Start a Lawn Care Business – Advice on Buying Lawn Care Equipment on Credit and Why College Won’t Help You as a Business Owner

Question:

I am only 20 years old and my father and I want to start a lawn care business, we pretty much have a plan set up however he is thinking about using credit to buy the equipment. Do you think it would be a good idea too use credit too buy the equipment and hopefully depend on the income of the business to repay that? Also He wanted to make me the Boss of the business is it alright to be the boss regardless of age or not having a college degree?

Answer:

Yes.  You should be the boss.

There is a lot you don’t know.  You’ll figure it out.  That can’t slow you down or hold you up.

Starting while you’re young has advantages.  You need less money to live.  You have less responsibility.  More energy.

You’ll make up for your inexperience by working extra hard and devoting more time to learning.

You can’t be a good boss until you first become a boss.

Age doesn’t matter.  You just have to do it.

If you are willing to learn – willing to seek out experts – willing to do whatever it takes – starting a business while you are young is the way to go.

I have a college degree.  However, if I could do it all over again I wouldn’t have spent the money.

It did not help me learn how to make money.

It did not teach me anything about marketing.

It didn’t teach me about finding the best employees when it’s nearly impossible to find enough good employees.

It didn’t teach me how to manage cash flow, buy insurance, fire dishonest employees, deal with frivolous lawsuits, apologize to clients when we’ve messed up for the second time, balance working crazy hours with being married and raising quality kids, negotiating 6 figure deals and just about everything else I deal with every day.

I’ve learned everything I’ve learned because I was the boss — and I had too.

I’m highly negative on college in its current form.

However.  Though I am negative on college I’m serious about learning.

You should become a boss.

And in the evenings take Accounting at a Junior College.  You should take specific accounting, finance, technology and writing classes.

You should plan to spend serious money buying books, audio books, going to workshops and seminars, and possibly getting coached by the best in the business.

I’ve spent a lot of money doing exactly what I am recommending.  And I continue to spend money on learning.  It’s been the difference maker in my life (businesses).

Every one of my friends that is highly successful, makes a lot of money and got to that level fairly fast has one trait in common — they are constantly learning and spending a lot of money on their education.

Everyone I’ve met that takes home a 7-figure per year pay check has spent 6 figures on their education and it wasn’t at college.

And those that continue to earn 7-figures per year in take home pay probably spend 25k to 75k per year to further their knowledge and abilities.

My point — don’t worry about not having a college education.  It’s highly overrated.

But be paranoid about what you don’t know — learn as much as you can.  It will make you a ton of money and help you get there far faster than everyone else.

Another very important point…

There are no rules about what you can and can’t do or if you do or don’t deserve to be successful at a young age without a formal education.

Your dad is doing you a favor by recommending that you be the boss at 20.  It will change the rest of your life.

Most of the advice you will get about starting a business and the possibility you might fail on your first attempt — or that you should wait and get a degree first — it is terrible advice.

It’s often given by people that ‘never did it’ — ‘never went for it’ — and absolutely aren’t living their ideal life style doing exactly what excites them.

Only take advice from those that are actually ‘doing it’ — that are the kind of people you want to become.

Ignore everyone else.  They shouldn’t get an opinion.

I made all of these points because I want you to be absolutely confident that you can start building a business now — at 20 without a college degree.

An idea about learning…

A lot of people don’t like to read.  Or feel they read too slowly.  Or are so busy they don’t have time.

With an iPhone and Audible.com you can get the equivalent of a high level college education in only a couple years.

Here’s how.

Every time you are driving or performing manual labor that doesn’t require a lot of thought and focus you should be listening to an audio book or podcast by someone that has already figured it out.

The iPhone has a feature that lets you play audio books at double speed.  It is my single favorite feature.  I listen to everything at double speed in half the time.

For the very best books you should consider listening to them multiple times.  The more you hear the information — the more of it you will absorb.

You will become what you listen to and who you surround yourself with.

Regarding your second question…

Should you finance your equipment?

Yes.  But maybe No.

I’m generally negative on debt.

As a young business owner it is critical that you don’t put yourself in a position that you have to take a large paycheck.

You need to be able to reinvest most of your profit so you can grow.

You need to keep some extra cash stashed away in case something bad happens or a great opportunity presents itself.

