Wednesday, November 14, 2018

Should I Finance my Equipment to Start My Business?

Starting a lawn care business can be stressful, but if you take time and think through it, you can do it easily and debt free! Starting a new business is very risky. According to the Bureau of Labor Statistics' Business Employment Dynamics, 20% of businesses fail the first year, 33% fail during year two, 50% fail by year five, and whopping 70% will not exist ten years later. You're starting your business with the goal to make profit and thrive. The statistics are against you. However, with dedication, learning and a little common sense, you will be part of the 30% without trouble!


Time for a Rant


According to a study in 2007, the biggest reason why small businesses fail is lack of sufficient capital plus cash flow problems. This is nearly 82% of the failures. Don't be a statistic! There's a huge demand for lawn care and landscaping all over the US. The competition is quite aggressive, but don't let it scare you. You will succeed if you minimize your risk. The easiest way to minimize risk to the cash flow problems is simple, DON'T GO INTO DEBT! You can easily start a lawn care business without debt. The "normal" business owners laugh at this, but year after year they're getting loans on mowers that take years to payoff. Many commercial landscape equipment dealers offer 0% interest for 48 months. Seems enticing, right? Wrong! When you're able to finance a mower for 0%, you're paying a premium on your mower because the manufacturer covers the interest by slightly raising the price on the equipment. There's a dozen outdoor power equipment dealers in my area and when I walk in with my checkbook, I leave with a mower, trimmer, blower, etc with a 10-15% discount compared to what the financing price would have been. I purchased an $11,000 mower for just over $9,000 because I had cash. I left the dealer with an paid for asset instead of a liability that I didn't fully own. It's a great feeling to know that starting with the first lawn I cut, it would be making me profit rather than making the payment. Rant Over. 

What Equipment Should I Purchase to Start Out?


You don't need much. You can easily make $100 an hour with a self propelled walk behind, trimmer, and blower if you live in an area that has smaller city lots. After overhead of 20%, you're now going home with $640 from an eight hour work day. However, this isn't the case for most people, so we need to think slightly bigger. 

Something that most new business owners want to do starting out is to look like the best right out of the gate. This will most likely cause a business business failure because of starting capital and cash flow issues. Instead, try to find a half ton pickup truck that's 5 or more years old in good shape and a cheap utility/landscape trailer. For example, you can get a 2010 half ton pickup truck for around $5,000, then a trailer for $1,000 or less. For less than $6,000 you now have your method of transportation. You don't necessarily need a commercial grade zero turn mower to start out. I started with a 2006 Toro Z380. A homeowner grade 38" zero turn mower that was used for a medium sized lawn until I purchased it in 2009 for $950. However, it seems that the market for a nice homeowner duty is about $1,500. Pair that with a $200 push mower, a decent string trimmer and handheld leaf blower, you're in business for $8,000 or less. 

I completely understand that not everyone has $8,000 to spend right out of the gate. That's why you're starting your business. I've had very few things come easy with my business until a few years after I learned what not to do. But go back to mowing small city lots and make your $100 an hour with a push mower. If you're operating this way, you can purchase an even smaller truck, van, or SUV and operate out of it until you're ready to upgrade. You'll be in business for less than $1,000 and make $800 a day that you can save and then throw at bigger and better equipment. That's $16,000 a month! Let's say you had bad luck and only work 2.5 days a week. You'll make $8,000. That's your goal for a truck, trailer, zero turn, and small equipment! You'll be in business debt free and killing it! 

What equipment did you start out with? Sound off in the comments!



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