Managing growth, SBA?

Discussion in 'Lawn Mowing' started by Duekster, Jan 3, 2007.

  1. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    I currently have a large customer that wants me to grow.

    I could take me from .24 to over 2 mil per year. I am glad the company is interested but not sure how I will manage the cash flow, growth, and most importantly the quality.

    I have been in business less than 2 years, my partner runs a res business for over 10 years, so we are on the verge. Is SBA the way to go?
  2. BSDeality

    BSDeality LawnSite Silver Member
    Messages: 2,849

    while its an offer that is hard to pass up be sure to thoroughly think it through.

    What kind of equipment will you need? how many employee's will you need? new shop? Once you answer those questions you can see if it will fit your company.

    If you decide to go ahead you could look for private investors (no interest on the loan). Obviously they'll become partners, but they front the risk. There is always the SBA too. I went through my banker and she set me up with a $15,000 Line of Credit without much problem (in business 2 years also at the time). She said I could have done $25K too w/o problems. any more than that and then you start needing substantial collateral (house, trucks) and a special add-on to your life insurance policy.

    I had a similar offer come my way last year. He offered me a gig to maintain multi-million dollar homes in the area I was already working, nearly endless amounts of work if I had the manpower and equipment. I decided that as sweet as it was it wasn't the right time for me to dive that deep. Next year might be different, we'll see.
  3. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Messages: 4,373

    Be leary.

    Follow BSDeality's advice.

    Another thing that I would say, after being in this business for 18 years, is what's the probability that you'll have this account for an extended period of time?

    Sure, you could have it one year, make the money, but after all the headache of hiring people, them breaking everything, and losing the account, selling everything at a loss to dump it, will it be worth it?

    Is it a contract for a period of time, say 3 years?

    Rather than an SBA loan, look for a small(er) bank in your area.

    I work with a bank in my area, and each time I want to buy something, basically I buy it, take in the serial number, and they make up the loan for it.

    This way you have a personal relationship with a banker. If you get the correct contract, they should have no problem fronting you the money for anything that you need.

    Also, you'll want to try to figure all equipment paid off before the contract ends, or at least the same time it ends.
  4. Jpocket

    Jpocket LawnSite Silver Member
    Messages: 2,282

    I wouldn't do it. No one contract should be the big a chunk of your work. We all know how things can go on the smaller scale, often things change from year to year someone is not happy, you drop/lose the account and move on.

    In the situation you are talking about this particular business/person who wants you to grow would basically run your business. You would have to jump when they say jump. When the contract expires or they get lowers bids what happens?

    WHEN not IF you lose the contract you'll be stuck with all the equipment trucks and employees.

    A job like this is more suitable for a company that does mulitiple contracts like this, with more on the way. You would need to already be doing 4 or so million a year for this contract not be such a high risk. even then at 2million it would still be half of your gross.:)

    I would decline or ask them if they would like to break the contract up into pieces. there would be hardly anyone around here who could handle that, except Valley Crest. Even the so called local big boys would be biting off more than they could chew.

    It would have to be like a 5 year contract, with no out for THEM. Leave an out for yourself just in case you can't handle it.
  5. rodfather

    rodfather LawnSite Fanatic
    Messages: 9,501

    Let me get this right. You have a single customer willing to give you 1.75M in work revenue to addition I perceive to what they are giving you now???

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