In 18 months I've gone from solvent to almost broke - need major HELP!

downhillfast

Have tried pretty much all of the above... friends' feet are sore from leaflet dropping about everything we try to put on! Ambience in the pub is fine - I'm very into catering for all tastes such as quiet music or sport on TV... kids have games available and a play area in the garden... we get a few walkers in and trade from the local canal also. It just isn't enough to pay the bills and provide me with any income.

I'm pretty much resigned to the fact that things have to change drastically.... without significant capital input (to totally change the pub and what it can offer) by means of a restaurant area and a decent (and honest) chef I do not see how this pub will ever make ends meet - and having spoken to new friends who have also known past licensees here - I AM NOT THE ONLY ONE! I was told that it was due to personal reasons and health reasons re a dodgy knee that the previous people sold the place - I now know it was sold when they too were struggling to survive. It's like flogging a dead horse here - no customer loyalty and no money to change things to encourage a different customer base.

I just want the most painless way out now I guess.

pusscat

Edited for formatting!

Good afternoon Downhill

I hope things are feeling a little better for you today? I have had a quick run through and this is where I think we are:

Firstly, apologies that this is so long…..

It seems as if you have made your decision to get out of the pub – so long as that is what you want then that is great. This means that your priority is now to get the best possible price for your business.

All of the advice I would have given would be based on turning the business around, however, this is likely to be a relatively long term project, and I am guessing that you want out ASAP? Much of the advice can also be used to improve the saleability of the business so I will jot it down anyway – it may be of some help

I will also add the get out clause that I am a consultant, my personality type is to see problems and find fixes, I am not always good at being subtle, gentle or tactful – none of the advice below is meant to offend or upset, I am not questioning your ability to run the pub (other than to get you to answer the question of why are you in debt – does not even need to be on here, can be on your own spreadsheet) it is based on only knowing a few details and I have made some huge assumptions – so please don’t take it personally if any of this is a bit brusque or just downright wrong - thanks

The generic industry figures would be approx

VAT 10%
Stock costs 35 -40%
Operating costs 30-35%
Profit Margin 15-25%

Given this kind of model, on your turnover of £190k the figures would stack up (approx) as below. This will vary depending if the £190k is for the year or for your 18 month tenancy – I have assumed 12 months.

Industry Standard

VAT £18k
Stock Costs £69 – 78k
Operating Costs £59 – 69k
Profit Margin £29 – 49k


Your Figures (approx) £190k

VAT £14k (assume £3.5k is a quarterly average figure)
Stock Costs£85.5 (assumes £75k wet and £10.5k dry – based on your figures from the earlier post)
Operating Costs £68k (based on my guestimates below)
Profit Margin £50k ( or £22.5k operating profit plus you have put £19K in are £6k overdrawn and have no money to pay £3.5k VAT)


This means that you have somewhere in the region of £50k that has vanished. Your priority has to be to understand where this money has gone to.

On these figures the business, is viable as it stands. Obviously, increasing revenue and spend per head would be nice, but it should not be your priority. Your posts so far indicate that you have been working very hard to try and improve the business – STOP – this may feel like progress, but this is actually like trying to find the alchemy formula for gold without understanding what gold actually is. At the moment (IMHO) you do not understand your business enough, you do not understand how much it costs you to do things, nor do you understand which parts of the business are profitable and which are not. Sorry if this sounds harsh, but I think that you are currently running yourself ragged trying to make improvements, this is making you stressed which is not helping your situation, financial or more importantly, health at all.

Any prospective buyer will want to see detailed accounts, so you will need to get on top of these for either sale or to move forwards in the business.

So where can this £50k be going?

You mention a chef who was pilfering, would this already be accounted for in the food GP%?
some equipment that needed replacing, should this not be the brewery’s responsibility? Did you have it checked when you bought the business.
my figures for operating costs may be wildly inaccurate, however ,if they are then there is something not right as you are way outside the industry norms
Your figures may relate to 18 months in which case the figure missing will be slightly lower

Once you have established where the missing £50k is then you can start to look at other costs in the business and start to understand which parts of your business are profitable and which are not.

stock costs
your wet GP looks a little low – things to check are your wastage figures, your stock checks (pilferage?) and your cash takings (pilferage, not accounting correctly, borrowing from the till etc.)
your dry costs depend upon what type of food you are doing – if it is crisps and nuts then you are very under performing, if it a restaurant operation it is not so bad (but still pretty high) Again, stocktakes, check for pilferage, wastage etc

operating costs
(this depend upon the type of operation you are running but…)

Assumptions are
1.2 FTE = 2880 hours per year. Cost including social costs estimated at £8per hour. Total Staff costs £23k
Utiliies – can only estimate, but £12k pre year is a good start
Rental to brewery (this is where I have no idea – hotels are my background and they don’t normally rent) Estimate £15k per year
Maintenance costs and contracts. We know you have Sky at £12k and allow another £6k for contracts
Operating costs on these figures are in the region of £68k on my guesses.

Check that you have the best deals on all contracts. Use your books to work out if your takings rose when you installed Sky, did it cover it’s costs? If not then consider loosing it

You presumably open during the day – how much of your takings come during the day? How much of the profit? Does being open during the day pay for itself? How many of your costs could be reduced by not being open?

Do you have a full time chef? If so, you are spending the majority of your wage budget to make the minority of your profit – need to do the sums on that one.
Are you contracted to provide food? Could you make more PROFIT (not turnover) by not providing food? If you need to provide food the consider your GP%, consider using your resources to maximise the revenue they generate.

