Uncovering the Key to Financial Success
Warren Buffet’s path to wealth wasn’t built from out-sized risks or investing in the latest and greatest emerging market companies. He had a formula. Invest in companies that have a consistently good service to offer their customers and potential customers. Then he looked for the one big difference-maker, which is a game-changer that leads to long term financial success.
Free Cash Flow
As best defined by Fortune Magazine, “A small business needs to define their free cash flow. Businesses typically calculate free cash flow based on what is left over after all necessary expenditures are paid, and non-cash items are adjusted on the net income. When a small business owner starts to think about business decisions from a free cash flow vantage point, new opportunities and perspectives are gained. More specifically, growth opportunities become more apparent. Where many business owners lose sight of this important consideration is when they make huge capital investments into infrastructure that has large depreciation costs and little long-term value is created…”
Taking a free cash flow approach to doing business changes everything. Paying cash for assets on the balance sheet may feel great at the moment, but the drain on cash heavily impacts your free cash flow and replaces it with assets…most of which lose value. The most important financial move you can make is to preserve cash, and financing plays an important part in that success.
Equipment needs are a great example of this situation. Business owners may naturally think of financing the $300,000 equipment purchase but overlook the $5,000 cash need to replace an asset during an equipment failure. A few of those situations per year and businesses have unnecessarily drained cash reserves when a simple monthly payment not only increases free cash flow but offers other benefits as well.
Financing equipment allows you to more effectively match revenues (from equipment operation) with the expenses of the equipment (monthly finance payments). Financing also helps you more effectively only pay for what you use of a depreciating asset rather than over-allocating cash and hurting return on investment. Finally, it makes ongoing equipment acquisition easier.
If you build in a monthly payment for your equipment needs, replacing the equipment due to failure, age or technology upgrades doesn’t require a painful allocation of cash. You simply finance the new equipment and align that monthly payment with budget already in place. Adding newly financed equipment to facilitate growth becomes easier as well because the new finance payments are incremental to the monthly budget as opposed to a huge cash outlay.
TimePayment helps preserve the benefits of free cash flow. For equipment needs starting at $500 and reaching to $500,000 and beyond with startups to growing national brands over 1 million companies have trusted TimePayment’s innovative technology tools and creative capital to fund equipment needs.
