# Debt Free Business



## Hoss4x4 (Aug 29, 2011)

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.


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## grandview (Oct 9, 2005)

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


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## Hoss4x4 (Aug 29, 2011)

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


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## wizardsr (Aug 8, 2006)

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


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## pooleo8 (Nov 8, 2009)

Dave Ramsey FTW!


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## grandview (Oct 9, 2005)

Hoss4x4;1309568 said:


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


I thought you meant business wise.


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## RLM (Jan 12, 2006)

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.


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## Hoss4x4 (Aug 29, 2011)

grandview;1309668 said:


> I thought you meant business wise.


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


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## Hoss4x4 (Aug 29, 2011)

wizardsr;1309635 said:


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


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.


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## Maclawnco (Nov 21, 2002)

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.


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## kglenn04 (Sep 7, 2009)

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.


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## Mr.Markus (Jan 7, 2010)

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,


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## jerrywane (Mar 8, 2011)

*Funny*

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>


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## RLM (Jan 12, 2006)

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


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## CGM Inc. (Dec 15, 2008)

Mr.Markus;1311057 said:


> 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,


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


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## MIDTOWNPC (Feb 17, 2007)

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.


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## JD Dave (Mar 20, 2007)

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.


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## MIDTOWNPC (Feb 17, 2007)

JD Dave;1311130 said:


> 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.


exactly 
yes money is cheap too borrow now.
and prices are deflated


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## snobgone (Feb 2, 2010)

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%?


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## Spucel (Feb 6, 2011)

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


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## elite1msmith (Sep 10, 2007)

to each his own.

No debit is nice because you can wake up in the morning with alot less stress. Minimal bills to pay. if you didnt end up working that day or the next or a year you would be better off with no debit. remember ***** happens

rapid growth is almost impossible without debit.

having financing does cost you money. but if you are smart having that money avaible to you can result in cost savings, even with the interest.

example - if you need 1 skid of salt it costs you $4.00 per bag. But if you buy for the whole season a semi, it costs you $3.50 per bag. and if you paid the the whole debit off in 5 ir six months as equaled to the payment time frame for cash....even with the interest you would come out cheaper, and you have one less headace about buying salt because thats done for the year.

Done right and suscessfully taking on debit is good, i would try to limit what you use to only areas that "save you money" 

the loader example.... yes buy Vs. rent is nice to buy/own...until you dont sign the contract with them next season and your machine doesnt have a good account year 2 or 3. Long term contracts buy, short term rent unless you have past experiance that leads you to belive you have plenty of work for it.

my final thought is to those that say "debit is good" i wouldnt be where i am today ---- Its not how much you take in , its what you keep , 

so if you sold everything, then paid off all the debit... would you still be ahead of if you operated on a cash basis....and if so, so it enough to justify the liablity, fear, or extra stress created knowing you now have bills to pay?


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## RLM (Jan 12, 2006)

If you loose a contract & no longer need the piece of equipment, you can always sell the equipment & cash out the equity you have built up in it.


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