Small Business Worries

nickj_2

don't know if you do this or if it's possible but could you put some tables and chairs outside for people to sit down over the summer
i would agree with the coffee idea , our local town has no limits to the places selling coffee and they all seem to do well , none have closed down afaik.
you should be able to get your accountants fees down , i only pay mine around £70 per month for a ltd company and that includes tax returns for me and wife .
is there a local station that you could serve at for commuters etc

and finally have you set a cut off point , if you feel that it isn't going to work out then there's no point digging yourselves further and further in debt, chasing your losses and suffering the stress etc that goes with it , unfortunately one of my friends didn't get out of a failing business and it destroyed them ... life is too short to be unhappy ,

greyteam1959

Chalkie99 is spot on with this advice.........
You should really be making your accountant earn his (expensive) keep by discussing the exact figures with him.

chalkie99 wrote: »

I have scanned through this thread a couple of times and apologies if I have missed reference to this but.........

.....you refer to wages, drawings and dividends.

Firstly, you may not be paying yourselves the optimum amount as a wage to avoid National Insurance charges.
You could pay each of you approx £625 per month wages.
There would be no tax to pay in the year & only a very small amount of National Insurance. Maybe £50 for the year.
This would ensure that your rights to a state pension continued.
Secondly,and more importantly, you say you are paying an extra £100 a week each as "drawings/dividends".
Which is it? There are really no such thing as drawings. Are you actually paying yourself a wage of £280 each?
Dividends can only be paid from cleared profits of the company and it is apparent from your posts that the business is not making a profit. Therefore, you simply cannot take money as dividends. It is illegal.
If for example your LTD company declares & pays a DIVIDEND (after tax obviously ) of £12000.
You pay it out & immediately straight back into the company the you can take it out as DRAWINGS at say £1000 per month.
HTH
The benefit is the reduction in the amount of National Insurance that you will have to pay.

chalkie99

I am not entirely sure that is correct.

The way I understand it is this:

The directors should each pay themselves a salary of £589 per month.

This amount means they are not only below the tax threshold but also that they qualify for National Insurance credits without actually having to make any National Insurance payments.

If they take dividends these can only be taken from after tax profits made by the company. Therefore the company has to be trading profitably before you can consider dividends.

There is no National Insurance due on dividends and there is no tax payable on them either except when the directors earnings exceed the standard threshold by earning over £35,000 per annum.

Remember that these come from after tax profits of the company so Corporation Tax of 20% will already have been paid by the company.

There is no particular point in putting the money back into the company just to draw it off again unless it is done as a directors loan to fund expansion for example.

The important thing is that they absolutely cannot pay dividends unless they have profit sat in the firm.

An accountant should have made all this clear.

If HMRC find they have taken dividends incorrectly they are likely to face unexpected tax and National Insurance charges which is why it is important to sort this out now.

patman99

OP, can you not open a personal bank account to deposit the cash into before doing an online transfer across to your business account ?. That way, you only pay one fee a week.

chalkie99

The cash belongs to the company not to the director.

I don't think this is legal and certainly not wise as it would begin to look a bit like money laundering.

It's all going to get a bit messy when HMRC start investigating.

paulwf

I would caution strongly against trying to diversify. Trying out every idea possible is what a lot of businesses in trouble do but it rarely works. It is impossible to be known as an upmarket coffee shop and a chippie at the same time. Put a hot chestnut stand outside and it gets even more bizarre. I call it the "jumping the shark" moment but for businesses rather than TV shows

My thoughts are:

- If you want to compete with the Costas and Neros of this world then you want to be spending around £3K on coffee kit, and tbh at the moment you don't want to be investing yet more money.

- Although the breakfast trade looks profitable you say you need to take extra wages to pay for playschool. Therefore is it really worth it?

- If you are open from breakfast until the evening you need lots of extra staff and it increases the amount of time when you have to have someone else managing the business. As you intend to make all your staff part time - and I can't really see why you are doing this - you run the risk of having low quality demotivated supervisors. Shorter opening hours where you are in control more is likely to be the way to keep on top of costs and maximise profit.

I will try and come up with some figures for you tomorrow. There is a very true adage that a business is like an oil tanker, you can't turn it around just like that no matter how hard you try. My aim would be to focus purely on the fish bar, you say you have a good reputation so focus on that. In my town there are lots of chippies but only a few are constantly busy, people always go to the ones that are the best. Could you add a few talking points to the menu like deep fried mars bars? Get known for using sustainable fish? Use gluten free batter one night a week? Develop a veggie range? That has to be the way forward rather than having staff that are Italian baristas in the morning and fish fryers by night.

paddyrg

paulwf wrote: »

- If you want to compete with the Costas and Neros of this world then you want to be spending around £3K on coffee kit, and tbh at the moment you don't want to be investing yet more money.

