Lawn Care Business Forum Lawn Care Business Book Lawn Care Business Blog Lawn Care Software
Home Forum Contract & Flyer Templates Blog Software Videos Podcast Calculators / Estimators Store Mower Review Design It Yourself Lawn Business School

Go Back   GopherHaul Landscaping & Lawn Care Business Marketing Forum > Business > Money, Finances, Stocks, Bonds, & Investments.

Money, Finances, Stocks, Bonds, & Investments. A discussion on Money, Finances, Stocks, Bonds, & Investments.

The problem with equity financing


Money, Finances, Stocks, Bonds, & Investments.

A discussion on Money, Finances, Stocks, Bonds, & Investments.
Reply
 
Thread Tools Search this Thread
  #1  
Old 03-07-2011, 07:04 AM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,386
Rep Power: 10
Steve has disabled reputation
Default The problem with equity financing

Investor Philip Fisher, was concerned about how companies paid for their growth. To finance growth, he saw that a company could choose from two options. Either they could pay for it with company profits or by selling stock in the company.

The problem, he felt, with companies that paid for growth through equity financing was the larger number of outstanding shares this created would cancel out any benefits the equity financing paid for.

Instead Philip preferred to invest in companies that had higher profit margins and could self fund company growth from profits.

By self funding, the growth that came more organically from within, and that growth would not be diluted by a larger number of share holders.

Think about how this applies to you and your business. Would you rather sell your uncle a % of your business for a $5,000 loan for a mower or would you rather use money you earned throughout the year to purchase it?

If the goal of purchasing this new mower is to help you cut a lawn faster and therefor make more money during your workday because you are cutting more lawns, what good is that extra money if you now have to give your uncle a certain percentage of your profits because he is now a part owner in your company?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote

Stop guess-timating. Learn how to estimate and make money! $$$
Mow Time Estimator Lawn Care Price Estimator Mulch and Topsoil Calculator Snow Plow Estimate Calculator


  #2  
Old 03-07-2011, 12:45 PM
The Cleaning Doctor's Avatar
The Cleaning Doctor The Cleaning Doctor is offline
Senior Member
 
Join Date: Nov 2009
Location: Helena, MT
Posts: 927
Rep Power: 5
The Cleaning Doctor is on a distinguished road
Default

Lawn care business tipsLawn Care Business Book
Very nice post Steve.

One book that I was reminded of today, I would recommend reading is....

Sam Walton, Made in America
__________________
Pat
Reply With Quote
  #3  
Old 03-07-2011, 03:16 PM
Hedgemaster Hedgemaster is offline
new member
 
Join Date: Jul 2010
Location: Pittsburgh, PA
Posts: 2,772
Rep Power: 0
Hedgemaster is on a distinguished road
Default

I'm "self funding" my growth by applying for a credit card with 0% interest for 15 months.
It arrived today - time to buy a mower.



Screw Uncle Bob.


Reply With Quote
  #4  
Old 03-07-2011, 06:08 PM
picframer's Avatar
picframer picframer is offline
Andy
 
Join Date: Jan 2009
Location: Halifax, Nova Scotia
Posts: 2,885
Rep Power: 9
picframer will become famous soon enough
Default

Depends, Equity financing is critical and the #1 route the majority of stocks that trade on stock exchanges and over the counter raise equity for operations and growth as it is the most cost effective way to do it. The ROE for the investor can be multiples vs investing in companies that raise capital through debt, plus the risk is far lower to the investor as the company that raises capital through equity does not have the debt obligation payments.

As for over capitalization due to issuing shares to raise capital, I don't buy it. It's all relative to the investment, what the cash will be used for (growth, new product etc) when capitalization is large and you want to increase the price of the stock you do a reverse stock split.

As a banker in syndication, I have personally handled hundreds of equity placements and even did them in companies I own.
__________________
Andy
Halifax, Nova Scotia
Reply With Quote
  #5  
Old 03-07-2011, 10:21 PM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,386
Rep Power: 10
Steve has disabled reputation
Default

Quote:
Depends, Equity financing is critical and the #1 route the majority of stocks that trade on stock exchanges and over the counter raise equity for operations and growth as it is the most cost effective way to do it. The ROE for the investor can be multiples vs investing in companies that raise capital through debt, plus the risk is far lower to the investor as the company that raises capital through equity does not have the debt obligation payments.
Do you feel there are public companies out there that are able to self fund growth through profits?

