Help with a large business decision [capital expenditure]

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southwest_stacker
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Help with a large business decision [capital expenditure]

Post by southwest_stacker »

I have a small business that I have ran for about ten years. I am a specialized contractor with about ten employees. I have had a six figure net profit every year I have been in business.

This year was my best year ever and I will probably have a net profit of close to 500k.

I am looking at buying some equipment for my business that would cost around 450k.

This equipment would essentially wipe out the profits from my best year ever but it would without a doubt enable me to do each of my jobs in the future in about 1/2 the time and with 2/3 the people I have now. This equipment would replace the equipment I have now which is about 15 years old and inefficient and labor intensive - but it works.

I am at a loss as to what to do. On one hand I could buy the new stuff and do twice as much work next year and potentially make insane profits but on the other hand I think what if I keep this 500k, do the same thing next year with the same equipment, and have a million in the bank towards my goal of early retirement?

I am confused as to how to calculate which is best. I am having a hard time figuring in the risk of buying the new stuff. What happens if I buy it and then business drops off?
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DonCamillo
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Re: Help with a large business decision

Post by DonCamillo »

One big consideration would be if the new equipment adds value to your business so that you might be able to sell the business and recover much of the investment.

If that is so, then investing in the new equipment might not be too different from investing for retirement.
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freebeer
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Re: Help with a large business decision

Post by freebeer »

You didn't mention what your current savings situation is

If the $500K you netted from this year is all you've got then I think sinking almost all of it into the new equipment even with high expected ROI would perhaps be a bit risky, since it would be over-concentrating your capital (financial and human) and since that situation would imply you haven't been a good saver and/or that your business results haven't been that consistent.

But if you had say $2M saved up already then I would look at it as whether you would be better off having $2.5M in the bank plus a business running inefficiently on outdated equipment, or $2M plus a business running substantially more leanly with up-to-date equipment. To me the latter would seem like it would put you in a better position, and investing the $500K in the equipment would certainly seem like it would "earn" more than sitting in a bond fund given the reduction in costs.

Regarding business dropping off, of course in a contracting world that's partly out of your control based on the overall economy but assuming you are in a niche that will have some ongoing business regardless, having reduced job costs will also give you more ability to get work by bidding lower. Another way to think about it is that if you don't modernize you might start losing jobs to competitors that have updated equipment.
DEBTINATOR
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Re: Help with a large business decision

Post by DEBTINATOR »

Are you willing to lay off 3 people as the new machine will allow? What is the amount gained from doing so?
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

My business is really strange in that I am there 100% of the time we do anything. The business does not have much value without me.

I am sure I could sell off the equipment if need be at some reduced price but it could not be a functioning business without me.
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Re: Help with a large business decision

Post by tphp99 »

Are you sure you would have twice the amount of work to fully utilize the capital outlay? If so, then it's a great purchase. The ROI would be really good as long as you can accurately forecast future production.

Good luck.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

DEBTINATOR wrote:Are you willing to lay off 3 people as the new machine will allow? What is the amount gained from doing so?

All my employees are hourly manual laborers. I have a few core guys that I want to take care of and others that are somewhat transient. It would not be a problem letting three go.

Our work is not super steady as in we work every single week but we do stay fairly busy. The three guys I would let go probably make around 15-20k a year. They are entry level near minimum wage jobs.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

tphp99 wrote:Are you sure you would have twice the amount of work to fully utilize the capital outlay? If so, then it's a great purchase. The ROI would be really good as long as you can accurately forecast future production.

Good luck.

I am not sure I would have twice the work and that is a big part of the gamble. I have turned away several jobs this year though because we do not have time to do them and we are currently booked up until January.
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Re: Help with a large business decision

Post by LadyGeek »

Is it time to update your long-term business plan? Reading between the lines I see:
  • Do you need disability insurance? If you get sick or injured, what happens to your income and health benefits, including those of your employees?
  • Are you concerned with maintaining a long-term relationship with your customers? If this is a specialized industry with specialized equipment, consider going for the upgrade and taking in a long-term partner. You'll have continuity and a way to transition into retirement when you're ready.
  • Another advantage of taking in a partner would be to train him/her on how to keep the business functioning if you're not available. It's a selling point when your customers get nervous about maintaining a long-term relationship.
  • From the customer perspective, investing in new equipment is a good sign. It shows commitment to the business.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

freebeer wrote:You didn't mention what your current savings situation is

If the $500K you netted from this year is all you've got then I think sinking almost all of it into the new equipment even with high expected ROI would perhaps be a bit risky, since it would be over-concentrating your capital (financial and human) and since that situation would imply you haven't been a good saver and/or that your business results haven't been that consistent.

