Wednesday, July 30, 2014

Is your fire truck manufacturer financially sound?

Bankruptcy's, shut downs, recalls, and rumors 

With all the news about fire apparatus manufacturers these days, who do you trust?

Why is this important?

You already know that buying a fire apparatus is a long term decision.  And things get tougher when the party on the other end of the relationship is no longer around.  Things like getting parts, having warranty work completed, correcting systematic errors.

How can you confirm the financial health of your manufacturer?

If you can understand financial statements or D&B reports, get them from the company you are considering and read them thoroughly.  Ask tough questions. And don't settle for less than full answers.

But there is a simple to compare health among manufacturers you are considering if you don't know much about corporate financial reporting. 

Simply ask for their performance bond cost.  Their rating is a measure of their financial health completed by a financial expert.

A lower score is better, just like golf.  So, a manufacturer with a bond cost of $5 per thousand is more financially healthy than one with a $9 per thousand.

Now, the difference between a $5 and a $6 is probably not much but the financial health between a $5 and a $10 company is substantial.  The bonding company is saying the $10 is twice as likely to fail than the $5.

Summary

Buying a fire truck is a huge investment in money and time.  And the rewards of a new fire truck are expected for years to come but are based on continued support from the manufacturer.  It's important to know your partner will be around.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, July 23, 2014

Is a donation run fire department an extinct species?

Has the cost of running a safe and modern fire department outgrown a donation funded department?

I'm talking about a department that receives 100% of its income from donations or fundraisers without any government support.

Let's do some math

We've looked at the financial statements from thousands of our customers over the past few years and have some interesting facts.  We've eliminated career departments serving large cities to get a clear picture of small rural departments.

The average fundraiser earns about $4,000 after the costs are subtracted (cost of food, bingo expenses, etc.).   Departments must run 10 fundraisers to have $40,000 in income per year, or about 1 per month.

Average insurance premiums are $13,000 for a comprehensive department policy.

An average new fire truck costs $350,000 which is a $40,000 payment for a typical finance term.

The average department spends $3,500 per year in training and $5,000 in utilities & fuel.

Equipping a fire fighter costs $9,500.

Summary

If your donation run department has a fundraiser per month, they will spend about 1/3 on insurance and another 1/3 for basic operating expenses and equipping 1 new fire fighter.

The department would be able to afford only a fraction of a new truck payment.

The traditional funding model of relying only on fundraisers & donations is inadequate for a modern fire department.

Every fire department must prove its economic worth to the local government officials who have historically received fire fighting services for free.


Stay safe!
John R. Hill
President
First Bankers

Wednesday, July 16, 2014

Fire Truck Leasing: The 1 unasked question

Last week, I shared the question that departments don't ask.  Today, I'll share the question that bankers won't ask you.


And that question is:

 What do you expect to happen while you are paying off this truck?

What happens when this question is asked?


Financing is a 4 part balancing act.  First, today's payment budget is balanced against the future financing cost (for example, the longer you finance has a lower payment but costs a lot more).  Also, today's needs are balanced against the future purchases (is the current truck paid off when we need to buy the next truck?)

When the question is asked, you can get advice how to balance all these competing forces.

Summary

If the question is unasked, you may do something today that hurts you later.  If your banker doesn't ask, ask yourself and share with your banker.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, July 9, 2014

Fire Truck Leasing: How to get the best results

Everyone who calls asks the wrong questions for the goal they have.

The goal for everyone is:

How can I pay the least amount to finance the fire truck given my budget?

 So, how to get the answer to the real question?


Our typical community pays almost 1/5 less than what they would pay if we hadn't helped.  We provide the knowledge to save lots of money.  And we show communities exactly how they save.

Summary

If you want the best results, start by asking the real question you have.  Don't ask the 3 questions the banking world has taught you to ask.  Those questions only help the banks.

Stay safe!
John R. Hill
President
First Bankers