Other common pitfalls
Consider if you fall into any of these pitfalls – if you do then get yourself out of them (simple to say – I know!)

Treating your business like a hobby, drinking in your own pub is a huge sign of this. Would you take a beer into the office?
Spending all your time doing the “day to day” jobs and none on managing the business and looking forward. Not managing your staff and missing problems because you were looking the other way
Always chasing the business from behind, never being in front of the rabbit
Not taking proper time off – the business becomes your life. You need time away from it to maintain your perspective (and your relationship!)
Providing a business that you would like to use, regardless of whether that is what the market needs
Trying to do a bit of everything because you think it will be more profitable
Taking the business personally
Not having clearly defined roles and responsibilities, everyone is in a permanent sate of “mucking in” because there is a crisis on
The crisis never seems to end

So, my action plan, to either turn the business around, or to get the best price for it consists of the following steps it the following priority order

1) Get on top of the books
2) Understand where the missing money is (it may not be £50k, that is just on my figures).
3) If the missing money is a one off cost then do what needs to be done (write it off to experience or prosecute your chef etc)
4) If this money is just seeping out on “nothing” then put a stop to it and put things in place to make sure it stays like that (example, borrowing petty cash – have a locked tin and keep the amount low), if it is being spent on “things” then get them into the accounts sot hey can be understood/
5) Clearly separate your business and personal finances. And understand your personal ones too (this should be easier when the business s sorted as they seem very linked at the moment)
6) Stand back, give yourself a pat on the back and then we can take a look at your business and work out where the improvements can be made to try and get you back on your feet.

Obviously, time is of the essence here – the longer you leave it to get sorted out, the further in you will have sunk.

I know it feels as though it is all too much at the moment, but once you start to take control you will feel a lot happier, I promise 

Puss

Brassic

Wow, I am seriously impressed with the help you have received from Puss here - what a lovely person to take the time.

Personally I can wholly sympathise with you. My hubby had a pub with Enterprise Inns when I met him, and a large part of our debt now is due to that business.

I had no experience at the time of running pubs, but I work now as a bar maid part time in an extremely well run pub/hotel, and can see several things which I'd personally do differently now (although at the time the point of no return had already been reached) BUT, even having said that there is no way I'd go into the business again. With a family it's just not worth it imho.

Since we failed spectacularly in the same business I'm not going to presume to give you advice, but just wanted to say Good Luck with it all, and I'll keep an eye on your thread to see how it turns out for you.

downhillfast

Thankyou all so much for the words of support and advice - especially to Puss who has spent a lot of time on it. I will get some accurate figures together soon.... the rent here is £31k and off the top of my head at the mo, gas and elec is costing around £450 a month each - which I feel is too much so have been working to reduce it with energy saving bulbs etc and being energy conscious with kitchen equipment (4kw fryers!) during busy times... saying that I am currently awaiting £1k rebate from the gas company (over estimates over 12 months - didn't realise Transco hadn't been out!) so that figure should reduce considerably now anyway.


Will post some more figures when I've dug them out.

Again, thankyou all

x

bukhaariuk

Sorry to hear about your circumstances.

I appreciate you have worked all your life and the only thing you have is the pub to show for it.

What I would do and many here would probably not agree:

Sell up and try to retrieve as much cash out of the business as you can.

Find a job with a regular income it does not need to be a fancy job(for example £40 to £60 a day in call centre)

Find a place to live, shared rented or better still move in with parents (relatives) to save money

Put everything about whats happened in the past behind you (I know thats easier said than done but no point crying over the passed)

MOST importantly try not to think of or get into any kind of quick money making idea, scam or scheme or business. Start again with realistic expectations i.e. get youself on a social housing scheme, regular income as an employee, try saving as much money as you can etc

apples101

How is it going DHF?

hope things are looking better.

sheryldoc

Hey.. I hope things r sorting themselves out for u..

jst wanna give a mention to Puss.. for taking your time to help.. as you must hav spent a bit of time sorting the advice u gave.. people like you who make this board work..x

downhillfast

Had a fairly positive weekend - trying to keep focused on sorting things out.

THEN MONDAY CAME!

I really am begining to hate the sight of the postman now... lots of bills arrived today.... along with letters from banks about returned payments.... rent is due tomorrow.... and VAT at the end of the month! Can't see how much longer this will drag on until things start to pull me under.

The £1k cheque I was waiting for is not gonna come by the looks of it - got a statement from gas company today with this months payment taken off the credit so I guess their gonna keep hold of it for next month's payment too - esp as I have defaulted on their payments in the past.

The elec payment bounced AGAIN - now owe them best part of £1500 Business rates bounced again too - owe them £1200.

Am definitely thinking that Christmas is not gonna be in this pub for me - if these bills aren't settled won't they just cut me off (elec) and kick me out (pub co)??? The longer it goes on the further into debt I am getting.

What am I meant to do?

clarab_3

Im really sorry DHF. I know very little about business, but did notice you refered to bank charge earlier (with DD's bouncing you must have lots?)

you should definately recover those charges through the bank reclaiming procedure elsewhere on this site. It won't happen overnight but it's YOUR money and you are entitled to it back. You may have to do something about the pub sooner, but it will ither go a long way to repaying your creditors, or a nest egg for your new life?

chriswuk_2

I know this isn't exactly 100% legal, but it's not as if your doing something really naughty......

Why not get a 90cm Sat dish set up, pointing at 13E hotbird. An Art Sports card will cost you around £80 for a 12month sub, and you can get all the Sat 3pm matches on (with English Sky sports commentry). That will sure to pull in the punters........