But if you had say $2M saved up already then I would look at it as whether you would be better off having $2.5M in the bank plus a business running inefficiently on outdated equipment, or $2M plus a business running substantially more leanly with up-to-date equipment. To me the latter would seem like it would put you in a better position, and investing the $500K in the equipment would certainly seem like it would "earn" more than sitting in a bond fund given the reduction in costs.

Regarding business dropping off, of course in a contracting world that's partly out of your control based on the overall economy but assuming you are in a niche that will have some ongoing business regardless, having reduced job costs will also give you more ability to get work by bidding lower. Another way to think about it is that if you don't modernize you might start losing jobs to competitors that have updated equipment.
House is paid for

Business is currently debt free

Have close to 600k in retirement (I am almost 40)

Zero debt

About 500k in the bank but I should net close to 300k more by the end of the year
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Re: Help with a large business decision

Post by KyleAAA »

Soooo, could you split the difference and invest $250k in new equipment while banking the rest?

I'd probably just do it and not think too much about it.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

KyleAAA wrote:Soooo, could you split the difference and invest $250k in new equipment while banking the rest?

I'd probably just do it and not think too much about it.

I wish but it is not an option. 500k to upgrade no way to do it incrementally.
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Re: Help with a large business decision

Post by michaelsieg »

You mention that you could do the work in half the time with the new equipment - so the question I would ask is: What the limiting factor to do more business is in your situation? - are you currently limited by the time for each project or do you have downtime between projects and the project volume is a limiting factor? Or is your presence of the essence and you can't supervise two simultaneous projects?
With the new equipment, your capacity to do projects could (in theory) increase threefold (new equipment twice as efficient and you still have the old equipment). So instead of laying 3 workers off, it might make sense to hire 5 more and work both equipment sets at full capacity....which using your numbers could increase your profit in theory threefold to about 1.5M annually, but obviously, if you have to be there full time for each project that might not work.
Combining the new equipment and old equipment could increase turnover time between projects (your time not limited by setting up/breaking down equipment), so you probably could increase your efficiency a lot by using both sets of equipment and still be present for each project.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

LadyGeek wrote:Is it time to update your long-term business plan? Reading between the lines I see:
  • Do you need disability insurance? If you get sick or injured, what happens to your income and health benefits, including those of your employees?
  • Are you concerned with maintaining a long-term relationship with your customers? If this is a specialized industry with specialized equipment, consider going for the upgrade and taking in a long-term partner. You'll have continuity and a way to transition into retirement when you're ready.
  • Another advantage of taking in a partner would be to train him/her on how to keep the business functioning if you're not available. It's a selling point when your customers get nervous about maintaining a long-term relationship.
  • From the customer perspective, investing in new equipment is a good sign. It shows commitment to the business.

Very good advice.

I do not have any disability insurance. Probably I should. I do not do any physical work really so as long as I can function mentally I should be able to run it.

Long term relationship with customers is important and is part of why I am looking at upgrading. They are ok with what I have now but it would be better for them too if I got newer stuff.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

michaelsieg wrote:You mention that you could do the work in half the time with the new equipment - so the question I would ask is: What the limiting factor to do more business is in your situation? - are you currently limited by the time for each project or do you have downtime between projects and the project volume is a limiting factor? Or is your presence of the essence and you can't supervise two simultaneous projects?
With the new equipment, your capacity to do projects could (in theory) increase threefold (new equipment twice as efficient and you still have the old equipment). So instead of laying 3 workers off, it might make sense to hire 5 more and work both equipment sets at full capacity....which using your numbers could increase your profit in theory threefold to about 1.5M annually, but obviously, if you have to be there full time for each project that might not work.
Combining the new equipment and old equipment could increase turnover time between projects (your time not limited by setting up/breaking down equipment), so you probably could increase your efficiency a lot by using both sets of equipment and still be present for each project.

Time is currently our limiting factor. Our clients basically hire us because of me. They trust that I will be there on site and that the job will be done right. I am not trying to toot my horn but I have a lot of experience and people trust the work I do. I don't think my customers would be comfortable with me not being on site all the time.

