Leasing – The Right Decision for Business Startups
Many entrepreneurs look at leasing from a consumer perspective. One that makes it seem like leasing is only a way to have the use of something, like a car for example, when you don’t have the cash to buy it outright.
Smart business people know that’s just not the case! Leasing a positive option to consider whether or not you have the capital to invest in the equipment it takes to start or expand your business.
Cash Flow is the total amount of money that comes in to and goes out of your business. Most new businesses that fail in the first year do so because of cash flow.
The Stitch N Print system cash-flows VERY well because the combination of printed tees and embroidery is such a powerful money-maker. If you leased a system for $400/month (just an example), and made $10/shirt PRINTED OR EMBROIDERED, you would just need to sell 41 shirts to be cash flow positive!
41 Shirts x $10 Profit/Shirt = $410.00 $410 Profit – $400 Payment = $10
Of course, that’s a small amount, but that calculation will show you the power of cash flow and leasing – look what happens when you sell 100 shirts in a month:
100 Shirts 41 Shirts x $10 Profit/Shirt = $1,000.00 $1,000 Profit – $400 Payment = $600 Cash Flow
Leasing is a business’s secret weapon to positive cash flow!
Capital = Cash in the Bank
One of the first financial goals that most personal financial professionals recommend is to have an emergency fund. That’s the money you squirrel away for a day when your AC breaks, your car has big issues or you miss a little too much work. It’s money that is vital to cover those times when your income doesn’t cover your out-go.
In Business, working capital serves the same purpose.
Let’s say you have $20,000 in cash to invest in custom t shirt printing equipment or a network modular embroidery machine system and take a look at a few scenarios:
- Marketing – the phone usually doesn’t ring by itself
- Taxes – not just sales tax, business taxes, employment taxes, etc.
- Taxes – YOUR income taxes – remember, no one will be taking money out of your paycheck every month, you have to.
- Accounting Services or software
- Insurance! Business insurance, liability insurance, etc.
- Equipment maintenance and repairs (if you’re going to break something, it’s almost always right after you get equipment and right before you get training.)
- Additional tools to fill larger or specialty orders (frames, hoops, heat presses, etc.)
When you lease equipment, you have saved money for those OH #$#$%^ moments.
It’s easy to see the advantages of leasing over a direct purchase, and if you don’t have the funds available to buy outright the advantages are even more so – you get to start NOW! You can also see by our cash flow example how easy it is to make your lease payments by selling as few as 40 shirts per month. What other business will provide enough money to pay for all of the equipment it takes to run it with such a small order?