Mobile Device
     
  10. sdk1959

    sdk1959 LawnSite Senior Member
    Posts: 909

    How much of that expense is for storage? Is there any way you can store it on your property, in a shed or the garage?

    At least with the equipment payments eventually they will be paid off. Hopefully before they need major repairs or replacement depending on the hours your racking up on them. Unless a LCO owner rents an apartment most LCO's don't need to pay rent for storage till they expand and run crews.

    Going forward you should look to cut the storage expense and pay cash for any more equipment you get. Buy used equipment with low hours over new to save additional money.

    Remember- the latest and greatest shiny new equipment and truck will not get you a single customer- marketing and salesmanship does. This is a business- not a beauty pageant.

    A customer will never say "oh I called you because you had a new truck and new equipment". No, they'll say "I called you because I saw your sign on your truck when you were working in my neighborhood".

    Good luck in 2011.
     

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