We currently are working at maximum capacity and my crew and myself are basically begging for days off. We work around 250 hours a month.

On one hand if we got the new stuff and brought in double the work we could make twice the money in the same time period but then again if we just kept the same volume of work with the new stuff we would get some time off which is not horrible either as long as it doesn't get too slow.

I guess my biggest fear is I just am having my best year ever and I would hate to sink the fruits of my labor into this upgrade and then have business go bad and lose it all.
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Re: Help with a large business decision

Post by michaelsieg »

I guess my biggest fear is I just am having my best year ever and I would hate to sink the fruits of my labor into this upgrade and then have business go bad and lose it all.
southwest_stacker
But the risk for that happening seems low - see if you buy this equipment outright, you are not leveraged and you have a huge advantage if business slows for whatever reason. In other words, you are much less dependent on cash flow than if you took a huge business loan. Imagine, that next year business droops by 50% - well, with working a quarter of the time that you work now you still would have a profit of about 250k - so I wouldn't worry about it.
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Re: Help with a large business decision

Post by sunspotzsz »

you are young and I think you should invest in the business.
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Re: Help with a large business decision

Post by nodenuff2 »

Stay the course until the 500k is not such a big deal. Wait 2 years bank another million or so then make the investment so what if the cost is then 600 k,
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Re: Help with a large business decision

Post by 4nursebee »

My first instinct reading this post is to suggest that you do not sound like much of a business person. You need to better understand depreciation, debt financing which would limit your initial outlay, and other accounting related things that would change the bottom line. What does your accountant say? If you do not have a business accountant GET ONE.

If it were me I would sit with pen and paper, come up with a matrix comparing best and worst case scenarios for each thing you are considering.
It then becomes easier to see what to do.
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Re: Help with a large business decision

Post by lhl12 »

Based on what you've laid out, it seems like a good decision to purchase the equipment. Yes, it's one year of profits and it's possible the economy could tank the day after you spend the money, but it seems like the payback on the purchase is so significant and so quick that within a year or two you'll be right back where you started but with a much more profitable business. Viewed just as an investment decision, the equipment purchase seems like a very high return investment. If things go bad, it seems like you will still be making money and the equipment will still pay for itself over time, but that it will just take longer. So, your worst case doesn't seem too bad, and there are lots of good case scenarios.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

4nursebee wrote:My first instinct reading this post is to suggest that you do not sound like much of a business person. You need to better understand depreciation, debt financing which would limit your initial outlay, and other accounting related things that would change the bottom line. What does your accountant say? If you do not have a business accountant GET ONE.

If it were me I would sit with pen and paper, come up with a matrix comparing best and worst case scenarios for each thing you are considering.
It then becomes easier to see what to do.
I would have to say to some degree you are correct. I am good at doing the work that I do, I am good at managing employees, good at interacting with customers, but I don't really understand accounting much. I do have a CPA I use for my taxes both personal and business but I don't really bounce a lot of ideas off of him.

I do not like debt. I understand mathematically it can be advantageous at times but personally I don't want to go into debt.

I have been trying to think of how to come up with a matrix to calculate the pros and cons and I just can't seem to figure it out. The variables seem to be unknowns. If the work remains steady the new equipment is almost a no brainer but if work dies off it would not be good. I have been in this line of work for 20 years and there are a lot of ups an downs. Work has been fairly steady recently but there have been years in the past when things were pretty rough.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

lhl12 wrote:Based on what you've laid out, it seems like a good decision to purchase the equipment. Yes, it's one year of profits and it's possible the economy could tank the day after you spend the money, but it seems like the payback on the purchase is so significant and so quick that within a year or two you'll be right back where you started but with a much more profitable business. Viewed just as an investment decision, the equipment purchase seems like a very high return investment. If things go bad, it seems like you will still be making money and the equipment will still pay for itself over time, but that it will just take longer. So, your worst case doesn't seem too bad, and there are lots of good case scenarios.
I am thinking you are right. I think my big hangup is I have this idea in the back of mind that if I can save up 2 million dollars then I will be able to retire, or at least be financially independent and not have to work anymore. I am viewing the money I have in the bank now as being 1/4 of the way there. If I buy the new equipment I will be poised to make more money IF the market is right, but I would be wiping out my savings and essentially back at square one on that goal.
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Hayden
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Re: Help with a large business decision

Post by Hayden »

Here's a way to think about this:

If business is good:
- if you buy the equipment, you'll hit your $2 M goal in about 4 years (?)
- if you don't buy the equipment, you'll hit $2 M in ? Years

If business is bad:
- if you buy the equipment, you'll have to slog through a lot of tough years
-if you don't buy the equipment, you have a cash cushion ...

