Credit iis Overrated (vol. Focus on your bank account)

[crcballer55]

Originally Posted by Mojodmonky1

Originally Posted by RFX45

Mojodmonky1 wrote:
My pops runs a legitimate business of "mowing lawns", as does my uncle, and a cousin (all have their own biz). While it is hard work, you CAN make a living off of it. Uncles been doing it for the last 20+ years and has been fairly successful with it. My dad just recently got into it after he quit his last business. Its a fairly low investment business (can get in for $100K or less) and as long as you work hard, you can see decent returns off of it.

but this is an entirely different conversation.

You say it is a fairly low investment at $100k? crcballer was talking about it like you need $100 to start a business. 
Like you said, your uncles been doing it for 20+ years. He must be one of the first and was able to capitalize on new and growing neighborhoods and manged to gather enough clients to be trusted. Your dad and cousin probably got good advice from your uncle who has been doing it for 2 decades, enough that they were able to succeed in it as well.  But now I just do not see it being as lucrative. Just an example, there are literally 5 different people/"company" moving lawns in my neighborhood alone, 5 different people competing against each other. Hypothetically, if I am right out of college and this is a business venture I would consider, I'd be hard pressed to compete with that. I'd have to look for a different location and starts networking, etc... Again, out of college with only a few hundred dollars in the bank and since I used mainly cash I have no credit history so I am stuck with what I have, how long before I run out? Keep in mind this part of the discussion was about this statement?
  

Given the terms set by crcballer, making decent money starting up a lawncare business would be EXTREMELY difficult.  The startup capital is necessary to purchase accounts and equipment (purchasing accounts will cost 80-90% of that $100K). 

Like you said, there are probably 5 different lawn mowing companies in your neighborhood alone.  I can virtually guarantee that the accounts/houses being worked by those 5 companies were all bought/sold/traded at some time.  Thats how that business works.  Not trying to sound racist, but no one really knows who it is that mows their lawn for them right?  They look out the window and see random mexican guy and assume he was either a) the same dude from last week or b) different dude who works for the same company.  The homeowner gets an invoice once a month and will mail a check or even drop cash, and that is that.  There is very little margin in that business to begin with.  It is a volume based business.  If you dont already have the existing accounts, the chances of you going door to door and convincing 100 different homeowners in a neighborhood to ditch their current lawnmower and hire you instead is... well... slim to none.  Thats why you buy accounts off of your competitors (or those who are retiring or going out of business).

College guy with a truck, a leafblower, a lawnmower, and a couple hundy in his pocket will not be able to compete with that.


I'm not too familiar with that particular business, but couldn't a college student position himself as someone trying to put himself through college as his competitive advantage to get into the market?  Most people will admire that and might be willing to give up their current business to support someone like that, no?  At least then they would know who was mowing their lawn and where the money is going.

The point of my argument, was not necessarily the type of business, but that you don't need a large credit line and massive startup costs to get a business off the ground.  As long as you have some imagination and the fortitude to get it going, you can be successful without digging yourself into a hole before you get off the ground.

 

[rfx45]

Exactly what I am saying Mojo. I apologize if it seemed a bit blunt on that particular reply.

 

[atlien seeko]

Just read The Millionaire Fastlane and thank me later. Best advice I've gotten in a LONG time...

 

[the notorious bum]

Im 20 yrs old my credit is sitting around 730, I owe like $500 on one card and my other cards have no more than $20 in debt because I only use them for small things like food.
The card that has the higher blance can get paid off at any moment. I don't get in debt with money I don't have. If pay with a CC it is becuase I know I can pay it cash but I use my CC to build credit.

I didnt get the credit score I have paying cash, so take bounce with your cash only crap.

 

[mojodmonky1]

Originally Posted by crcballer55


I'm not too familiar with that particular business, but couldn't a college student position himself as someone trying to put himself through college as his competitive advantage to get into the market?  Most people will admire that and might be willing to give up their current business to support someone like that, no?  At least then they would know who was mowing their lawn and where the money is going.

