Brush mulching biz: If you had $100K to spend?

[Gamma]

Let's say you want to start up a brush mulching business & have let's say $100K to spend on it.

What would you spend the money on?

I have been thinking I'd spend it as follows...

Purchase the following pieces of equipment new:
ASV RC-100 Brush Mulching & Forestry Package $74K
Solesbees Equipment 73" brush grapple $2,500
PJ Goose Neck trailer, 22.4K GVWR $6,700

I already own a paid for 2000 Ford F-450 for towing.

Plus several thousand for spare parts & maintenance items such as carbide teeth, belts, hoses, grease and so on.

I'd also have to account for taxes, insurance, fuel, tools, advertising and other start-up costs.

I'm having a hard time deciding whether I should sell a piece of property that I own and take some of the money ($100K) to start a brush mulching business up by paying for everything up front with cash leaving me with no business debt, or should I borrow the money & finance the equipment purchase?

Are there any cons to having paid cash for new equipment up front? I would think that it would be nice not having to worry about making enough money each month to make the equipment loan payments. Or am I wrong?

 

[Terra Firma Scott]

Are there any cons to having paid cash for new equipment up front? I would think that it would be nice not having to worry about making enough money each month to make the equipment loan payments. Or am I wrong?

Gamma, Having your equipment paid for is nice. If you have a slow week,month,etc its not as critical to get out there and lowball jobs just to get the cash to make that payment..keep some of that 100k for cash flow ,unexpected breakdowns, repairs etc..

This "no-payment" scenario has kept me alive thus far and when i injured myself and couldnt work for 6 months it was a MAJOR relief to know that the equipment was paid for...Alot of people may have folded at that point...

Everyone has different approaches and views on this..It all depends on what your personal situation is...

My .02cents-STILL WORKING ON GETTING THAT DARN TIMBER AXE....$$$$$....

2004 CAT 257 HIGH FLOW
2006 Anderson Goose 20K GVWR
2005 Brewer tag along 12K GVWR
2001 F350 4X4 Dually
72" Bucket
60" Root Rake/Grapple

 

[EddieWalker]

My equipment is paid for and the idea of having to make a monthly payment scares me. But I'd also hate to cash out on a piece of real estate if it was increasing in value. Have you done the math? How much can you expect to earn from mulching versus what you make on the house in rent and equity?

A house will usually increase in value, a machine will only decrease.

Eddie

 

[Robbie Hegwood]

Two quick points. One, the savings in finance charges. On a 100k that would be pretty substancial. But i think Eddie put a very good perspective on it. That would be the best financial way to figure it out.

Second you will need operating cash. From your numbers you would have that covered as well. I think your plan would allow the most growing room possible. If work warranted a larger piece of equipment that would be the only thing you would have to finance. Works for me. Robbie

P.S. The clock is ticking, Will be mulching fulltime by June 24.

 

[Gamma]

My equipment is paid for and the idea of having to make a monthly payment scares me. But I'd also hate to cash out on a piece of real estate if it was increasing in value. Have you done the math? How much can you expect to earn from mulching versus what you make on the house in rent and equity?

A house will usually increase in value, a machine will only decrease.

Eddie

Eddie,

Actually the real estate that I own is 44 acres of farm land here in Missouri. There's no house or any other buildings on it at all and I don't rent out the land for farming. It just sits there for me to enjoy when I go out there for hunting or just to relax. It has been increaseing in value over the years that I"ve owned it. I'd hate to sell it, but I'd also like to start a brush mulching business, which would hopefully make me more money than what I sold the land for.

I'm undecided on what to do, so I'm just looking for others opinions in order to make a more informed decision ultimately.

Rory

 

[Kendall69]

NEVER pay cash, Always leverage your money and make your money work for you.
Example you can buy equipment with 0%, so you can use their money for free, while your 100k sits in a mutual funs and earns from 8-16% a year.

While you rent your land for another *****K per year.

Anything goes south, you still have the money anyway, and or sell the equipment for a small loss ( not really since you made money hopefully)

So with this scenario you make money from mutual funds, rent and the equipment and no interest has left the building.

It's all about leverage.

Don't laugh at the 16% some funds have brought in 24% in a year with averages over 5 years fo 8-16% - do a search their out there.

The key here is not to sign for equipment them blow the cash like a drunken sailor, as long as you invest the cash you will be ahead of the game.

Most people have the cash, buy equipment then also blow the cash DUH!