I’ve seen owners, time and time again, increase their standard of living to the point that they need such a large paycheck that they can no longer grow their company because they don’t have enough free cash to reinvest in the company.

Or during slow months they have to use their line of credit to cover their paycheck.

I’m negative on personal debt.  I’m not opposed to it but you should work to eliminate personal debt as quickly as possible.

I am for business debt used wisely and for short periods of time.

Without going into the details… actually paying cash for everything and remaining debt free can be a very dangerous business strategy at times because it can make you so cash poor that you can’t sustain a temporary business downturn.

I have personally used business debt many times.

Once you eliminate your personal debt and start to build cash reserves you can eventually become the bank for your company.

For example, I frequently loan the companies I’m involved with money at the beginning of each year.

Until you reach this point it is very wise to have a line of credit or credit cards that you keep available but only use when absolutely justified.

The problem with debt is that most people that use it to grow a business don’t understand it and get themselves into a lot of trouble.

First, an example of how to use debt the smart way as you grow your company.

At the end of the year you will pay taxes on all of your profits for the year.  If you have 500k left over at the end of the year you will pay taxes on that 500k at your current personal tax bracket tax rate.

If you are taxed at 33% you will pay $165,000 in federal taxes.  Even if you leave all of the money in the company’s bank account for next year.  It doesn’t matter.  You will still pay taxes on that money.

So a tax strategy is to spend as much of that 500k before 12/31 on prepaid business expenses that will be incurred the following year.  Such as buying chemicals, trucks, equipment, prepaying insurance, rent, etc.

The problem with this approach is that by spending most of your profit at year end you will be cash poor at the beginning of the next season.

The solution?

You use a line of credit to cash flow the business until you stabilize — until you recapitalize your bank account.  Then you pay off the line.

You might pay 5k in interest to the bank but you saved $165,000 in taxes.

That’s a wise use of debt.  But, mismanaged it will put you out of business.

Now an example of how to misuse debt.

You start a new business.  Finance your truck.  Finance the equipment.  Buy business cards.  Form an LLC.  Get insurance.  Buy a fancy computer and business software.  Get a new cell phone.  Etc.

Then you print your first door hanger.  Knock on your first door.

Oops.  You though you would get 10 new clients for every 100 door hangers you put out.

Instead you get 2 for every 1000 door hangers you put out.

Then you bid a bunch of jobs and win the work.

But after a month you start thinking “I’m not making enough money”.

When you add up your time and divide it by the prices you are charging you’re making about $15/hr and you still have to pay your debt, gas, supplies, etc.

And.  Within a couple weeks of kicking off your business you realize there is a lot you don’t know.  Your business plan isn’t working out anything like you had planned.

So you have to change your strategy.  Possibly do work you hadn’t planned on doing.  Offer services you hadn’t planned on offering.

The debt you took on to buy equipment and trucks and business cards becomes a big burden and makes it a lot harder to turn the business into a success.

The solution.  And my answer.

Have you done anything to prove to yourself you can succeed in this business?

Have you sold any clients?  Have you made any money?

If you are 100% positive that you can get business that is profitable — meaning you’ve already done it — then financing your equipment might be a wise move.

I recommend that you use a cheap truck and used equipment until you prove you can sell work, make money, and that you actually like the business.

At that point, if you don’t have any money to buy better, more reliable equipment you should finance only what you need.

Keep in mind that a $300 blower can be purchased in 30 minutes.  Do not pre buy a bunch of equipment and store it in your garage.

You should wait until the last minute and buy it when you can wait no longer.

Finance the equipment but only the equipment you must have.

Too many businesses are started with unrealistic growth expectations — so the owner buys way too much equipment and fancier trucks and trailers than initially needed.

If you are certain you can get profitable work and you buy only what you need I suggest you finance the equipment.

Having lesser equipment that slows you down and constantly breaks down will be a detriment to your business.  The right equipment is key.

So good equipment is not something you want to wait too long to buy.

One more thing…

If you have one job that requires a specific type of equipment and you only need that expensive equipment for that one job — you are better off not doing the job.

I’ve seen a lot of $8,000 riders and $4,000 aerators purchased because the owner won his first commercial job.  The idea is that one commercial job will become five and the equipment will be justified.  However, it doesn’t always work out that way.

Unless you are fully committed to selling a lot more of that type of work — and you have a plan to make it happen — wait.