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Debt Free Business

Discussion in 'Business Fundamentals' started by Hoss4x4, Sep 18, 2011.

  1. Hoss4x4

    Hoss4x4 Member
    from FL
    Messages: 34

    Who operates a debt free business? Our plan is to start with all our equipment paid for and was wonderin who else does it. It will keep the risk down and allow time for growth.
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    I'm 95% debt free,does that count?
  3. Hoss4x4

    Hoss4x4 Member
    from FL
    Messages: 34

    I guess it depends on what the 5% is. The only debt we have is our house.
  4. wizardsr

    wizardsr PlowSite.com Addict
    Messages: 1,584

    Another Dave Ramsey guy huh? :waving: All my stuff is paid for, stashing money away for the next big purchase! Thumbs Up
  5. pooleo8

    pooleo8 Senior Member
    Messages: 271

    Dave Ramsey FTW!
  6. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    I thought you meant business wise.
  7. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    There are several schools of thought on this ideally yeah no one has debt, that said as you grow you need larger equipment to take on accounts that are ....larger & @ 100+k a piece I don't know to many contractors with that $ lying around...just rent a lot of guys say, renting only saves 15% or less than just buying on a 60 month note, per year & at the end of the note you have a low hour machine that is worth almost the purchase price. The smart money manager will also tell you to finance the equipment & hang onto the cash, the intrest rates are so low it will cost you next to nothing to use the banks money to purcase the equipment & keep yous in reserve, to make payments if needed, ideally that should come from $$$ generated by that piece working. The dealer i buy my equipment from rents out about 15 wheel loaders, rotates them every 3 or so years, i would be willing to bet, he sells those machines (after renting for 3 sniw seasons & making $ 45k off them) for what he would of paid for them (dealer cost), I know he has told me over that many machines the note makes him nervous & ut becomes a lot for his shop to maintain. So to answer your question... Yeah I have debt, I also have equity, & equipment doesn't depreciate like trucks, for instance my first loader is a 2007, bought new, I just saw one listed in equiment trader with similar hours to what mine has now, for what I paid for mine in 2008.
    Last edited: Sep 19, 2011
  8. Hoss4x4

    Hoss4x4 Member
    from FL
    Messages: 34

    I did. wasn't sure what what you were reffering to.
  9. Hoss4x4

    Hoss4x4 Member
    from FL
    Messages: 34

    Guilty. It changed my life. I didn't want to move where I am but with a big house payment, trucks and boats I had no choice. Now I can take a large pay cut and still live the same. Close to at least. This is how I will move back to MI to be with my family again.
  10. Maclawnco

    Maclawnco Senior Member
    from OH
    Messages: 695

    I am and have operated that way from the get go, with the exception of my house pmt. However, it was because of my very conservative nature and my natural desire to want to have control over my situation.

    Eventually you will see there is this mathematical formula called your sustainable growth rate. Its a product of many different variables in your business but can not be altered as much as one would like to try. To grow beyond what your sustainable growth rate takes an alteration to your capital structure - ie: acquiring debt or increasing your debt as a percentage of ____. At this point, you will either self finance and put your money into your business (you are the bank) or you will go the the brick and mortar bank and literally borrow their money. However you do it, you will find that to sustain prolonged significant growth, you have no choice.
  11. kglenn04

    kglenn04 Junior Member
    Messages: 2

    I own and run a debt free business. I used a term called bootstrapping to get where I am today and proud of it. There is nothing like knowing that there is no one in your pocket every month for cash that you work hard for. I say if you can swing it knock it further than they built the fence. However then again I am younger and in college and the bulk of my business comes from home owners. Your situation maybe a little different.
  12. Mr.Markus

    Mr.Markus PlowSite Fanatic
    Messages: 5,781

    I operate debt free... paid for my house when I was 38. (but I don't live lavishly)
    I upgrade equipment only if I have the bank account to buy it outright, then I can shop financing if I want to or just buy it. There's always something on the list though.Thumbs Up,
  13. jerrywane

    jerrywane Senior Member
    Messages: 134


    When you die,and they take your money,are you in debt???? Am gonna watch this one close.I told a best friend 30 years ago to not get into debt....he listened to me and i did not.He is living well in CA. and i am still working my azz off,but getting there.....I keep moving the goal post! My family is what i will have set for life(or a good chunk of it) and the toys don't mean nut-tin when yer 6 feet under...Enjoy while you are here,and work hard>:rolleyes:
  14. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    You guys that are running "debt free". What size companies are you running, years in business, etc. ?
  15. CGM Inc.

    CGM Inc. PlowSite Veteran
    Messages: 3,598

    I was in the same boat b4 I bought the biz....not anymore but will be back there very soon :)

    MIDTOWNPC PlowSite Veteran
    Messages: 4,555

    I have debt.
    If I didnt take on any debt I wouldn't be where I am now. Which is exactly where I want to be.

    as much as I would say Id love to be out of debt in some ways I dont personally understand some of the debt talk and why its so bad to have debt. If I can buy a house with minimal down, use my hands to fix it and sell it or rent it out and at the end of the day show a profit. Whats wrong?

    so my question is say I had the opportunity to get a $40k contract but it involved me getting a new machine worth $25k you dont have the cash in the bank you wouldnt take on debt? I would.

    would you buy out a competitors business if it came up, if you had to get finiancing? I would.

    calculated risks

    someone mentioned Dave Ramsay but this guy pushes paying off smaller debts first to get on a roll and get things paid off regardless the interest charged. that is ********
    if you have x amount of dollers in your hand, you put it to the place that it saves you the most money. I dont need to get on a roll, id rather roll in it after. Id like to see this guys networth.

    It speaks no where really of tax. There are times you can either write the gov't a cheque or buy a new truck. Paying for it with cash or not. You pick where the money goes.

    Some of these guys that write books and do seminars are there because thats how they make their money.

    some of the guys I look up to are ones that started from nothing and even if they lost it all they never went bust and built it back up again. I dont like people going bankrupt, that bothers me. I dont care if they were 6ft deep in debt its the come back they made, the swing back from what they learned, and it made them smarter, that I like.

    sorry for the long post I found it interesting.
  17. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,194

    Nothing wrong with good debt that will make you money. Money is cheap right now and if your smart you can really use that to your advantage. If you have a 1 million in equity is it bad to owe $100,000? The largest companies are generally guys who took the biggest risk and almost went bankrupt a time or two. I don't like debt now but without it I wouldn't be where I am.

    MIDTOWNPC PlowSite Veteran
    Messages: 4,555

    exactly :drinkup:
    yes money is cheap too borrow now.
    and prices are deflated
  19. snobgone

    snobgone Senior Member
    from CT
    Messages: 122

    The faster we grew, the more capitol it required, the greater the risk, the greater the return.

    I dont mean to say big companies all carry debt, just growing fast is hard without other peoples money even with good margins.

    And JD, a 10 to 1 ratio sound pretty good to me.

    What's wrong with 0%?
  20. Spucel

    Spucel Senior Member
    Messages: 413

    Nothing wrong with a little debt as long as you are in control of what you are doing.