If so, are these better companies to invest in or no?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #6  
Old 03-09-2011, 02:57 PM
picframer's Avatar
picframer picframer is offline
Andy
 
Join Date: Jan 2009
Location: Halifax, Nova Scotia
Posts: 2,885
Rep Power: 9
picframer will become famous soon enough
Default

Quote:
Originally Posted by Steve View Post
Do you feel there are public companies out there that are able to self fund growth through profits?

If so, are these better companies to invest in or no?
Many do, perhaps once they get their feet under them, most do. However when a company wants to take on serious growth because of an opportunity, generally they will issue equity so that they are not carrying debt obligations should something go wrong, thus the risk to the investor.

As for what is the best to invest in, there is no clear cut answer, every investor is different and here in Canada you do a risk evualation and that will tell you the types of companies you should be looking at. generally younger people with disposable income will take larger risks than say someone in their 50's as they are looking at long term growth as the person 50 wants med risk as they are getting close to retirement, someone 65 will want fixed income with little to no risk.
__________________
Andy
Halifax, Nova Scotia
Reply With Quote
  #7  
Old 03-10-2011, 01:29 AM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,386
Rep Power: 10
Steve has disabled reputation
Default

Quote:
As for what is the best to invest in, there is no clear cut answer, every investor is different and here in Canada you do a risk evualation and that will tell you the types of companies you should be looking at.
Very interesting! Does this apply to stock investments or is this more for mutual funds?

What kinds of questions are asked in such an evaluation?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #8  
Old 03-10-2011, 06:23 AM
picframer's Avatar
picframer picframer is offline
Andy
 
Join Date: Jan 2009
Location: Halifax, Nova Scotia
Posts: 2,885
Rep Power: 9
picframer will become famous soon enough
Default

Quote:
Originally Posted by Steve View Post
Very interesting! Does this apply to stock investments or is this more for mutual funds?

What kinds of questions are asked in such an evaluation?
Generally speaking mutual funds are lower risk as you have a mixed bag of equity within the fund, i.e. not putting all your eggs in one basket.

My son who is last year in University (CFA) finished a modul in equity trading before Christmas, it was aa topic of deep discussion over the holidays. Once you understand the market, you may be like me, share prices are more often than not driven by spec vs how well the company is doing. So when you look at a company, you have to factor heavy what the market reaction is to events that may effect that company.

I'll use something simple and dear to us all which makes my blood boil. Canada has vast oil reserves, we are the largest supplier to the USA in the world, now our oil prices here are based on what the spot price is on the NYSE, the NYSE is driven by fund managers following world events.

Oil is currently at record levels again, however our country is self sufficient yet we are paying these rates because of what is going on in the middle east even though the USA and Canada do not purchase any quanity at all from Lybia which is the hot spot at the moment. It makes no sense.

I have seen share prices go through the roof because of market hype, I have seen shares drop to almost worthless prices simply driven by investors who thought something may be bad news for the company when in fact the company was doing fine.

Speculation by income managers swing the market big time, thus no easy answer.
__________________
Andy
Halifax, Nova Scotia
Reply With Quote
  #9  
Old 03-10-2011, 10:02 AM
wandfsmall wandfsmall is offline
Senior Member
 
Join Date: Sep 2010
Posts: 925
Rep Power: 5
wandfsmall is on a distinguished road
Default

financing is what kills most businesses. I am a debt free company, it takes forever to grow this way but it does not come down very fast either. It also allows me to offer lower prices then my competitors that have million dollar buildings. I understand borrowing money for equipment but keep that to a minimum and you will be standing when all of the lowballers around you take out your competitors.
Reply With Quote
  #10  
Old 03-11-2011, 12:16 AM
Steve's Avatar
Steve Steve is offline
Administrator
 
Join Date: May 2003
Posts: 36,386
Rep Power: 10
Steve has disabled reputation
Default

Quote:
Generally speaking mutual funds are lower risk as you have a mixed bag of equity within the fund, i.e. not putting all your eggs in one basket.
Now with these mutual funds, are most of them a collection of stocks and bonds? Are they not traded constantly by the mutual fund manager?

The thing I wonder is this, if you invest in a mutual fund in efforts to lower your investment risks, because your money is spread out across many stocks and bonds, through this mutual fund. If the market decreases in value, a mutual fund manager will try to buy and sell his way out of losses. Because he does this, when the market swings up in the future, won't you lose out on much equity because the mutual fund traded a lot of stocks?