The point of my argument, was not necessarily the type of business, but that you don't need a large credit line and massive startup costs to get a business off the ground.  As long as you have some imagination and the fortitude to get it going, you can be successful without digging yourself into a hole before you get off the ground.

The problem is, this is a volume business where you have to burn and churn.  On any given day, 1 crew of 2-3 workers will go through 20-30 houses.  Most people have it setup to have their lawn mowed, leaves raked, etc.. etc... twice a month.  25 houses/accounts per day x 10 days (5 per week) = 250 houses/accounts.  Just rough numbers, but if you were to work 250 houses/accounts a month (twice a week), after expenses and overhead you might net $2-3K a month.  Imagine how difficult it would be to convince 250 seperate homeowners to inconvenience themselves and switch lawncare companies to help you out.  Even if you can manage to find 250 people to switch, you are still barely making as much as you would be if you worked full time flipping burgers at In-N-Out (maybe even less).

In a perfect scenario, I do agree that you can start a business without a line of credit or massive startup costs, but the key here is that your situation has to be ideal.  First and foremost, you have to be in a situation where your basic living expenses are covered (have parents willing to let you live in their house, raid their fridge, and not pay rent or help with the household expenses).  Second, this situation has to be stable for a very long time.  Everyone has heard the cliches that "it takes money to make money" and "you get what you put into it".  While these are not 100% true 100% of the time, more often than not it is.  If you start with virtually nothing, its going to take a very very very long time to build that business up to a scale where you can realize enough return/income to live comfortably without the assistance of your parents.  

 

[rfx45]

Originally Posted by crcballer55

I'm not too familiar with that particular business, but couldn't a college student position himself as someone trying to put himself through college as his competitive advantage to get into the market?  Most people will admire that and might be willing to give up their current business to support someone like that, no?  At least then they would know who was mowing their lawn and where the money is going.


I am probably know as much as you in the field but I am a bit confused by that statement? You're saying that you want them to say that they are going through college so they should hire him? It doesn't always work like that. I know that lawncare isn't just about mowing lawns, you need to know how to handle plants as well. It is a specialized skill in a way. There are people out there that are real particular with their gardens and lawns and won't hire just anyone who doesn't have much experience. Now this is based on the side of homeowners, I know a few are obsessed with their garden/lawn.

crcballer55 wrote:

---

As long as you have some imagination and the fortitude to get it going, you can be successful without digging yourself into a hole before you get off the ground.

The problem is everyone isn't creative and those who are creative aren't always business savvy. But you also have to consider other things like the market and how saturated it is. Not to step on anyones toe but look at the 100 new tee companies that come out, 99 of them fails because all they do are printed tees that thousand others have done. Those who succeed adapts or develops a niche in the market and finding that particular niche is the hard part, finding something that no one has done or capitalize on yet is the key. Sometimes that isn't even enough, you still need to evolve and change.  Look at Fubu and Phat Farm, they were huge before but they did not adapt and where are they now? LRG managed to adapt and change and they are still around, not sure how well they are doing now but they still mass produce clothes so they must b doing well enough.

crcballer55 wrote:

---

The point of my argument, was not necessarily the type of business, but that you don't need a large credit line and massive startup costs to get a business off the ground.  

True but to truly succeed and become bigger, you still need to get some credit up for a loan. And in business, once you're big enough, you are still going to need that credit to expand, no business pays cash on everything, it's always on credit and that is what the whole discussion is about. 

 

[crcballer55]

Originally Posted by The Notorious Bum

Im 20 yrs old my credit is sitting around 730, I owe like $500 on one card and my other cards have no more than $20 in debt because I only use them for small things like food.
The card that has the higher blance can get paid off at any moment. I don't get in debt with money I don't have. If pay with a CC it is becuase I know I can pay it cash but I use my CC to build credit.

I didnt get the credit score I have paying cash, so take bounce with your cash only crap.

