Small Business Worries

Lanz81

Hi

To Cut along story short myself and my husband opened a takeaway in 2009. Had to take out a loan to buy th leaee of the shop and to refurb it, loan was £100k. We are struggling to make ends meet, we are paying all bills due exoecft we never have enough cash flow left for the VAT bill which is mounting. we have set up a payment nplan with them but find then everytimg we have the new bill we just dont have the funds. We were wrongly advised to set up as a limited company and had crap accountant which I have now changed. When we thinlk thinks are improning we have one or two bad months and then we are chasing out tails. Last month we were down £5k than the month before so when we think we are getting somewhere we end up bad to square one with mor outgoings than incomings!

Any advice is much appreciated

paddyrg

Blimey, times sound tough, sorry to hear it. A lot of people are suffering at the moment, it is rotten

I guess the burning question is what you want to do? Can you sell the business and walk away with the loss? Do you want more customers? Do you want cheaper supplies? Do you want to raise prices? Do you want one of you to go back to 9-5 to float the business? Do you want to lose staff? Do you want to grow into new markets?

I wouldn't rush to assume a limited company as a structure is such a bad thing for you, it certainly can't be blamed for the trading environment and business decisions, and it isn't costing you anything significant over any other structure and has advantages. Why do you feel the company structure was bad advice?

jexygirl

Hi there,
we are a food led buisness, and we are significantly down as well.

I have our food GPs down to the Nth degree , I spend a couple of weeks each year messing about (reviewing is the official term!) measuring/counting /averaging /portion controlling/counting onion averages in a sack! Seems anal, but isn't - you should know what EVERYTHING costs to the penny, so you have your GP right.

Also do a monthly ring around suppliers, to make sure pricing is the best it can be etc, and frequently swap one to another to get a better deal, even for a month.
It is your buisness and your money, and you should know these things.

At the same time, if we take less, we are paying less supply costs and less VAT. You only pay the VAT on what you sell so you must have had sales...

Can you extend hours to be open longer /earlier or offer things compared locally - ie. does everyone offer delivery but you for example?
Try to attract different clientele at different times perhaps?. Even if it means you work hours you never planned to, open for breakfasts, do a lunch deal, look at bogofs, look at pre ordered delivery of sandwiches / party menus. You are paying rent for the place, so use it to maximise every opportunity, not just when it suits you.

Our deal nights are break evens, but the side orders ( HUGE GP!) and drinks mean we take money that, if there was no deal, we wouldn't, and also look busy to passing trade...

As Paddy pointed out - you need to decide what you want to do - have you the energy/ time /inclination to seriously overhaul and inspect EVERY aspect and roll up your sleeves? Or do you want to walk away whatever?

The problem isn't with how the buisness was formed ie. ltd co or whatever nor the accountant you have - if you change both, will trade suddenly come pouring in?
Your buisness is affected by how much you put into making it work. I'm not saying you are not trying, but I am saying, how much more do you have to give?


GL
Jex

paulwf

Some excellent points have been raised by previous posters.

My feeling is the first thing you need to do is make sure you get monthly profit and loss reports. This just means a quick stocktake (takes very little time) and get a book keeper to keep on top of all your income and outgoings. You can't do anything until you get a barometer of how the business is doing. The cost and time involved is minimal so please do this.

You can then sit down with your new accountant and have a frank discussion about where the business is going. Jexygirl's posts are like gold dust you can do things to halve your outgoings and double your takings, but you need to know how bad the situation is.

My gut reaction is that if you have to service a £100K loan for a takeaway you are going to struggle. That must be taking out a huge chunk of cash each month and is probably turning a lucrative business into a loss making venture.

OP any chance of posting rough monthly figures? I'd understand if you'd rather not but a quick look at that would be very useful.

Lanz81

thanks guys great advice.

we own a fish bar and also sell breakfsat and baguettes. we are open 9.30am to 9.30pm, 6 days a week. we have tried opening earlier, later and sundays but it hasnt worked.

my partner goes in at 8am to prep the spuds and do the filtering of the range i then drop our son off at playschool and start at 9.30pm to sell breakfast and prep for the day. our son finishes playshool at 12pm and then one of us takes him home while the other stays to work, we swap shifts. staff come in at 12pm until close (fish bar opens at 12). we have staff in for 60 hours per week.

