Staff hoping to take over business

Dagmar72

HappyMJ wrote: »

If the current business is in trouble with the HMRC then my advice is to avoid. Maybe you could set up a new company and buy the assets from the old company and let the owner wind his company down. You can then trade under the new company name and can continue as you are with no surprises.

That is the idea indeed, sorry if I didn't make it clear. They'd form their own limited company not take over the existing one, but they'd buy the lease / assets / goodwill.

Banks will lend against your own personal property such as a second mortgage. Then you are taking the risk personally.

That's what I thought, but most people involved don't own property. One of them does own another business though so that might help.

It's highly unlikely they will lend you the money secured against the business only especially with only 3-4 months accounts. Why aren't there 6 years?

3-4 months is what we have access to now, provided by the current manager (and we trust him). To get further back I guess we'd need to ask the owners / their accountants, but we're not sure how truthful it would be.

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Dagmar72

podperson wrote: »

Could be a little off the mark here but if as you say the people involved aren't that bothered about having the business as an investment but just want to keep their jobs and try to improve the business then have you considered approaching the 'local people' who are already interested - if they want to keep the staff on anyway and keep the business fairly similar then they may welcome having the staff on board. If you could raise some money then they may even agree to giving the staff a 'share' in the business in exchange and a say in how it's run. Also if there was extra moey raised then the old owner would be more likely to accept that offer rather the one from the big chain.

yeah it is a good idea, and one we'll investigate, we don't know who they are at the minute, I guess we could always ask, but then again we don't know who we might end up with, they could be even worse than the current owners.

I simplified things and don't want to go into too much detail here, but it's not just about people keeping their jobs, some of the people concerned have put a lot into this business already and could lose more than a job.

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Dagmar72

Pennywise wrote: »

So many issues, where to start???

You need far more accounts than a few months to get any form of backing at all - the owners must have these, as they will have been needed for annual tax returns. It's completely unreasonable for a seller not to provide a potential buyer with the accounts.

You may think the owners don't do anything, but there's a lot more to running a business than just the front line that you see. Don't assume that you can do it all yourselves - properly evaluate what needs doing.

They got the current manager to deal with what couldn't deal with themselves, which is pretty much everything. I don't think there's anything they do that he can't do himself.

As for finance, if you've not got a decent deposit, then forget it. I'd suggest you need to find a deposit of around 35-50% of the purchase price, plus stock and costs - banks will lend maybe 75% on freehold, but probably nothing on stock or goodwill. Obviously, this depends on the split of the purchase price, whether it's freehold or leasehold, etc etc.

It's just buying the lease + goodwill.

You're going to need to re-mortage against your own properties to get some cash together. How are you going to be able to repay the capital and interest (probably over 10-15 years)?

As said above the people involved (bar one) definitely don't own their own property, but the business seems to be making a yearly profit that pretty much equals the amount of money required in the first place.

Don't fall into the trap of buying a dead-duck of a business just to save your jobs. You'd be far better losing your job and going on benefits or getting a new job, rather than re-mortgaging your home, risking all your savings, etc., only to lose the lot if you can't make a go of it.

Thanks but as said above (and I don't want to go into too much detail but feel free to PM me) it's about more than just a job.

The more people involved, the worse it is going to be. You're going to have disagreements, you'll all be putting different amounts of money it, you'll all be doing different work, how on earth are you going to decide how to share the profits and if it's loss making, how do you deal with not everyone being able to put in more.

I don't know and that's what's worrying me. For instance I didn't volunteer cos I know I can't pledge any money, but I know I'll be doing most of the work. There's other people who want to be directors who can't pledge any money either, so what's the point in them being directors in the first place if they'll end up doing less work than me? not that I don't trust them, but it doesn't make much sense.

To move this forward, you need at least 3 years of accounts and a definite selling price to start with.

We have a definite selling price. But as I said before there are 2 offers already and it's up to the owner who he sells to.

Then you need to find out which staff actually have any cash to put in (or willing to remortgage to get it). You can then see if you're anywhere near being able to find the say 35%-50% you're going to need to put in with the bank matching it. Then you can forget all the staff who aren't putting anything in. Hopefully, you'll be left with 2-3 people which is a more manageable number. Then you all need to start talking to accountants, banks, solicitors, etc., to get an idea of feasibility.

Yeah that's what I thought, I wasn't comfortable with that many people being involved, especially when they have no obvious contribution and no clear cut role

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Dagmar72

steve1980 wrote: »

So, the business is in debt to HMRC and you're thinking of taking over?

Yeah as far as I know they're in debt for VAT, but that's because the ownershave been draining the business (which could be viable otherwise).

There are no accounts prior to the last 3 - 4 MONTHS and the business has been running for 15 years.

The last 3-4 months is what we have direct access to (when the current manager took things over). Is there a legal requirement for the owners to provide us or any other potential buyer with earlier figures?

Are you mad?

Yeah probably. Maybe not me, but other people definitely

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paddyrg

I certainly wouldn't even entertain an offer without YEARS of books, and if the ownsers can't provide them RUN AWAY. The 'other offers' may be valuing the business on the lease only as the site is worth more to them than the business by the sounds of things Why pay the owner anything? Why not find a new site nearby (smaller/cheaper maybe) and the key staff start that up in opposition to the closing down business if the buyers just want the lease for something else. That way you don't overpay, the goodwill is less relevant if the shop is closing and the customers will be driven to use your new place anyway.

paulwf

paddyrg wrote: »

I certainly wouldn't even entertain an offer without YEARS of books, and if the ownsers can't provide them RUN AWAY. The 'other offers' may be valuing the business on the lease only as the site is worth more to them than the business by the sounds of things Why pay the owner anything? Why not find a new site nearby (smaller/cheaper maybe) and the key staff start that up in opposition to the closing down business if the buyers just want the lease for something else. That way you don't overpay, the goodwill is less relevant if the shop is closing and the customers will be driven to use your new place anyway.

That would be my plan as well! One thing though OP, a lot of businesses require sustained investment at first i.e. reinvesting most of the profit you make. You then build up the business and reap the rewards with more profits down the line, or when you sell it. This might be incompatible with your aims of using the business to draw a regular salary, certainly if you require a wage from day 1.

paddyrg

Incidentally, if you do this, and the new owners just want the lease, you can probably buy the stock you want to get started up at a steep discount (and ditch the dead lines nobody wants at the same time!)