Twenty Nickels
If you save twenty nickels, you’ve made a dollar
by
Raymond Matkowsky
www.datastats.com
email: rdm@datastats.com
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Issue 9-10 September 2010
You do want to play this game!
Part II
by
Raymond Matkowsky
In the last issue of this newsletter the article “Do you really want to play this game?” discussed just a handful of reasons to go debt-free. If you missed it clicking on the title will take you to the archived web page.
At any given time my business is 95% to 100% debt-free and I can’t speak too highly of being in such a situation. The previous article pointed out that there are financial advantages to not taking on any debt. But, there are also operational and intangible benefits in doing so.
For instance, everyone has probably had to deal with the “customer from hell.”
The customer that drains you of resources and patience. I, like most of us, can only comfortably handle a certain number of customers per year. If you do not have many debt payments to make, you can pick and choose your clients. You do not have to take on all comers because you need the cash flow. You choose people you know you can work with and those that value your work. You can withstand ecconomic downturns more easily. Historically, they come every four to six years. If a client runs into financial difficulties it will not sink your business plus you could offer them financial terms that can help them get over the rough spot. This only makes you and your company more valuable to them since you can offer them something the competition can’t.
Two things that is certain. Many companies cannot go completely debt-free and it will not happen overnight. In fact it will probably take you many years to reach that goal and it is a goal worth striving for. For each year you chip away at your debt level, you will be automatically increasing your cash flow/profit.
How do I start?
You start from zero. Say you normally borrow US$100,000 per year to finance your operations. At 7%, you will pay about US$7,000 in interest or about US$585.00 per month. This year you make the determination that you will only borrow US$90,000 and make up the US$10,000 difference by taking US$585.00 a month from your cash flow. However, you are not really taking US$585.00 per month but US$525.00 per month because you are now saving US$60.00 per month in interest charges. Each year you increase your contribution to whatever level you are comfortable with. At 10% increase each year you will be debt-free in ten years and save approximately US$31,540 in interest.
Your bottom line
Remember, all savings go right to your bottom line. All savings are pure profit!
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A Call For Reader Input
We at Data Stats would like to see this newsletter become a reader supported forum for help questions, answers, or general comments on anything appearing in this newsletter or Data Stats’ website. If you have a question, answer, or comment to contribute send them to me at newsletter@datastats.com. I will try to publish it here.
If you have an urgent question to ask, you don't have to wait for our newsletter to come out. We will try to find you a reader or one of our experts that may be able to help you. So, if you have a question, comment, or think that you can be of help, send us an email at once to: newsletter@datastats.com.
Also, in your email, please let us know if we have permission to share your email address with experts that may be able to exchange ideas with you directly.
Raymond D. Matkowsky
Copyright © 2010 Raymond D. Matkowsky
Data Stats
P.O Box 672
Old Bridge, New Jersey 08857-0672
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