Cash and Carry start up

pop_gun

I did a little research on wholesalers and found that starting capital of anything between £25,000 and £50,000+ was needed to start a cash and carry.

Ever since I was small boy I've heard people talk about cash and carries as an easy way of making money.
I saw a food stock wholesalers in london for sale. The asking price was £199,000, the turnover was £2,400,000 and the net profit was £40,000. I realise the profit is small considering the turnover, but I'm wondering if the owners took a large chunk of the profit as payment and left the rest to be taxed.

Has anyone on MSE ever owned or run one?

What is\was your experience?

phill99

Bear in mind that cash and carry Is a high turnover low margin business. You make avery low profit on each item, but as you are selling in bulk, you make your profit that way. What is the average profit for that industry?

paddyrg

Problem is you're competing with Booker and the supermarkets, so you have to get better deals than any of them with the manufacturers or face even thinner margins. Booker own makro too, so even more buying power.

Net profit means after wages etc. Entirely possible the owners take beefy wages, although it is usually better value for them to take a dividend, and that money appears in the net figures. It doesn't sound like a money tree to me too be honest...

Wywth

pop_gun wrote: »

I did a little research on wholesalers and found that starting capital of anything between £25,000 and £50,000+ was needed to start a cash and carry.

Ever since I was small boy I've heard people talk about cash and carries as an easy way of making money.
I saw a food stock wholesalers in london for sale. The asking price was £199,000, the turnover was £2,400,000 and the net profit was £40,000. I realise the profit is small considering the turnover, but I'm wondering if the owners took a large chunk of the profit as payment and left the rest to be taxed.

Has anyone on MSE ever owned or run one?

What is\was your experience?

If that were the case, it would be clear from the accounts.

I suggest you spend your £25k-£50k on getting a good accountant to help you with due diligence.

somethingcorporate

Wywth wrote: »

If that were the case, it would be clear from the accounts.

No it would not if it was taken as salaries. A number of smaller companies I used to audit included directors salaries in the salaries line and effectively hid how much they were paying themselves.

It was very tax inefficient though as per Paddys post above.

That margin is tiny, I would not touch a business like that. Far better to use items bought from C&C and sell at a higher margin but lower volume although you have the difficulty of finding customers.

Wywth

somethingcorporate wrote: »

No it would not if it was taken as salaries. A number of smaller companies I used to audit included directors salaries in the salaries line and effectively hid how much they were paying themselves.

It was very tax inefficient though as per Paddys post above.

That margin is tiny, I would not touch a business like that. Far better to use items bought from C&C and sell at a higher margin but lower volume although you have the difficulty of finding customers.

It may be possible to omit directors remumeration from a small companies abbreviated accounts, but they are required to be disclosed in the full accounts.

Only a fool would refer to abbreviated accounts when doing due diligence, so please OP, don't spend your hard earned cash on this alleged accountant.
As I said before, get a good one!

somethingcorporate

Wywth wrote: »

It may be possible to omit directors remumeration from a small companies abbreviated accounts, but they are required to be disclosed in the full accounts.

Only a fool would refer to abbreviated accounts when doing due diligence, so please OP, don't spend your hard earned cash on this alleged accountant.
As I said before, get a good one!

I was auditing them for a different purpose rather than the purpose of buying the company or in practice so perhaps you should wind your neck in. It was an internal commercial audit which has nothing to do with either of the above.

I have a full audited set in of accounts sat next to me (not provided by me but to me) that has directors salaries included as part of the salary. If you think it is wrong I guess you should take your issues up with one of the biggest regional accounting firms that provided it.

I just read your post again, you are advocating someone spends £50k of their money on a company with an annual net profit of less than that? I'd spend it on a business that looks profitable to check that it is but not on one that looks like it isn't! A company with a margin of 2% simply is not worth spending half a hundred grand on.

motorguy

pop_gun wrote: »

I did a little research on wholesalers and found that starting capital of anything between £25,000 and £50,000+ was needed to start a cash and carry.

Ever since I was small boy I've heard people talk about cash and carries as an easy way of making money.
I saw a food stock wholesalers in london for sale. The asking price was £199,000, the turnover was £2,400,000 and the net profit was £40,000. I realise the profit is small considering the turnover, but I'm wondering if the owners took a large chunk of the profit as payment and left the rest to be taxed.

Has anyone on MSE ever owned or run one?

What is\was your experience?

For clarification, are you proposing 'buying' this cash & carry at a reduced price of £50,000 OR are you proposing opening one from scratch, with your £50,000

NiceGuyEddie_2

somethingcorporate wrote: »

I was auditing them for a different purpose rather than the purpose of buying the company or in practice so perhaps you should wind your neck in. It was an internal commercial audit which has nothing to do with either of the above.

I have a full audited set in of accounts sat next to me (not provided by me but to me) that has directors salaries included as part of the salary. If you think it is wrong I guess you should take your issues up with one of the biggest regional accounting firms that provided it.

Marvellous though that is, directors' remuneration needs to be separately disclosed in full accounts. It doesn't matter if they're lumped in with salaries in a single line in the detailed P&L, directors' remuneration requires separate disclosure (ie by way of a note to the accounts).