Totally see what you're saying, but... if there is no coffee place in the area, and there is a 30 minute passing trade window when a few flasks of fresh filter coffee can make you a bunch of upsell, at a quiet time of day for a chippy, why *not* try it? Supply something easy to make with a massive GP to an underserviced market at a dead time. Please note, I suggest filter coffee which can be made with a kettle, a filter funnel and paper, and a flask for under £30 all-in, not major cap-ex.

Diversification and following the market is how Nokia went from wellyboots and oilskins to mobile phones, and IBM from clocks to IT consultancy. It isn't inherently bad if you test a market and find it works, and take your place within it. Yes, it feels a bit pained when pubs do popcorn, but there was no 'gastropub' market 20 years back, now there are chains of them.

paulwf

I've just put the numbers into a P&L spreadsheet. I can't be that accurate as I was a bit confused about some of the loans and repayments but basically as your own numbers suggest you are roughly breaking even.

My assumptions on the calculations are that you have a GP of 70% and a staff cost of 20% which should be realistic as that excludes your wages. I have however included £135 a week each for your directors salaries.

In terms of costs although everything adds up you need to focus on the big hitters which are GP, electric/gas and wages. Although for example saving £5 on phone calls a month may help you have a wage bill of several thousand so that should be the priority. So...

GP: you need to know the cost of everything and work out the portion size from this. When you are selling thousands of portions of chips a month making the portion sizes 10% too big will really have an impact. Find a way of regulating portion sizes and know the GP of your key lines so you know what to sell e.g. it might be more profitable to sell a side of baked beans rather than pea fritters.

Gas/electric: this will be specific to your business but work out what is consuming the most and keep those appliances switched off until you really need them. Keep heating and main lighting off when doing prep if possible.

Wages: this has to be your key focus as it is your largest cost after ingredients. Firstly keep rotas and work out your sales and wage bill per day. Over time you can then work out where you need to cut down hours to keep your staffing percentage on track.

On the subject of wages I really do think you should ditch the morning trade and then come in at 11am at to start prep, that person can then do a complete shift. Between the two of you it should be possible to cover the main shifts and then just get in part timers to cover the peak times.

Of course breaking even is not enough as you say you need to draw a higher wage which is understandable. On your current turnover I don't think this is possible though as even if you reduce your costs you still have an insane amount of money being paid out in loans and debt repayment. You probably want to be increasing turnover by 20-25% to be comfortable until you can get the debt down. Upselling (by ALL your staff) and doing free promo (sampling, leafletting in the street outside the shop etc) might easily give a 10% rise. I expect you could also put your prices up 5% without having any impact on trade...try it, you'll be amazed how little people worry about a small increase if the quality is there.

s_b

Excellent posts paulwf and of course what you say applies to any business.
Ive tried many ideas over the years and non of them have made me rich ,but when the going gets tough as it is lately in any business i always stick to core business and what im good at ,because as you quite rightly say if you do too much you spread too thin and end up being good at nothing and lose focus
If i can add i know 3 different businesses and their owners and they are all going bust because they are so used to the money coming in automatically that they cannot stand away from the ball and see their business from another angle,they are going to fail i know, but i warned them a good 2 years ago that every business has its day and you always need to look around in case you are missing the boat in some way,the ones i know all do their jobs well but refuse to move with the times so if people want mars bars in batter give them mars bars in batter if they want real haddock instead of pollock then give them haddock but inform the customer and make it a key sales point even to the disadvantage of the fish frier down the road who is trying to undercut you
In my nearest town i often see a very large bear waving at the side of the road and it works, it draws you to what he is doing, so if your shop is slightly off the beaten track in an arcade and other shops are closed when you are open then you need something unusual to get noticed.

patman99

Just a thought, businesses have to provide facilities to heat food. Would it be feasible to offer a service like they have in India, where the customer drops-off a multi-section dish on the way into work along with the selection from the food menu and payment. The foods gets pepared, then delivered to the place of work where the customer can then heat and eat at their leasure.

How about a fill-a-flask service for the builders.

My pub landlord tells me a 90p cup of tea gives him 87p profit, but a £1.20 portion of chips makes only 30p.

If there is a Train station nearby and you can park close-enough, there is a good trade to be had in early morning coffee/tea for the commuters (don't be tempted to park on the station forecourt though).