I have a feeling this is going to be a long post. But, it seems like one I need to make after watching quite a few people in this business expand and grow. This can be done in the wrong way, and there are some things you need to keep in check or failure is a sure result.
A business plan is the best thing you can have. I don't mean a general idea of what you want to do, or how you would like to grow, but an actual written plan outlining all of your purchases, expenses, marketing plans, projected revenue and yearly expected growth. This should encompass at least 3 years, and preferably 5. Consider inflation, losses, equipment replacement and cash reserves. Stick to it. Leave room for both CONTROLLED expansion and REDUCTION. Yes, sometimes you have to reduce the size of your business.
Cash or credit? The easiest way to buy gear is to whip out the plastic and expect to pay for it later. Its our nature and we do it to self satisfy our desire to "Have it now". We expect to pay it off after we earn the money but thats the lure into the trap. It is too easy to spend that money, make the minimum payment and eventually realize you are stuck with a big bill. For a small start up, maybe 3-5 thousand tops, it might be ok, beyond that I think its trouble.
So, cash is great. But where do you get it? A lot of guys I know don't have it. But, they have a few toys laying around the house. This is yet another trap. Its nice to have the cash to spend, but where did that cash come from? If you sell a car that you owned, for lets say 10 grand, and buy 10 grand worth of stuff, you can say your equipmewnt is all paid for. In some respect that is true, but you only have the equipment now instead of having the car AND the equipment. It was only a trade off. Nothing more. it does not put you ahead of the game. Our goal as business owners is to generate revenue AND keep our stuff, LOL. Avoid selling anything to pay for equipment if you have too. I know start ups are slightly different, but control how big you start and you will be ok.
Earnings well spent! This in my opinion is the best way to do it. Resist the urge to treat yourself or take the money and run. Don't do it. Pay for only those expenses that are incurred during business operations. I mean, grab some lunch once in awhile, or some pop, just don't run out and start buying 'Wants", purchase only "needs". With this money in the bank, as you grow with your business plan, you have the capital to purchase expansion equipment, pay your taxes, take care of equipment repairs that pop up and all teh important aspects of a successful business. Purchasing equipment with only the money you have earned gives you peace of mind and you don't owe anybody anything.
Taxes. Working for yourself costs a fortune. Taxes for us is outrageous. Make 20 grand, buy 20 grand in equipment and its not the total wash we think it is. We still have to pay federal and state income tax to an extent on that money earned, and if you spend it all, you may find yourself in deep trouble. I get audited all the time. This is by far my least favorite experience. These people are well trained. They know how to work the numbers better than every single one of us. They will look into every dime you have coming and going, and dig deeper and deeper if they find ANY discrepancy. So watch yourself in that aspect. I'll buy this, buy that and write it off. Its a tad more complex than that.
Insurance. If you have a policy that covers you for 50 thousand in gross revenue, make sure you add insurance if you earn more than that. I'll only report this much, and save myself. Let an insurance company audit your books, drop you for not disclosing true numbers, and then try and find another company to cover you. I made this, I made that, and your agent is watching what you made saying hmmnnnn. Thats more than what he is insured for. Do it right all the time.
June. Busiest month around for us. Probably the same for most in this area, maybe everywhere. We all hate to refuse business, and it seems like we could make a killing by soaking it all up. Another pitfall. Does it make sense to pay extra insurance, purchase gear, and use it for one month? Turn this away. Chances are it will sit most of the time. Only so many units can be handled by one company, andstriving to buy more just to cover grad season will lead to late deliveries, cancelled deliveries, upset customers and a bad name and reputation. All for what? One busy month? Rethink it folks.
This just touches on a few issues. I'm seeing too many people want to be like so and so, do what so and so is doing, buy what this company has, and you need to develop your own plan and use input to help guide you, nothing more. What works for some, does not work for everyone. I do not disclose all of our business ops for a reason. It isures our success in our market. So trying to do what someone else does can lead to trouble because you may not have all the info. Just be careful is all. I want to see everyone enjoy and succeed in this business.
- Brian S., vidmagas, Roxborough Bounce and 17 others like this