Your credit score has no relation to your level of wealth.  Your credit score only indicates your level of interaction with debt.  You could inherit $1M tomorrow and your credit score wouldn't change one bit.

I'm a bit holder with an even higher credit score and also have a mortgage with no other outstanding debt.  I used to buy into the thinking that you needed to buy stuff with plastic to increase your score.  I started actually closing cards and my credit score didn't move one bit.  We need to stop focusing on how high our credit (debt) score is and start focusing on increasing the balance of our bank accounts since that is a far better option for making purchases and providing a buffer when emergencies come (because they will).

 

[crcballer55]

Originally Posted by RFX45

Originally Posted by crcballer55

I'm not too familiar with that particular business, but couldn't a college student position himself as someone trying to put himself through college as his competitive advantage to get into the market?  Most people will admire that and might be willing to give up their current business to support someone like that, no?  At least then they would know who was mowing their lawn and where the money is going.

I am probably know as much as you in the field but I am a bit confused by that statement? You're saying that you want them to say that they are going through college so they should hire him? It doesn't always work like that. I know that lawncare isn't just about mowing lawns, you need to know how to handle plants as well. It is a specialized skill in a way. There are people out there that are real particular with their gardens and lawns and won't hire just anyone who doesn't have much experience. Now this is based on the side of homeowners, I know a few are obsessed with their garden/lawn.

crcballer55 wrote:

---

As long as you have some imagination and the fortitude to get it going, you can be successful without digging yourself into a hole before you get off the ground.

The problem is everyone isn't creative and those who are creative aren't always business savvy. But you also have to consider other things like the market and how saturated it is. Not to step on anyones toe but look at the 100 new tee companies that come out, 99 of them fails because all they do are printed tees that thousand others have done. Those who succeed adapts or develops a niche in the market and finding that particular niche is the hard part, finding something that no one has done or capitalize on yet is the key. Sometimes that isn't even enough, you still need to evolve and change.  Look at Fubu and Phat Farm, they were huge before but they did not adapt and where are they now? LRG managed to adapt and change and they are still around, not sure how well they are doing now but they still mass produce clothes so they must b doing well enough.

crcballer55 wrote:

---

The point of my argument, was not necessarily the type of business, but that you don't need a large credit line and massive startup costs to get a business off the ground.  

True but to truly succeed and become bigger, you still need to get some credit up for a loan. And in business, once you're big enough, you are still going to need that credit to expand, no business pays cash on everything, it's always on credit and that is what the whole discussion is about. 

I highly encourage you to read Linchpin by Seth Godin.  It shows you how to be indispensible and not be just another flash in the pan like FUBU or Phat Farm. 

In regards to the business credit for expansion... Apple is a debt free company with no outstanding debt.  The same holds true for Chic-Fil-A and many other businesses.  Many of the business who have fared best in the current environment are those who have managed their cash flow well and expanded within their means.  Now, with that said, most businesses typically utilize a 30, 60, or 90 day payment plan for their inventory after it is received but that is separate from a credit line with a bank.  The Net60 is just a typical accounting procedure utilized by most businesses.

 

[rfx45]

I never said it is possible but are seriously telling me both Apple and Chic-Fil-A started out debt free from the beginning up til now? I somewhat remember Apple being in trouble in the 90's but I'm no Apple expert so I'm not sure.

Again, you are seeing this as black and white, credit or cash. I am not saying never use cash or get as much credit card as much as possible, I'm saying both are good in moderation. You keep throwing these examples of success stories but it's not going to change the fact that it will be difficult to start a business if you plan to pay nothing but cash your whole life and save up enough money to start a business. It's not going to happen overnight. Not everyone is making 6-figures right out of college to pull that off. But go ahead, start a business w/o any credit history and keep paying cash your whole life. Chances are you know what you are doing and might live comfortably this way but not everyone's going be able to do it and to blatantly say credit isn't necessary is just a bad advice.