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Overhead Revisited

Discussion in 'Business Operations' started by Evan, Dec 20, 2001.

  1. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Messages: 1,712

    but the control of an asset that counts. Although debt ratio is something to be watched carefully it is noty a crime to finance rather than pay cash.

    Lets suppose that you had money to pay cash for a truck. You also could utilize a front end loader tractor or skid steer to improve productivity, sales and profitability. If debt wasn't out of control I'd vote finance both rather than pay cash for a truck.

    Second scenario, pay cash for a walk behind or finance it and buy a bed edger machine as well. I'm going with the mower and the bed edger.

    This whole business thing is about what's in it for me or what's the bottom line. Being debt free is not alway's what is best. Being in control of debt so financial obstacles are not fatal in the case of a big contract loss or economic downturn is important as well.
  2. turfman99

    turfman99 LawnSite Member
    Messages: 212

    Another way to approach that Matthew is just to slip in some more hours on the billing and watch the net profit find it's way to the BOTTOM LINE.

    It's is all part of our concept that everything and ever bit of work we do needs to be in a contracted amount of dollars to the client, ( no hours mentioned or implied anywhere) and then work the job to beat those budgeted hours with 100% quality control.

    If you state a finite number of ours to the client and you come in undr that, the client conversely is going to expect a reduction in billable hours. That's fine and you will reach your net profit goals you have set in your company billable hourly rate, but that is going to put a ceiling on it at that point.

    If you can decrease your on site and support hours and still maintain quality, you still bill the client the contracted price, but you realize a greater net profit on those hours. Extend that across your crews and you can see a significant improvement over your already projected and protected net profits.

    It is possible to bill more hours than you actually buy from your employees. Growth without capitialization.
  3. turfman99

    turfman99 LawnSite Member
    Messages: 212

    As far as paying cash for equipment and vehicles goes, I would not think about that until I had my credit line at zero, and three to 5 months cash to cover overhead in money market account untouched, or loan the money to myself from that acccount instead of credit line, never going below 3 months overhead expenses in that account.CASH RESERVES.

    Credit lines should only be used for bridge financing on payroll when paymets do not come in soon enough, short term finances, less than 6 months, and kept avaliable for immediae needs.

    There are way too many finance, lease and credit avaliablie now to tie up a credit line when you can utilize other financing vehicles for those specific needs. They are different types of credit for different needs.
  4. HOMER

    HOMER LawnSite Gold Member
    Messages: 3,183

    One never really knows how stupid he is until he starts reading posts like these.

    I'm truly amazed that I'm still in business!

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