So if instead of investing in a mutual fund, say you parked your money in, for instance, a walmart stock that doesnt seem to move much. Even if the stock market as a whole went down, as long as you left your investment alone, the underlying business principles of Walmart are not going to change, so as the market picks up, your walmart stock value will too. When it does, you wouldn't have lost out as you would have with an investment in a mutual fund?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
Reply

Bookmarks

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Forum Jump

Similar Threads
Thread Thread Starter Forum Replies Last Post
Cat Problem tomcat172002 Trials & Tribulations - The drama of running a business and of life. 9 08-06-2009 09:57 PM
Start-up Financing MLuciano Starting a lawn care business. 4 07-11-2008 04:38 AM
Financing with Better Outdoor products jewwells Truck, Trailer, and Outdoor Power Equipment Discussion, Repairs. 4 01-24-2008 11:17 AM
Problem Gopher Software Support Archived Question & Answers - Read Only 1 03-09-2006 03:29 PM
Problem Gopher Software Support Archived Question & Answers - Read Only 0 03-09-2006 03:17 PM

» Recent Threads
  RatingTitle, Username, & Date Last Post Replies Views
30 Inch Push Mowers Pros...
Billy Goat
06-27-2013 08:07 PM
Today 09:04 AM
by CLB454
23 6,317
Kohler command carb...
ExtremeLawncareServices
Yesterday 03:09 PM
Today 04:15 AM
by stevef1201
3 134
Not sure, but anyone do...
SnowRemoval2k14
Today 12:10 AM
Today 12:10 AM
by SnowRemoval2k14
0 69
2014 Gie-expo
ExtremeLawncareServices
08-19-2014 11:22 PM
Yesterday 09:23 PM
by ExtremeLawncareServices
3 898
Trying something new,...
ExtremeLawncareServices
Yesterday 09:07 PM
Yesterday 09:07 PM
by ExtremeLawncareServices
0 84
Tribulations of working...
stevef1201
09-13-2014 08:37 AM
Yesterday 10:10 AM
by stevef1201
8 572
Mulching beds
Bradcook21
Yesterday 07:43 AM
Yesterday 10:03 AM
by stevef1201
2 162
This sucks...
Matther777
09-18-2014 04:56 PM
09-20-2014 07:19 PM
by ExtremeLawncareServices
9 473
These are the days on...
ExtremeLawncareServices
03-22-2014 09:12 AM
09-20-2014 05:39 PM
by ExtremeLawncareServices
120 8,400
Replacing a Shindi T-27
Dan Tanner
09-13-2014 12:59 PM
09-20-2014 03:16 PM
by kslawn
2 578
Scag turf tiger hydrolic...
ExtremeLawncareServices
09-04-2014 10:55 PM
09-19-2014 05:59 PM
by ExtremeLawncareServices
11 935
Mowing 7 acres
avetslawncare
08-31-2014 04:24 PM
09-19-2014 03:29 PM
by acrajchel
6 1,108
snowplowing
jshak40
09-01-2014 07:20 AM
09-19-2014 11:49 AM
by Steve
23 1,494
Looking for feed back on...
ExtremeLawncareServices
09-17-2014 08:38 AM
09-19-2014 08:17 AM
by ExtremeLawncareServices
9 509
Lowballers scrubs &...
Darksteel
01-13-2014 07:35 AM
09-18-2014 06:32 PM
by Northwoods Outdoors
58 6,899
Hello from upstate NY!
A&MLawn&Snow
09-18-2014 11:19 AM
09-18-2014 04:10 PM
by Sprinkler Buddy
2 361
Price to apply fertilizer
SS.Lawncare
09-15-2014 11:10 AM
09-18-2014 01:16 PM
by Steve
9 622
Trailer tires
J.A.S.LawnService
09-01-2014 10:17 AM
09-17-2014 09:57 PM
by curts lawn care
4 1,022
new to the forum
SGlawncare
09-16-2014 11:20 PM
09-17-2014 08:29 PM
by curts lawn care
3 440
Help With Snow Blowing...
Robertf31
09-13-2014 10:55 PM
09-17-2014 12:34 PM
by Steve
11 795
Non-Stop Summer?
SouthallMowing
09-14-2014 10:51 PM
09-17-2014 10:48 AM
by stevef1201
6 576
Poll - net income
Dan5082
11-15-2010 08:08 PM
09-16-2014 04:44 PM
by jrs.landscaping
12 3,311
Getting lowballed!
PineHillLawn
06-27-2012 07:23 AM
09-16-2014 01:25 PM
by jrs.landscaping
