Superintendents at almost every golf course have system upgrades they really want to do. But almost every golf course is short on cash. Budgets have been cut and revenue improvement has been slow in happening. Ownership/management is having a hard time approving expenditures for irrigation and turf equipment.
“Maybe next year” is the all too common refrain from superintendents. Worse, some have repeated it about their projects for 10 years now! The question must be asked, “What will be different next year?”
How much longer can duct tape keep an ageing irrigation system alive or an ancient mower in operation?
When it comes to available cash, next year is not going to be any different than this year. Nor will 2015 hold any significant change. And there is no magic box of money coming in a UPS shipment any time soon. Cash is and will remain tight. It takes a long time to improve a cashflow condition unless you have a fast growing revenue stream.
Consider the various financing options. In today’s environment, financing provides the fuel necessary. Money is available and those who have it are looking for places to invest it. It is much easier now to get financing even if you have a cloudy credit history. You can finance almost anything, including irrigation equipment.
Cost Savings
Lets say you have a mower or irrigation system that is now up in age. How much do you spend for parts, service, and labor to keep it running? Parts and service are easy to figure because you have invoices for your expenditures.
Time invested by you and your staff should be considered too. That time, if removed from dealing with down equipment, can be invested in other activities. Your crew time is limited too and has more value than usually considered.
Add up your costs over a year. Financing means a monthly payment or a certain amount paid each year. Sometimes, the amount of payments in a year will be less than the total maintenance cost for an old piece of equipment. That is a cash flow enhancer! Of course the assumption is the new piece of financed equipment will have very little maintenance cost.
Course Quality Improvement
If you had the new mower or irrigation upgrades, what improvements to the golf course quality would result? Sometimes there isn’t much, but often there is.
Quality improvements mean happier golfers, who hopefully will play more often, recommend their friends to play your course, and spend money in your facilities. That is a cash flow enhancer.
Also factor in what can be done with the extra hours the new system will provide. Would more course improvements be possible? Would the extra time allow for better course quality? Try to put a dollar number on the labor savings new equipment and systems cause.
Beat the Price Increases
If you buy now you are purchasing at the lowest point for the foreseeable future. Costs are going to be increasing.
Tier 4 regulations is bumping the cost of turf equipment. Raw material prices will be bumping the costs of irrigation products. Besides that, manufactures and distributors have been selling at extremely low margins since the recession and are aching to make some money. Added to that will be the inflationary cycle that will hit our economy one of these days.
If purchases are continually put off “until next year” you will be paying more. It’s a buyer’s market right now with low prices and cheap financing. That is a cashflow enhancer.
Rates are Going Up
Right now money is almost free. We have exceptionally low financing rates. As the Federal Reserve begins backing off their bond buying program (QEI, II, and III), interest rates will be going up. Not trying to scare anyone, loan rates will rise, but really just back to a normal 6-8% range.
Buy Now and Finance Now
Financing spreads the cash outlay over the finance period. We suggest looking at 5 year terms. For most any equipment or irrigation product that means you will pay it off while it still has good residual value.
Spreading the cost over 5 years helps minimize the effects to cashflow. Better to buy now and make payments than to try saving money over a 5 year period to make a purchase. Having the item now means you get the benefits and can more easily plan and manage your asset base for best productivity and return on investment.
Not incurring debt is still the best way. Problem is large amounts of cash are not nor will be available for a long time. Can the golf course maintain quality and golfer satisfaction waiting that long for basic operational system upgrades? If not, then finance it.
