Buying v's Finance / Leasing
Many of our clients believe that saving up for their new equipment will eventually make their gym dream come true. We believe this to some extent but also know that most of our smarter clients prefer to Lease or Finance their equipment. This gets them the equipment they need now, keeps funds in their account, and gives them greater tax benefits. Lease payments are usually small monthly payments that don't affect your cash flow as outright purchases and are tax-deductible every quarter. This helps offset your tax amount resulting in fewer tax payments. The old-fashioned way of saving and purchasing outright takes longer to achieve and slows down your progression.
Ever wondered why your competitors get all the nice things?
It's simple, they plan for success and leverage good debt by leasing their equipment and using their earned cash savings on items that will help them make more money such as Custom Gi’s, Gloves, Rashies, and Shorts which they can on-sell to their clients and members.
With a lease-to-own or finance method, you can obtain the equipment you need now with smaller monthly payments, just like rent on your premises but you get to own it after the finance term. Here's how the numbers stack up. Let's say you want to deck out your gym with some 150sqm of Fuji MMA Mats, a Boxing Ring and say 10 new Boxing Bags. How will this scenario play out like...
75 x Fuji MMA Mats
1 x Fuji 6m Boxing Ring
10 x Fuji 6ft Heavy Bags
Total Cost: $23,990.75
How long will it take you to save up to $23,990.75?
As a business, you need to manage cash flow and trying to save that amount of money may take a small gym anywhere up to 2 years to save if you're diligent enough to put away $1,000 per month. Scenario 1 is that you already have the funds and you can purchase it outright. Happy days, new gym equipment, but no savings left and you're waiting another 2 years before you can tackle any other major advancement projects. Scenario 2 is that you can hang onto your working capital and use Business Financing or Lease to purchase the same items. You get your dream gym started today rather than in two years' time. You'll attract more members during those two years and ensure you have the best-looking gym in town with the best equipment to run your gym like a boss. People shop with their eyes and your first impression counts more these days as people search local gyms in their area on the internet and may not even step foot inside your gym. So making the best first impression gets new members and potential new ones excited even before they walk in the doors
Running the numbers over 3 years would look like this...
Click the image above to calculate your numbers.
* Your monthly payments would be $851.16. Like any good business leasing you would pay interest on this but here's the kicker, your GST would be refunded at your first quarter GST/BAS returning you $2,399, you'll then be able to claim your repayment (quarterly not yearly) and in some cases, you might take advantage of the government's instant Asset Write-Off which is currently offering an Asset Write-Off for purchases of up to $150k.
Now, let's say you took $10,000 from your $23,990.75 to invest in sellable items such as Custom Club Gi's, Club Rashies, Club Shorts, Club T-shirts, Custom Club Boxing Gloves, etc. that would leave you with $13,990.75 in the bank and a chance to start making more month... scenario one will have you working harder try to recoup your money while scenario two is making you more money. The other advantages are:
Would you rather walk into a gym that looks like a scene from a Rocky movie chasing chickens or would you rather train in a state-of-the-art training facility?
* We are not accredited tax or financial advisers. Always seek a professional or speak with your accountant for further advice.