10:23 PM
Unknown
Every mobile service business entrepreneur dreams of a time when he or she has 100s of service vehicles servicing the entire region. That is the entrepreneurial spirit, and it's alive and well. Now then, how does a small business entrepreneur know when to expand their business?
Well, it has always been my contention that an owner/operator can make more money running one-unit with a small team, than several and overseeing it all. In fact, it seems it takes 5 or more units to make the same amount of profit as it does with one which you run your way yourself.
Okay so, if an entrepreneur has one unit, and they run it, when is it time for them to expand and buy a new truck and equipment? Well, it just so happens that the other day a mobile service business entrepreneur with a very strong business clientele, explains that he needs a new truck and trailer for his business, but is wondering if now is the right time to buy, and he wants to make the right decision and wonders if he ought to go apply for a business loan. So he asks;
"I am in a need of a new truck and new equipment due to more work and places that I have to travel. I can go to Ford lot and lease a vehicle, and purchase a trailer to pull around. I drive a Ford F150 now with high mileage and it's about to go out on me. So what are your thoughts?"
Dear Entrepreneur, having newer equipment increases efficiency, but old reliable equipment that you know is fine too. If you vehicle is about had-it then you might consider a new truck. I worry about the F-150 because there is not much weight behind it when towing a big load, unless it has a tow package and upgrades (larger engine) and so, I'd wonder what the weight you are towing is. Yes, you could get a vehicle loan, but you'd also be paying higher insurance too, multiple costs of course.
Perhaps you need to ask yourself the following questions:
What is your current income from services?
Are you doing well on collecting on receivables?
Are you staying up on payroll?
Is your current vehicle paid for yet?
What is the cost upfront, payments for a new truck + insurance for commercial vehicle?
Are you expanding rapidly, meaning some of those new accounts are not paying you yet, but you are paying all the costs and labor upfront, waiting for a check in a couple of months?
All these are important issues and questions. And the most important of all issues is perhaps cash flow. Now then, in this case the entrepreneur is looking at F150 5.4 8 cylinder with the towing package, and a closed in trailer, and he is from the Great State of Alabama. Okay so, in this case study he must remember summer is coming and he may not need an enclosed trailer in summer to protect his equipment from the weather. Yes, Alabama and weather, well that's entirely another story isn't it?
As an entrepreneur he need to consider if he is worried about theft of equipment, and if that is one of the reasons he wants an enclosed trailer. If he gets an enclosed trailer, it will slow down efficiency a little, as the crew has to keep opening doors to get to the equipment to work, but he will also have room for a big sign, which will really help get new accounts.
Now then, when it comes to operational costs, as in gasoline, yes, a V-6 towing 6,000 pounds on a trailer has got to take the mileage down to 10 mpg or so? Ouch, but a V-8 is more efficient and can do it without using as much fuel. So, fuel costs, insurance, efficiency, increased payments, and safety are keys to a proper decision matrix here.
Here is another important piece of advice; what's most important is that you take your "ego" out of the buying decision. I always like to tell folks to get 130 to 150% maxed out before buying a new piece of equipment like that. Remember also that a $500 per month truck payment, well for a small one unit operator, that is a significant payment, and it takes a lot of profit to overcome that, so what if you have a problem, or a situation?
Please consider all this and think on it. If you have a question for another future article please contact me.
Well, it has always been my contention that an owner/operator can make more money running one-unit with a small team, than several and overseeing it all. In fact, it seems it takes 5 or more units to make the same amount of profit as it does with one which you run your way yourself.
Okay so, if an entrepreneur has one unit, and they run it, when is it time for them to expand and buy a new truck and equipment? Well, it just so happens that the other day a mobile service business entrepreneur with a very strong business clientele, explains that he needs a new truck and trailer for his business, but is wondering if now is the right time to buy, and he wants to make the right decision and wonders if he ought to go apply for a business loan. So he asks;
"I am in a need of a new truck and new equipment due to more work and places that I have to travel. I can go to Ford lot and lease a vehicle, and purchase a trailer to pull around. I drive a Ford F150 now with high mileage and it's about to go out on me. So what are your thoughts?"
Dear Entrepreneur, having newer equipment increases efficiency, but old reliable equipment that you know is fine too. If you vehicle is about had-it then you might consider a new truck. I worry about the F-150 because there is not much weight behind it when towing a big load, unless it has a tow package and upgrades (larger engine) and so, I'd wonder what the weight you are towing is. Yes, you could get a vehicle loan, but you'd also be paying higher insurance too, multiple costs of course.
Perhaps you need to ask yourself the following questions:
What is your current income from services?
Are you doing well on collecting on receivables?
Are you staying up on payroll?
Is your current vehicle paid for yet?
What is the cost upfront, payments for a new truck + insurance for commercial vehicle?
Are you expanding rapidly, meaning some of those new accounts are not paying you yet, but you are paying all the costs and labor upfront, waiting for a check in a couple of months?
All these are important issues and questions. And the most important of all issues is perhaps cash flow. Now then, in this case the entrepreneur is looking at F150 5.4 8 cylinder with the towing package, and a closed in trailer, and he is from the Great State of Alabama. Okay so, in this case study he must remember summer is coming and he may not need an enclosed trailer in summer to protect his equipment from the weather. Yes, Alabama and weather, well that's entirely another story isn't it?
As an entrepreneur he need to consider if he is worried about theft of equipment, and if that is one of the reasons he wants an enclosed trailer. If he gets an enclosed trailer, it will slow down efficiency a little, as the crew has to keep opening doors to get to the equipment to work, but he will also have room for a big sign, which will really help get new accounts.
Now then, when it comes to operational costs, as in gasoline, yes, a V-6 towing 6,000 pounds on a trailer has got to take the mileage down to 10 mpg or so? Ouch, but a V-8 is more efficient and can do it without using as much fuel. So, fuel costs, insurance, efficiency, increased payments, and safety are keys to a proper decision matrix here.
Here is another important piece of advice; what's most important is that you take your "ego" out of the buying decision. I always like to tell folks to get 130 to 150% maxed out before buying a new piece of equipment like that. Remember also that a $500 per month truck payment, well for a small one unit operator, that is a significant payment, and it takes a lot of profit to overcome that, so what if you have a problem, or a situation?
Please consider all this and think on it. If you have a question for another future article please contact me.
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