A company with $1M in equipment debt and $35,000 monthly payments generates $100,000 in revenue. Mike Andes shows why selling the financed trucks and focusing on the debt-free maintenance business ($40,000/month) makes more sense than chasing growth that drains cash.
This business had almost a million dollars worth of debt. And here's the math on it. He was paying $35,000 per month in loan payments on big equipment. He was doing about $100,000 in monthly revenue. But this is what's crazy. He was doing $60,000 per month in revenue on projects. And in order to be able to have the equipment required to do that $60,000, he was paying $35,000 worth of loan payments. And sure enough, his response when I said, do you really need that? Was, I just need one job every single month to make sense of it. But what the problem was is he got 10 of those type of pieces of equipment and trucks, and so now all of a sudden, you need to produce 100, $120,000 a month in revenue just to break even on being able to pay off your debt. At the same time, he made 40% of his revenue from maintenance. And all of those trucks, all that equipment, and all of those trailers were completely paid off. So my recommendation was, why don't we sell all these trucks, all of this equipment, get rid of all of this debt, and just focus on the business that's doing $40,000 a month in revenue, focus our services, increase our marketing penetration market, and do it with no debt, because now he has a whole bunch of trucks and equipment that's completely paid off.
