How to fail part 2

Discussion in 'Lawn Mowing' started by PROCUT1, Feb 18, 2011.

  1. CLS LLC

    CLS LLC LawnSite Senior Member
    Messages: 487

    I'm interested in this thread and will be following it. I also appreciate you sharing this information with us. I do have one question. Would spreading your money/line of credits over multiple banks have helped your situation? Naturally they all would have eventually cut or lowered your line of credits, but it seems, assuming they didn't do it all at the same time, you would have been in a better place to handle the coming credit crisis.
  2. AI Inc

    AI Inc LawnSite Fanatic
    Messages: 27,061

    Posted you quoted missed the fact that they were generating income because he was only paying interest.
  3. blk90s13

    blk90s13 LawnSite Bronze Member
    Messages: 1,453

  4. AI Inc

    AI Inc LawnSite Fanatic
    Messages: 27,061

    Bad part about the dude with the baloon notes is after making all those payments, he is still upside down on those properties.
  5. coolluv

    coolluv Banned
    from Atlanta
    Messages: 4,514

    I have a few questions. First, how can they just pull a line of credit away from you without any prior notification and then turn that line of credit into a loan that must be paid immediately and take money from your savings account to pay off the line of credit. With good credit, why wouldn't one of the local community banks bail you out?

    Now I know that they pull $hit like this all the time but in your situation I don't see how its legal, and I don't see how you would not have a legal case against them for ruining your business. unless that line of credit that you signed for had those stipulations in it.

    The other question I have is, why if you have been in business as long as you have been would you grow to the point that you needed that much of a credit line or should I say that you needed to use that much of the credit line. If you were making the money you say you were making you should of accumulated enough in savings to cover material cost and payroll etc. Like you said you were not to the point that you could eliminate the bank and have the credit line as an emergency.

    So it sounds like you may have made the mistake of trying to grow too large to quickly, which is the same scenario playing out again.

    I understand the use of the line of credit, but I think you got used to having it and relied on it too heavily to keep the doors open. Couldn't you talk to your vendor and have them sign a release relieving the company you did the work for from any liability with the promise of paying them when you get paid? Or have them come with you when you pick up the check and cash it and then pay the vendor. I'm sure you could work something out so the customer pays you.

    I'm not saying your not telling the truth about everything, but something don't smell right.

    Just asking.

  6. planetlc

    planetlc LawnSite Member
    Messages: 129

    I really appreciate this post, your display of honesty is uncommon on online forums, and it shows that with some hard work that one can make their way out of tough times. Again, thanks for your honesty, details and information you are sharing about your personal struggles in the industry.
  7. 93Chevy

    93Chevy LawnSite Fanatic
    Messages: 41,970

    Subscribed; I'm withholding my comments until later.
  8. lawnjocky

    lawnjocky LawnSite Member
    Messages: 189

    I won't go so far as coyote10 in calling your story fiction but there is a very strong fish smell about it. I never thought much of your first how to fail story and I think less of this one. I would encourage others to follow two old sayings, "Don't believe everything you hear/read" and "Learn from others mistakes".
  9. mcw615

    mcw615 LawnSite Senior Member
    Messages: 473

    First, I will make clear that I am not in your shoes and know every detail of everything, your market, clients, etc.

    I do have a couple two cents to put in from your experience in the last 5 years.

    One: Payment Terms. $18,000.00 in immediate materials and labor burden with a 45-60 payment to reimburse those expenses plus provide you with your profit. That right there to me is a huge red flag. I learned this lesson from charging customers 'per mowing'. Ex. Month of May mow account weekly, June 01 send invoice for services rendered from May 01-May 31, payment due June 30. At the beginning of each year there was always a struggle for money, a large overhead in labor, costs, mulch materials and having your accounts receivable on those terms. I went bold last year and said I am only offering maintenance contracts (contract is only way to set a solid price to invoice customers MONTHLY DEPOSITS), I did my calculations and knew I would loose 10-15% of my customers just because it 'seems complicated', but in return I knew I would be gaining more business from my customers by adding additional services. As far as projects go, I have payment terms (which are somewhat negotiated with the client) but 50% down 2 weeks before the start of the project to begin ordering/paying for materials, at 50% project completion a 25% payment is due; then immediately at the completion and 'walk-through' the final 25% is due. I have found this is completely fair, it is not forcing clients to pay for project before it is completed and they understand it is not making me have to buy the materials.

    What happens when you do a $30,000.00 seal job and that customers check bounces? They may have had the 30k in the bank when they signed the contract, but 2 months later anything could have happened. I would never put my or my company at risk like that, just because they signed the paper to pay you whats due, does not mean that will happen 100% of the time, putting my companies profit out there like that to pay for materials with good-contract-faith to get paid in a near 60 days..YES, the bank screwed you over, but if you had good contractual payment terms, you would have had your money to pay your suppliers and not be relying on a line of credit for the mean time waiting on money to come in.

    Two: Where's your profit? You said after materials, labor, and overhead was paid for you were left with 12k profit-job/week...and only $20,000.00 in the bank? Like I said, don't know the in's and out's of every detail, but sounds as though you grew to operating off line of credit and were profit spending savy, when you should have been working to get out of relying off the line of credit to keep the engine of your business going.

    Hope most of everything has recovered well, look forward to hearing more of the story.
  10. grassman177

    grassman177 LawnSite Fanatic
    Messages: 9,795

    exactly, and why did we put more RED necks back into office?:hammerhead:

    you just made me fightened even more by someone else confirming exactly what i think on the subject

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