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Avoid Buying Hard Assets
Encourager-In-Chief: September 5, 2018
Avoid buying hard assets
Depreciation depreciates your cash flow.
Ask anybody who’s ever bought a brand-new car what happens to its value as soon as you drive it off the dealer’s lot and you’ll know why you should be very cautious about adding any hard assets to your business. While this is always prudent, it is especially important when you are just getting started. One of the biggest mistakes many new business owners make is biting off more than they can chew—or should I say, more than they can afford.
If you are in the early stages of planning your business, I challenge you to figure out how lean you can run your business. Entrepreneurs frequently overcomplicate their systems and often need to have some type of security when getting started. The reality is, if you have a great product or service, you need not complicate the system with expensive vehicles, equipment, or buildings.
For example, my business is primarily coaching clients, presenting seminars, and keynoting speaking engagements—usually in hotel conference rooms or client offices. I can conduct most of my non-billable business from my home with the use of a phone, laptop, and calendar. Yes, there are some additional essentials like handouts and merchandise items to sell, however, the hard assets required to operate my business total less than $5,000. That means my business is extremely profitable and there’s nothing much to depreciate.
When you buy a new truck, it’s going to become an old truck with breakdowns and repairs in its future. Unless you are a delivery service, you may not get back what you put into your vehicle. If you are a contractor, all you need to get started is a truck and the ladder. You don’t need to start off with a full showroom and warehouse. That can come later, once you’ve demonstrated you know how to manage your cash flow and delight your customers.
I’m not saying you should never invest in hard assets but you do need to be practical about them. Set goals for yourself and don’t purchase them, if at all possible, until you can completely pay for them. Your bottom line, and your spouse, will thank me for this advice.
“Impress your customers with your service, not with bells and whistles.” -- Dave Romeo
This excerpt is taken from my Survive and Thrive in Your Own Business seminar. I also encourage you to order for my Survive and Thrive in Your Own Business video program, which covers this lesson in much greater detail.