growing with debt vs. no debt

Discussion in 'Business Operations' started by georgialawn88, Jul 3, 2013.

  1. georgialawn88

    georgialawn88 LawnSite Bronze Member
    Messages: 1,075

    Theres always been a debate about this. Whats your opinion? Is there a right or wrong? Say u wanna grow but u dont have the coin. So u get a truck payment/ride on payment. U put a guy in the truck. Your making money but you have a 700/mo payment which eats a good bit in your profit. Is it worth it? Or the opposite look do you work hard wait 3-4 yrs then buy a truck with cash then hire someone. Whos in favor of what? Lot more risk in taking out loans. You get big and u.have 10k a month in payments.... Your making money but what happens when economy crashes... Gas goes to 7.00/gal. A historic drought hits. Wheres that 10k cmin from? What do yall think? What boat are u in and what boat would u like in?
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  2. me!

    me! LawnSite Member
    Messages: 8

    The biggest problem I see with debt is it seems most people buy more then they need.

    I used debt but it was as little as possible. 5 grand trucks and used mowers. Its not the favored business model that most have and not what they teach in school but I felt risk should be avoided as much as possible.

    We have not had a business loan in a couple years now, We pay cash for trucks and equipment, we buy used mowers and used trucks. Most of our vendors are either COD or we pay them when the bill comes in.

    I have seem to many business get buried in debt to think debt can ever be a good thing.
  3. smokenjoe_10

    smokenjoe_10 LawnSite Member
    Messages: 98

    It could go both ways I paid cash for everything my first 8 years this year I upgraded truck 30,000 and got a bigger better riding mower 15,000 my first just say 2 weeks is payments then it's profit. The truck was much needed the mower could have waited but John Deere had some sweet deals going and I was getting a job or 2 extra every week. You need to build credit some how just don't go and get 100,000 in equipment and expect to make a living for the next how ever many years.
  4. cpllawncare

    cpllawncare LawnSite Silver Member
    Messages: 2,659

    Debt is something that has to be managed, used properly it is a great tool to grow your business, used improperly and it will put you under.
  5. Southern Heritage

    Southern Heritage LawnSite Member
    Messages: 169

    This man is 100% correct. Now I'm not saying I'm bigger or better but we seem to be a bit larger scale then some on here but I have a little over $4000 a month in notes.
    3 new trucks mowers dingo skidsteers etc.
    I still make a healthy 6 figure profit. Now I built my company around these loans. I did not buy 3 new trucks and 3 zero turns etc Etc and pray for work. The reason I financed them is for the simple term cash is king and we needed it to invest into jobs and other growing expenses with a much faster return. I will say if all you do is mow grass it's much harder to turn a healthy profit with a $750.00 truck payment and $200 mower payment each month. My grass cutting truck ( bi- weekly mow blow and go) is 2001 F-350 gas burner with a paid for z turn. My trucks that do my high end commercial and residential are 2013 &2012 chevy 2500 & 3500 trucks both have 2013 johndeere that we just replaced our older ones. I plan to get 7 years from both trucks and 5 years from each mower. At the end depending on rates we will buy new trucks on credit.
    Also everything I have financed is 0% interest. That's a big deal to me.
    Also those are not all of my trucks but it gives you a idea of how we operate and deal like we are successful.
  6. Joel D

    Joel D LawnSite Member
    Messages: 125

    I don't believe debt is something to be scared of. If it were not for 0% financing deals I would not be where I'm at today. I would never pay interest though. Even if I had 30 grand sitting in the bank I would still finance a mower. $200 a month isn't that hard to swing, and if something goes wrong I still have my savings.
  7. meets1

    meets1 LawnSite Gold Member
    Messages: 3,857

    Speaking of that - - trucks, mowers, etc. I run trucks to 150K miles. Mowers 1500-2000 hours or 3 years old. Trailers we keep. Debt is a mangement tool just like your business account.
  8. cpllawncare

    cpllawncare LawnSite Silver Member
    Messages: 2,659

    All our trucks are paid for, we have two mower payments hopefully down to one at the end of the season, I don't plan on buying any new mowers for the next few years, I'm going to focus on growing our design install side of the business, like southern said it has a much faster ROI than the mowing maint side, I wish I had started that side sooner but I didn't have enough experience or people in the industry to get it going, the last two years has been great growing years for us especially this year, other than the monsoon rains it's been a good year. Zero interest loans can grow your business quite fast when managed properly.
  9. JB1

    JB1 LawnSite Fanatic
    Messages: 5,904

    Great thread, and discussion, you got going.
  10. seabee24

    seabee24 LawnSite Senior Member
    Messages: 619

    i would agree, done smartly it can really help. , done poorly combined with a slow year for any reason it will kill you.

    I would stay as debit free as possible, right until you find that the cost of the debit or interest will be less than the cost of the lost labor from break downs or doing it the hard way because you don't own the equipment.

    IMO if your a 1 or 2 guy mowing show, if you go out on the route, you shouldn't have a huge need to go into debit. if you break down, it shouldn't kill you in most cases.

    If you have 3-5 guys in a truck, and 40 homes to mow a day, and their truck breaks and needs a tow. Thats a lot of money standing around, and a big problem if the repair takes a few days. it might be better to get a new truck to prevent that. The same could be said for mowers.

    even 2 cycle equipment, I use to hang on to the same trimmer for 8 years plus. now its cheaper to just get new every other year to prevent problems

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