I am very savvy with the costs of products and stock and am always shopping around and haggling prices with providers even playing them off with each other.

we also do a local evening delivery service which can be great but again it hit and miss like tonight i had one dekivery, the night before 8!

++++Try to attract different clientele at different times perhaps?. Even if it means you work hours you never planned to, open for breakfasts, do a lunch deal, look at bogofs, look at pre ordered delivery of sandwiches / party menus. ++ with regards to this does it work well? do u make a good profit from say meal deals? we have had a few pre-order of offices etc and our local community centre have had buffetts from me twice. we have a lot of old people around us that i would try to get through the door more or to deliver to them more.

Unfortunately we are not on a main rod we are in a shopping centre that just has a small shop and a community centre. we do have some office near us and they come in at lunchtime but we could do with a few more of them.

our accountant were crap, didnt vene advise about waste, home office, petrol etc!!!

we really love the place and really want to make a go of it. i dont want to sell and tbh i dont think its worth what we owe! i love it and so does my partner and we have built up such a good reppor with regular customers and the community, we just need more of them through the door! we have built an excellent reputation for our quality food and our fish cooked fresh to order.

I would hate to go back to a 9 to 5 job, really hate it! if we could get more customers in and earn an extra couple of £K A MONTH WE COULD MAKE IT.

This is how things are looking at the mo:
Wages2700Stock4500ApproxRent & Rates270Telephone50Insurance100Gas & Elec800Gas repayment plan212Water55Loan Repayments1351HP (Armarda Finance - Range)1060PAYE/NI250Refuse112Accountant180Dividends/Drawings800EFG150Bank Service Charges100Misc100HMRC Payment Plan900HMRC Payment Plan - PAYE310Savings for VAT1500TOTAL15500Approx Income15000
Loan is on a 6 month holiday period as the range will be paid off in august. still paying £500 a month interest tho!

thanks guys for your help i really appreciate it x

paddyrg

Accountant at £180/month - are there any of the less involved things you can take over, eg payroll, VAT? My accountants aren't the cheapest locally, and have a city centre office etc, and I still pay them under a grand a year just for advice and the annual limited company return, doing my own VAT and payroll.

Bank - £100/month in charges is very high, look at other banks business banking offerings, you may find one offering a better tariff for you?

Gas/leccy - can you find a way to economise? Service kit/insulate/use half the griddle off-peak??

For the local offices, can you take a trolley in there with rolls mid-morning? You can then also upsell with drinks and crisps maybe?

Is there enough footfall of a morning to be worth doing posh coffees for the office workers (either from your premises, or taking a portable stand/back of the van espresso machine to catch them on the way in to work? Pain in the rear, but people will pay lots for a decent fresh coffee that isn't the usual machine/instant stuff at work. You could even just do a big brew of fresh filter coffee at the shop and keep it in those squirty flasks and sell that hot and fresh to people where you do get footfall. Great markup.

Wintertime, hot chestnuts? Crazy markup, short season, can be very popular.

Just thinking aloud!

Lanz81

in the process of changing accounts. bank manager is looking at charges for me this week. i am in the process of fidning a cheaper supplier for gas and elec and i am always turning things down/off that are not in use! unfortunateky the offices around us have cafes because of the location, its out the way and its not the type of area for posh coffee, its in wales lol! thanks for your thoughts hun

Lanz81

ps loving the chestnut idea for crimbo

paddyrg

I don't know which bit of Wales you're in, but having grown up there, I know you guys still get TV and see the rest of the world with big cardboard coffee cups, so don't write it off out of hand. There are just as many coffee chains in the conturbations as in England, and it might turn out to be an underserviced market if nobody else is doing it near you. Make your life easy, those squirty flasks start at a couple of notes, plus a plastic coffee filter with papers, a kettle, and a bag of something rich-roast you could be testing the market for £30 if you work out a decent position for passing trade for 30 mins peak time in the morning. If you sell out, do more the next day and find the market, if nobody will part with a quid for a fresh filter coffee on the way into work (and I'd be surprised) then you have at least tried for the cost of a few fish suppers ;-)

jexygirl

following paddy and thinking aloud - please forgive me, its late and a last minute check before bed!

