Wednesday, January 13, 2010

It takes Money to Make Money

We always hear that it takes money to make money right? Well here is a perfect example, and another reason not to spend your money on CRAP. Let me just clarify the last point. There is a certain percentage of our population who can buy CRAP, but if you are not living on interest from investments, if you have any credit card balances that are not going to be paid off in the next 30 days, and if you are working a 9 to 5 then you are not a part of that small percentage.

Why? How come you can't buy CRAP? Because when opportunity knocks you have to be ready to greet it at the door, welcome it with open arms! Most of the time that means you need two things: Money and knowledge. You should be getting more and more knowledge everyday because it's FREE. Reading this blog is knowledge, the internet if full of free knowledge, so stock up. Money on the other hand is in short supply. I think when Christmas rolls around we forget what short supply really means. Just look at your credit card notice, these bastards are jacking your rate up to 29.99%! That’s short supply. It’s easier for me to date Halle Berry then it will be to get a business loan for the next two years so that means your own cash is extremely valuable right now.

Here is a great example why:
As you well know, I run a string of small businesses. Wash and Roll has been on it's last leg, a victim of local economy (located in Southfield, MI) and a victim of the recession. We have little to no operating capital. At the end of every month our account balance is zero to negative.

Well things that we have done last year are starting to pay off (something to remember: what you do today affects everyday of the rest of your life). So we recently got a contract, A huge contract by our standards. It’s a trucking company with enough rigs where I have to hire another person. Yeah baby!! We were and are elated. Everyone is excited, this is something that we have been waiting for and working for.

After the bottles are popped and the joy dies down I have to figure out how much will this new contract cost me?

That’s a weird question, but if you own a small business you know exactly why I ask this. Here’s why: The job is going to pay roughly $450 per week. Nice!! But here’s the rub, the job costs me $275 (in labor and supplies, so I have to spend $1100 every month. Plus we need a specialty piece of equipment that will cost about $600. So after the first month I'm out $1700.

But wait there’s more,

I send them the first monthly bill after 4 weeks of work, but they have net 60 Payment terms. That means that they pay 60 days after they receive the invoice. Ouch!! Translation: $1100 for two more months plus another $550 just in case the check is late.

So when I get the call I’m happy, but in the back of my mind I know that I’m out $4500 bucks – or $4450 to be exact! Money that I won’t see back for some time. I will get it back, but at the rate of $175 per week starting in 90 days.

Double Ouch! So the moral of the story is I have the $4500 bucks. Why? because I did’t go to Vegas with my boys, Why? Because I didn’t spend more then $200 on Christmas gifts, Why? Because that is how I roll!!!">You tell me what's better, opening the door when opportunity knocks or that $4000 HD 48inch HDTV with Dolby Digital surround sound?

On 2nd thought, Don't answer that!, The thought just makes my old school 17 inch feel that much smaller.

Hey if the TV is too loud, I might not hear opportunity knocking on the door!!

All in for 2010. What are we waiting for!!

1 comment:

Raynbows said...

Thank you for your insight..and concern to share your knowledge