24 5,010
Compare this summer to...
Steve
09-03-2014 12:52 PM
09-16-2014 11:20 AM
by Hanks Lawn Care Services
15 1,225
thinking about throwing...
veteranslawncaresystems
09-09-2014 10:31 PM
09-15-2014 03:41 PM
by Steve
12 904
Hello
Robertf31
09-12-2014 10:34 PM
09-15-2014 03:17 PM
by Steve
2 489
Newbie......Again
Jibber
09-13-2014 12:17 PM
09-15-2014 02:54 PM
by Sprinkler Buddy
2 590
need help with starter...
GoGreenerKS
09-12-2014 04:23 PM
09-15-2014 02:25 PM
by Steve
3 511
Brake job!
kslawn
08-30-2014 07:49 AM
09-15-2014 02:16 PM
by Steve
12 1,214
Hello
jawnebgoode
08-28-2014 08:37 PM
09-15-2014 02:15 PM
by Steve
3 984
Employee uniforms
Gerardo_Landscape
01-21-2014 11:11 PM
09-15-2014 02:12 PM
by Steve
5 1,112
Greetings from the north
Northwoods Outdoors
09-13-2014 08:55 AM
09-15-2014 02:07 PM
by Steve
1 476
darleneh
darleneh
09-15-2014 12:33 PM
09-15-2014 02:07 PM
by Sprinkler Buddy
1 477
My 1st bid
WesleySnips
06-11-2014 03:13 PM
09-15-2014 02:05 PM
by Steve
29 1,898
New Aerator
Chaz
09-09-2014 11:43 PM
09-15-2014 01:50 PM
by Steve
9 736
Yearly contract Pricing
jrob0691
08-21-2014 08:57 AM
09-15-2014 01:23 PM
by stevef1201
8 1,381
getting ready to start
calebmoss
05-23-2011 09:35 PM
09-11-2014 12:21 PM
by Steve
34 11,385
Stihl pull cord replace
SGL1
09-03-2014 09:22 PM
09-10-2014 12:25 PM
by Steve
9 907
Softball field
kslawn
08-15-2014 09:28 AM
09-10-2014 12:16 PM
by Steve
18 1,653
Lawn Route Templates
Landscaper1165
08-30-2014 01:52 PM
09-09-2014 08:05 PM
by Landscaper1165
4 1,141
New truck and trailer...
Johnny Rocket
05-14-2012 03:41 PM
09-09-2014 07:23 PM
by Matther777
18 6,724
What gets you bad press?
Steve
09-09-2014 11:48 AM
09-09-2014 07:21 PM
by Matther777
2 604
Signs on your snow plow?
Steve
01-15-2007 01:07 AM
09-09-2014 11:42 AM
by Steve
19 6,350
Exmark Lazer Z S-Series...
BLC7
08-22-2014 10:18 AM
09-08-2014 08:08 PM
by avetslawncare
12 1,420
New to the business
flamingyouth87
09-05-2014 11:52 AM
09-08-2014 11:55 AM
by Steve
3 820
Hello from Ohio
kurtwin
08-28-2014 05:06 PM
09-08-2014 11:51 AM
by Steve
7 1,111
Facebook
element009
03-23-2011 08:36 AM
09-07-2014 07:35 AM
by avetslawncare
24 7,889
Help pricing cut down 7...
Bradcook21
08-26-2014 11:17 PM
09-06-2014 02:09 PM
by Bradcook21
8 1,201
billing matters
sbuchanan8154
09-05-2014 09:56 AM
09-05-2014 03:00 PM
by Steve
3 796
Thoughts
googus
09-05-2014 07:28 AM
09-05-2014 02:23 PM
by Steve
2 735
» Popular Tags
2wd 4x4 article marketing bid birdscaping care charge collections subcontractor commercial credit card decorating ditches ecosymbiosis employee problems exmark ferris financing four wheel drive gopherhaul grass gravely hardscapes health honda how much to charge hydraulic installation landscape services lawn lawn care lawn care busines plan lawn care business seo lawn care business show lawn care business website lawn care business website seo lawn care website leaf lighting brass outdoor lights marketing mechanic monthly mow mulch mulch price native plants new buisness outdoor environments past due patio install podcast promotion running a business scag scag v-ride schedule seo snow starting a business steep lawns stihl sulky theft of services toro tractor auger trailer mate pro truck new used landscape walk behind walker won't return wright stander rh
Powered by vBadvanced CMPS v3.1.0

All times are GMT -5. The time now is 11:01 AM.


(C) 2011 Riggs Publications - Terms of use & Privacy Policy

All times are GMT -5. The time now is 11:01 AM.

(C) 2011 Riggs Publications - Terms of use & Privacy Policy