The second key issue, after the state of the industry, is your personal goals. You've been doing this for 20 years. Do you want to do this for another 10-20 years, or do you want to get out of this business, and do something different.
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Re: Help with a large business decision

Post by 3CT_Paddler »

4nursebee wrote:My first instinct reading this post is to suggest that you do not sound like much of a business person. You need to better understand depreciation, debt financing which would limit your initial outlay, and other accounting related things that would change the bottom line. What does your accountant say? If you do not have a business accountant GET ONE.
I respectfully disagree... anyone who can run a profitable business (with no debt) and keep ten employees on the payroll over many years is very likely a good business person. Often its the sophisticated accounting that leads to overleverage and "swimming naked".

Southwest_stacker, you know better than most the risk and uncertainty of running a business. I would try some simple back of the envelope calculations to get an idea of how risky the move is. Take your average profit over the last five years (and throw out this year just to be safe). Let's just say $100k. In my experience in a family business, even if you bring in new machinery that should in theory bring up your profit margin... as your volume grows your profit margin will shrink some. So if you double your work (and lets assume keep all your employees to handle the greater workload), your profit will likely average out closer to $175k. That's an additional $75k in profits every year. Disregarding time value of money, that's an approximately 6 year payoff... which in my opinion is a sufficiently low number to justify the purchase (unless you think the business will be much worse in five years). I would recommend a more comprehensive analysis with a business accountant (calculate ROI), but even with a business accountant they are not going to capture the inherent uncertainty of running a business.

If it was me, I would look at taking at least some profits off the table ($150k?), and possibly do a line of credit with the bank for the remaining $100k to complete the machinery purchase. But using all of the profits for a machinery purchase is not a bad plan IMO. Worst case scenario is that you make the purchase and your business profits vanish. Typically such a piece of machinery will still have resale value (70 cents on the dollar?) if your business folds. So you have limited downside with this purchase.
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Re: Help with a large business decision

Post by Gus »

Is there a reason you won't say what the business is? Knowing what the business is and what sort of equipment you're talking about may lead to better suggestions.
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southwest_stacker
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Re: Help with a large business decision

Post by southwest_stacker »

Gus wrote:Is there a reason you won't say what the business is? Knowing what the business is and what sort of equipment you're talking about may lead to better suggestions.

Yes. It is fairly specialized. I bet there are less than ten companies in the US doing what I do. Most people would not know what the equipment was but I will say it should have about a 10-15 year useful lifespan.

If I were to need to sell it obviously there would be a limited market of people looking to buy it but I think someone would want it. Then again if I was selling it because business had tanked the other handful companies doing this type of work would not likely be trying to buy equipment as they would be hurting also. That is part of the fear of the decision as well because it is not like buying something like a 18 wheeler or a crane or bull dozer or something where there is a huge market across several industries that you could sell it to.
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Re: Help with a large business decision

Post by Kosmo »

southwest_stacker wrote:This equipment would essentially wipe out the profits from my best year ever but it would without a doubt enable me to do each of my jobs in the future in about 1/2 the time and with 2/3 the people I have now. This equipment would replace the equipment I have now which is about 15 years old and inefficient and labor intensive - but it works.
If you have 10 employees and a 40 hr work week, you have 20,800 man-hrs of work in a year. If this new equipment allows you to do the work in 1/2 the time with 2/3 the people, you now have 6933 man-hrs of work to generate the same output. That's equivalent to 3.33 full time employees. Will you get rid of the excess employees? Will some transition to part time work? Can you grow the business proportionately with the new "excess" production capacity?