Knowing now, it is a fish bar, I can see why there is no brekkie trade! I would probably monitor trade and not open till lunch - if it costs more to open in staff and utilities, than you take at that time, then dont open unless you have a different offering at those times.

You say you have staff in for 60 hours a week - but those figures (admittedly its late, so I did calculate over a 4 week month - 2700 /4 (weekly) then by 60 (hours weekly) = £11.25 an hour! I think you need to be more real about staffing hours or their pay!!!) plus you then have the NI and tax bill on top.
£800 a month drawings on top of wages - do you NEED that much between you, or is that the truly ABSOLUTE bear minimum you need to pay your own bills / outgoings (not what you feel ok about or justified, but what you TRULY need) - ours are half that, but we "live" (camp out in 2 TINY rooms) on site, so earn 50 quid a week on a good week for our 80+ hours! - nothing for months sometimes!

You said initially you are not on a main road, in a shopping centre, with one small shop and a community centre, and subsequently added that you are "out of the way" and local offices around you have cafes, and yet it cost you a 100k loan to buy and refurb??? Why was that? Where did you think your target market was, and what were your reasons for doing that, as those reasons, as per original plan are still there - re look at your buisness plan, thats what it is there for, as a guideline and constant reassessment tool to make sure things are right.

Lastly - stock 4.5k - income 15k... GPs are at just over 3 times, and you are takeaway (assume you have incorporated that in figures. You don't pay the same VAT if people take away...)
Aim with VAT increase etc. to have GP at LEAST 4 times - 18k... which proves right(ish) from your figures - if you were hitting 4x GP, you would have the bills covered despite that wage bill!.

I KNOW that a portion of chips costs me 7p - I buy chippies choice potatoes, chip them in my machine, and sort them. I also know that a fillet of haddock costs me average £1.50 depending on the size because up here we buy by the stone. I do nowhere near the quantities I assume you do of fish n chips, so that in mind, would expect you get a FAR better deal on fish than me. £1.57 out to customer. Minimum charge £6.30. The GP takes into account wrappers, salt n vinegar, gas, leccy, counc il, tax wages, oil and all the other stuff. Thats what a GP is, gross profit, then the outgoings come out, so make sure you are making it in the first place.

NEVER underestimate the beauty that is upselling side orders to your customers! When did you last ask if they wanted mushy peas / curry sauce /gravy or a pickled egg? or whatever extras you have to offer ? Suggestive selling owns!

Lastly this statement worries me: our accountant were crap, didnt vene advise about waste, home office, petrol etc!!!

Your accountant only works on the information /figures /receipts you give him - it isn't up to him to run your buisness - he deals with the figures you provide, and, whilst he can advise on the best way to maximise your profits, he is not responsible for you not knowing something like if you deliver a meal, it will cost you money in petrol, which is therefore a buisness expense - you are.

What advice about waste? The cost of removal, or off setting waste?
As with any type of food outlet, the waste offset cost should be minimal - otherwise you are not monitoring levels or stock rotating properly and ordering accordingly.
Home office - we spend 15 mins in a morning inputting daily takings and receipts into a spreadsheet, check emails a few times a day.
Your petrol, apart from deliveries - is to and from work. If it is for deliveries, then although I don't know the ins and outs, as a buisness that would have been an obvious expense so keep a receipt...
None of the things you "blame" your previous accountant for, will change the way the buisness is run, or increase trade and profits - as I said before, that is down to you.
Jex

paulwf

Thanks for the detailed reply Lanz.

Could you do me a favour and confirm the figure for the rent and the figure for the rates please? Is it £2,700 as £270 seems very low. Do you have to pay a service charge to the shopping centre.

There also seems to be some figures missing such as maintenance and stationary or are these included under misc?

Will try and do some breakeven figures for you once I have the info

BTW are you taking your £800 between you are a directors wage - £135ish a week which is tax and NI free - or are you taking dividends which isn't so tax efficient?