JRAs flag ship partner Junk Doctors was started debt free because it had too. Ever since they have used selective debt to speed up the growth process. Lee Godbold talks about how to properly use debt in a Junk removal business in this video.
What’s going on? A Thursday afternoon in the office. Just got a payroll wrapped up. One of the things I’m always trying to get everybody to do is don’t be afraid to spend money on stuff that’s going to get you more business. Don’t be afraid to spend money on advertising. Don’t be afraid to hire people and spend money on hiring people. Make those investments, they’re going to turn around and create more income for yourself. One of the things that I want to talk to everybody about is debt and the problem with debt.
The issue of debt, there’s a lot of people that really don’t understand it. You have some people that take way too much of it. They get it too quick. They look at it as very easy money. They go out and get it. They don’t think about the ramifications. What if something goes wrong, are they able to pay back that obligation? Then you’ve got the people that take the Dave Ramsey route. Everything that Dave says, they believe it is scripture. They want to run everything completely debt-free. They believe debt in all forms is bad and both of those routes are incorrect. The first one we’ll get you into more trouble. You got a little bit of a chance of having some big-time success by going out and getting debt like crazy without thinking of the ramifications. You’ll probably eventually going to get burned up. The other one, you might stay out of trouble, but you aren’t going to get anywhere. At least not with any sort of speed.
Dave will disagree with this, but the problem with debt-free approach to business is, it’s too slow. In business, you’re either the quick or the dead. Once you realize you’ve got a formula that works. You’ve got a business that’s making you money. You’ve got an idea that’s making you money, that you’re monetizing. You need to go out and you need to get money and need to put that money into that particular service. Whatever that investment, whatever it may be. Get it out into the marketplace expand, improve and all like that. It’s making you money. Taking out debt on stuff that turns around, pays you and the covers that debt payment plus makes you a lot of profit. That’s something you’ve got to be willing to do. Now with debt, you want to be careful. You don’t want to use a lot of it when you first start a business if possible. I am all for trying to start a business. Trying to find a way to start a business debt-free. Why is that? Because when you go in and you’re starting a business. It’s unproven, so it’s not a proven model. By going out and getting debt on something, especially if you’re having to pay back principal and interest right off the bat, it kills your cashflow. When starting a junk removal business, unless you have a pretty good income, $75,000 plus. Probably $100,000, I’d rather you beat 100,000. Especially have kids, kids and marriage. $100,000 plus that income isn’t going away or if you have significant savings, which I put it $150,000 in cash plus. That’s a little on the high end. Even $100,000 in cash, that money might have been a little high. $70,000 in cash, you could go out and get a new truck. Still have the cash to make that monthly payment. If you go out and get a brand-new Isuzu truck with a junk removal body on it. Your payment is going to be around $950 a month.
With about $70,000, you can meet that obligation. You can meet all your other payments. You can advertise hard and you still have plenty of money in the bank up until that point that the business can make that payment. Those of you that don’t have that income and you don’t have anywhere close to $70,000 saved. Go to the used truck route by a truck. Buy a used truck to save up, to get the money. To go out there and buy that used truck. Once you get started, you can be cashflow positive or very close to cash flow positive and your business. What happens is if you’ve got that big payment out there. You’ll quit advertising to save you a little money, so you can make that payment. You’ll quit hiring people. That stuff that has to get done for you to grow. You’re not going to get the $2,000,000 a year like we did by year 5 by not making those types of investments. Now, once that business has proven. Once that junk removal companies are cashflow positive, you want to go and buy another truck. Your second truck probably should be new.
That way you have a good reliable vehicle and your maintenance costs are going to be lower. You got something that can always be running in case that used truck goes down. If possible, keep enough sellable assets. Assets that you can sell or cash on hand to cover the debt you have out. Get a line of credit. Everybody, whether you use it or not, go to the bank. Get a line of credit. So, you’ve always got something you can cover your expenses with and if at all possible. Always think of worst-case scenarios. Most people always think of best case scenarios. What is the worst-case scenario? If that worst-case scenario happens, can I still get this debt paid off? You don’t want to have to go into bankruptcy, lose your house or your business go under or anything like that because of money you owe. A lot of times you can wait a little while to get the money to go out and buy that item or buy that piece of equipment or make that investment. If you look at the worst-case scenario and you’re worried about covering that obligation. If that worst-case comes up, that’s probably what you should do. So, don’t be afraid of debt, but don’t treat it haphazardly or nonchalantly either. You have to respect that, but you can’t be afraid to use it if you want to have major success. We’re here to help you manage that and talk to you about it. Consulting calls, we’re here for you. If you want to go with the AdWords management route with us, we’re now offering. We’re probably about to go weekly. In addition, it’s coming down to $1,500 a month and that can actually be done in two separate payments of seven $750 a month to help out on that cash cashflow.
We’re looking into potentially actually going weekly with that to further assist on the cashflow because with AdWords and JRA campaign, after about a month its satisfaction was guaranteed. Give us a month to 6 weeks to really calibrate that campaign. It is going to be profitable right off the bat. We’ll continue making changes over the next several months. Constantly Monitoring, making sure there’s no wasted ad spend. Make that campaign profitable for you. It’s not going to be extremely profitable at first year. Especially until you get some SEO going on, but we’re going to get you profitable jobs right up front. That’s going to be repeat customers later on down the line. That’s going to be reviews, getting reviews online which is going to help book more jobs and that’s going to be potential referral business as well. Call us a t +1 919-466-9322. Visit junkremovalauthority.com or email me at [email protected]. Talk to everybody real soon.