What if you upgrade only half of the equipment now and half later (is that even possible, or is it all or nothing)? Do you need to take on employees (or contract out) for installation and maintenance of the equipment? Do the employees need training on the new equipment? What's the delay in production for changing out the equipment? Can you finance the equipment over its useful life (or shorter)? What will you do with the old equipment? Can it be sold/recycled/scrapped for profit? Or must you pay someone to remove it? Must you get rid of the old equipment at all or can it be used as backup or for increased production? What are the associated carrying costs of keeping the equipment? Will upgrading equipment force you to change physical location?
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Re: Help with a large business decision

Post by southwest_stacker »

Kosmo wrote: If you have 10 employees and a 40 hr work week, you have 20,800 man-hrs of work in a year. If this new equipment allows you to do the work in 1/2 the time with 2/3 the people, you now have 6933 man-hrs of work to generate the same output. That's equivalent to 3.33 full time employees. Will you get rid of the excess employees? Will some transition to part time work? Can you grow the business proportionately with the new "excess" production capacity?

What if you upgrade only half of the equipment now and half later (is that even possible, or is it all or nothing)? Do you need to take on employees (or contract out) for installation and maintenance of the equipment? Do the employees need training on the new equipment? What's the delay in production for changing out the equipment? Can you finance the equipment over its useful life (or shorter)? What will you do with the old equipment? Can it be sold/recycled/scrapped for profit? Or must you pay someone to remove it? Must you get rid of the old equipment at all or can it be used as backup or for increased production? What are the associated carrying costs of keeping the equipment? Will upgrading equipment force you to change physical location?

We do not work 40 hour weeks or have a physical location other than to store things. We travel to our job sites which are all over the US and while we are there we work 80-90 hour weeks. Currently we are at our jobs for anywhere from 2-4 weeks at a time with 10 people there. I am thinking with the new equipment the job could be done with 6 or 7 people and what was taking us two weeks could be done in one, and what was taking four could be done in two.

Ideally I would like to work 2 weeks per month and have two weeks off. Keep in mind we are working 80-90 hr weeks so working two weeks a month is working "full time" in that most people work four 40 hr weeks. We get the same hours per month but do it in two weeks. Also my 2 weeks "off" are not really off. They are spent doing paperwork and planning for the next job.



There is no option to upgrade partially. It is all or nothing. The old equipment really only has scrap value, which is likely not much. It is 15 years old, and equipment on the market today is so much better. It will let you go twice as fast with less people.

I figure 1 week downtime to get the new equipment, test it out, train my guys,, etc.
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Re: Help with a large business decision

Post by 3CT_Paddler »

What about your competitors? Even though its a small group, if they are using the latest equipment you are going to be at a pricing/structural disadvantage over the next 10 years.
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Re: Help with a large business decision

Post by southwest_stacker »

3CT_Paddler wrote:What about your competitors? Even though its a small group, if they are using the latest equipment you are going to be at a pricing/structural disadvantage over the next 10 years.
This is true and is one of the reasons I am considering upgrading. That being said my equipment is paid for and while I am not super efficient, I have good margins because I don't have huge equipment payments. I would guess many of competitors have their equipment financed so while they are able to work faster, a lot of their income goes to service debt. They are able to offer lower prices because they work faster but they also have to charge more to be able to cover the equipment. I am slow but am able to keep my costs low because of low overhead.

If I am going to be doing this 10 years from now I am almost positive I will need to upgrade. I guess the bottom line dilemma is if I can coast through with what I have now until I reach my 2 million in the bank to retire early goal or should I upgrade which may mean I could hit the goal sooner but it is at a risk of spending virtually all my savings and possibly taking much longer to hit my goal if things go south.
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Re: Help with a large business decision

Post by technovelist »

Can you lease the equipment? That might reduce your downside risks and let you keep more of a cash cushion.
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Re: Help with a large business decision

Post by Kosmo »

southwest_stacker wrote:We do not work 40 hour weeks or have a physical location other than to store things. We travel to our job sites which are all over the US and while we are there we work 80-90 hour weeks. Currently we are at our jobs for anywhere from 2-4 weeks at a time with 10 people there. I am thinking with the new equipment the job could be done with 6 or 7 people and what was taking us two weeks could be done in one, and what was taking four could be done in two.
Thanks for the clarifications. That does change things, but you still face the "problem" of excess capacity. What used to take 10 guys 4 weeks will now take 7 guys 2 weeks. Do you start the next job sooner? Are there enough jobs in the queue so that you don't have 2 weeks of down time between them? I guess I'm not clear on your goal for making this upgrade. Do you want to increase your market share? Do you want to decrease recurring costs (e.g., labor, maintenance) for your existing market share? Do you want to complete jobs faster to have more "free time" for your and your employees? Something else? Are any of these goals worth the capital outlay for the new equipment?
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Re: Help with a large business decision

Post by billern »

I have some clients in manufacturing businesses that buy large machinery. OP, I don't know exactly what you do but I'm guessing you are in a similar position to what I see.

