A good friend of mine recently decided to start his own business. You might remember me talking about it and how leverage works. He’s partnering up with his brother, who has his own small painting business.
There are a lot of decisions to make as an entrepreneur and their latest one involves transportation. They have an old van. It runs, but it isn’t very reliable; it needs some work.
The Decision Is This
There are some options here. Let’s take a look …
- Spend $500 to get the old van running smoothly
- Buy an old van or truck for around $3,000
- Buy something new or almost new in the $20,000 range
Other Things To Consider
Before you decide what the right decision is, there are a few things to consider here. Here’s a couple. And maybe you’ve already thought about them:
- Reliability. If you can’t depend on the vehicle to get to the jobsite, that’s a big problem. There’s a cost to your reputation and ultimately there are some real dollars tied to that if you lose jobs because you’re unreliable.
- Image. Part of your reputation is image. We live in a world where image is important and people will judge you on face value. A new truck conveys a much better image than an old beat up one.
Got it figured out?
Now Let’s Get Into The Mindset
“The company always buys this old broken-down junk” is a statement that most people who’ve ever worked a 9 to 5er have uttered. Or certainly heard. It’s an employee mindset. After all, it’s the employees that have to deal with that broken-down junk everyday.
When you first start up a business, getting to positive cash-flow is everything. And the capital you have to invest in the business has to last until you get to that point where the business is standing on its own two feet.
And then once you’re making money, it’s about ROI. Return on investment.
So, although there’s no answer here that’s 100% right because there are a lot of factors to consider, there is one answer that’s a lot more right than the others. You spend the 500 bucks to get the old van running smoothly.
Once it becomes too expensive and too time consuming to keep repairing, it’s time to buy another one; maybe used or maybe lease a new one. And in a pinch, if it totally breaks down, you can always rent a vehicle for a few days until you decide the best course of action.
That’s what most well established billion dollar companies would do. And it’s what most seasoned entrepreneurs would do.
Think like both.