Hobby ShopsMar 1st, 2013 | By Editorial Staff | Category: Jack Schrock's Blog
We live in a small, tourist-type town in Central Texas. There are many quaint shops here and most are little more than “hobby shops.” Put another way, when they retired from the city, Mom and Pop came to town and opened a small shop that allows them to pursue a cherished hobby. Given the fact that they open and close on their schedule rather than when tourists are in town and they use what I call cigar box accounting, which means the left hand puts some money in the box now and then and the right hand takes it out more often than not. However, these small businesses were never really intended to provide an income, much less show a profit. As “hobby shops” they allow retirees to pursue their particular interests without trashing their 401ks.
Now let’s turn the page to towing and recovery. I fear many firms are run too much like hobby shops but they need to succeed because the owners depend on them for their livelihood. Having gone through the financing exercise with many towers, I know that too many have weak financials and a poor credit history despite many years in business. As a result, they must pay a much higher interest rate when making large purchases that require a loan. Also, far too many feel “wealthy” anytime they have a wad of bills in their pocket because they tend to confuse cash with profit.
I once sold a HD wrecker to a young tower from upstate New York. He confessed that he discarded his cigar box accounting in favor of more accepted practices. As a result, his credit was excellent and his financials demonstrated a positive net worth so he qualified for a much lower interest rate for that new wrecker loan. And, lenders tell us there is an annual failure rate of 25 percent in T & R. So to avoid that disaster, put some business in your business and last longer.