Often, these large pieces of machinery take time (usually a year) before they are really operating at 100%. There is software and hardware troubleshooting and tweaking that has to be done after it is installed and the operators need to be trained. For that first period, the machinery is not very useful.

Knowing this, the equipment manufactures often offer financing that does not have payments or interest accruing for the first year to motivate the buyer. Additionally, they may offer very low rate financing.

I understand not wanting to use leverage for your business but make sure to at least consider the financing terms to make sure it is not a better option. Also, if your accountant understands your business and has good general business sense, you should talk to him/her about what you are considering to see their thoughts.
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Re: Help with a large business decision

Post by southwest_stacker »

Kosmo wrote:
southwest_stacker wrote:We do not work 40 hour weeks or have a physical location other than to store things. We travel to our job sites which are all over the US and while we are there we work 80-90 hour weeks. Currently we are at our jobs for anywhere from 2-4 weeks at a time with 10 people there. I am thinking with the new equipment the job could be done with 6 or 7 people and what was taking us two weeks could be done in one, and what was taking four could be done in two.
Thanks for the clarifications. That does change things, but you still face the "problem" of excess capacity. What used to take 10 guys 4 weeks will now take 7 guys 2 weeks. Do you start the next job sooner? Are there enough jobs in the queue so that you don't have 2 weeks of down time between them? I guess I'm not clear on your goal for making this upgrade. Do you want to increase your market share? Do you want to decrease recurring costs (e.g., labor, maintenance) for your existing market share? Do you want to complete jobs faster to have more "free time" for your and your employees? Something else? Are any of these goals worth the capital outlay for the new equipment?
Very good questions. You are making think about this a lot which is good and is helping me figure this out.

The 10 guys vs 7 is simple. Let some go. Right now I have 5 core guys that have been with me a while and I want to take care of. The other 5 seem to come and go, high turnover, etc. Out of my 10 it seems a couple of them are new people on every couple of jobs.

Right now our absolute maximum capacity is working 3 weeks a month. That is the crew working three 80-90 hour weeks on the jobs away from home and 1 week off. During that 1 week off I am not really off I am working on paperwork, getting ready for the next job, etc. This is what we have been doing and it is killing us. The crew is exhausted, I am exhausted, it is starting to hurt my marriage and kids because I am always working.

If I kept the exact same amount of work per month what was taking me 3 weeks could be done in 1.5 weeks. My gross revenue would be the same but expenses would be much less. Instead of 10 guys working three weeks I would have 7 guys working 1.5 weeks. Less payroll, less motel costs, less meals, etc.

My hope would be to add some more work to where we were working 2 weeks per month. In this scenario I would be accomplishing in 2 weeks what would currently take 4 weeks to do and is pretty much impossible to do now. My gross revenue would increase while at the same time increasing profits as payroll and motel / meal expenses would be cut in half.
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Re: Help with a large business decision [capital expenditure

Post by Alex Frakt »

southwest_stacker wrote:I am sure I could sell off the equipment if need be at some reduced price...
So could you buy something better than what you have at a reduced price?

Another thought. With only 10 competitors, you probably know most of them. Perhaps one of them with newer equipment wants to retire or concentrate on something else. For less than the cost of upgrading, you might be able to buy someone out entirely. That happened often in the (much smaller) specialized business I used to be in.
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Re: Help with a large business decision [capital expenditure

Post by Grt2bOutdoors »

Does the manufacturer of the equipment provide financing? If so, consider taking out a business loan for 50% of the cost of the equipment and put down 50% to purchase it or some percentage that makes you feel comfortable. Either way, with the profits you indicate you could take the loan out within 2 years. Good Luck!
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Re: Help with a large business decision [capital expenditure

Post by rayson »

OP,

Are you committed to your business for next 10 years? If so, it is clear that you should BUY the equipment. Financing or Cash is your personal preference. Your biggest concern today seems to be risk of burn out for you and your 5 key employees. By buying new equipment, you can improve your quality of life and focus more on growing your business. You seem to be working in a niche industry segment, and you + your 5 key guys are going to be key to grow the business. As soon as you buy the new equipment, make sure you reduce your labor costs.

Good luck!
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