Advice for the future of my company

Discussion in 'General Business Forum' started by PCLTD, Jul 9, 2019.

  1. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Evening everyone,


    I will try to keep this as short as possible but I am looking for some third party advice on what to do with my company, its something I have been thinking about for the last couple of weeks but cant get a clear answer in my head.

    So to start with the company is a e-commerce set up within the sports industry, I have a small warehouse to hold some stock and for the business address but its not needed long term and is ran from home. Other than that there is no major out goings (no loans, credit or over drafts). I am the director and my fiance works with me.

    The company was established seven years ago and we have worked with various suppliers to grow the company from a £1500 initial set up (no start up loans etc) to the point where we are turning over £350-400k. Being online we struggled to get accounts with some suppliers as we didn't have a physical shop but in the end had a good selection of premium & popular suppliers.
    However recently one of these suppliers contacted us and said they can only sell to physical shops due to pressure from HQ and it has knocked up a bit, sales are still stable and nothing to worry about but if we want to continue to grow we will need a physical shop.
    The problem is I also have other commitments and we dont have the time to be in a shop 9-5 through the week & weekends and taking on a full time employee while opening a shop is a gamble we dont want to take.

    In short its left me with the following options:

    1) Cash out the business and move on to my other projects - I think I will be able to sell the company quite easily and someone with the time can open a shop.

    2) Bit of a wild idea but look at franchising the name so someone nationally can benefit from our work and we will essentially manage it (if thats the right word)

    Benefits of the company if someone wanted to use our name & franchise it.
    - We have established accounts with these suppliers are we on the elite pricing due to the amount of orders we process, this takes time to build up.
    - We have established accounts with Worldpay, DPD, V12 finance and others. Again these are all on premiums levels so we get the lowest rates possible (excluding DPD but its pretty cheap).
    - Established and regular customer base, 3000+ followers, 100% feedback on numerous sites and so on.
    - We are in the process of getting a new fancy Magento 2 website. If someone wanted to franchise we can offer a click and collect service through the site so they can also benefit from the sales by getting customer in their shop. Collection is something we have never offer but often asked so its a good way for us to boost foot fall for a new shop. We have spent a lot of money in the last 6-8 months on the new site, upgrading finance providers and a lot of other back end stuff.

    To be honest I wouldn't even know where to start with the above but I am looking for a way to pass the company on as I know there is huge potential, loads more variations of products we could sell and actually professionally market it which is something we have never done.

    What do you all think?
    Can you even franchise (if thats the right word) an online company?
    Is it worth the hassle and would we even be needed, how would we get paid?

    Or is it worth advertising the company, selling stock, withdrawing cash and walking away with a lump sum to boost my other project?

    Any help appreciated, I am open to other options and willing to listen.

    Thanks!
     
    Posted: Jul 9, 2019 By: PCLTD Member since: Aug 3, 2018
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    14,924 1,630
    Selling quite easily - maybe, maybe not. A chunk of those who put their business for sale appear to still be selling it a year or two later. And buying price may not be what you want as a seller.
    Some businesses do sell quickly. Within a few months.
    Not seen many though, one I do know was seriously undervalued (owner's grand-niece sold it on).


    Franchising - it does not sound like its worth it. A lot of work to be able to franchise, creating a business that can be replicated easily with established procedures, stock, training, branding etc. Does not sound like you are close to being able to do that. It can be done, just not sure you could do it yet.


    Benefits - that sounds like what a buyer of the company may want to know. When you say followers - followers on social media? Untransferrable social media?

    Every company has huge potential, its included in a lot of selling details. Meaningless to a buyer, obviously means a lot to sellers who aren't utilising it.
     
    Posted: Jul 9, 2019 By: Mr D Member since: Feb 12, 2017
    #2
  3. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Thanks for the info.

    I appreciate selling the company isn't straight forward. I would like it sold within a year if I went down the route but know it can take longer.

    In regards to potential I imagine this is something which gets thrown a round a lot with company sales but we genuinely do. To be more open we are an online cycle shop but we specialise in the sale of just high specification mountain bikes. There is potential for the new owner to sell road bikes, lower end bikes (sub £700) and children's bikes. We also only sell high value accessories and parts so again there is potential to sell lower end stuff such as tyres, handlebars etc etc.

    The reason we only deal with higher end stuff is due to time, it works for us as its lower turn over of sales but higher profit. If someone was to open a shop they would benefit from our customers (higher end) but also open up the above market. As you will know road cycling is big business at the moment.

    Followers are on social media. These are genuine followers we have built up and not bought. We get lots of comments and interaction on posts and products. We also have a community group with over 600 members which is used for private sales and 'online socialising'. Its a good genuine following.
     
    Posted: Jul 9, 2019 By: PCLTD Member since: Aug 3, 2018
    #3
  4. Clinton

    Clinton UKBF Big Shot Full Member

    4,135 1,473
    <sigh> Here we go again.

    No, you can't franchise. Having one operation making a tiny profit is not a basis for franchising. I don't know where you micro businesses get these fancy ideas! If I've heard it once, I've heard it a hundred times - from every guy who owns a mobile cafe or ice cream van to the bloke down at the local market who runs a stall selling jewellery tat. They all think they can franchise their operation.

    Open multiple outlets, demonstrate they can operate as independent profit centres, then bung £100K+ into all the legals, forms, processes, procedures, dispute resolution mechanisms, branding etc. Then spend another £100K or so in marketing to sell the idea to punters. No, you can't spend £23.47 in marketing and expect to sell £20K franchises!

    Spend all that money and, bingo, you've got a franchise.

    It would take an idiot to pay you for this "potential" and while it's not impossible to find idiots ...expect to pay at least a few tens of thousands to find one dumb investor who has more money than sense and willing to base his offer on the "potential" you see in your business. I have more thoughts on potential here.

    I would have given some constructive suggestions but you are so carried away with all this completely unrealistic nonsense about potential that there just doesn't seem to be any point.
     
    Posted: Jul 9, 2019 By: Clinton Member since: Jan 17, 2010
    #4
  5. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    4,235 853
    Persevere with what you are doing.

    Suppliers come and go. There are many.

    Start developing your own brand and push this for the next few years.
     
    Posted: Jul 9, 2019 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #5
  6. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    In regards to Clintons response - Was that really necessary?

    I didn't come here being big headed thinking I was going to become a millionaire franchise expert. I openly admitted I had no idea if this could be done but would be considered if viable. I found out from reply number 1 that it was unlikely and wasn't made to feel an idiot.

    I also didn't come here to be mocked and belittled as a 'micro business' owner making a 'tiny' profit who is carried away with my plan. In regards to value I have no idea whats its worth but will be realistic in my expectations, its not going to be life changing money but hopefully enough for a bit of a cash injection to my new project.

    Your reply was completely pointless and rude, you have wasted my time and yours and at the end of it came across as some one extremely negative and unprofessional in front of like minded business owners. Considering you are someone who sells companies reading that would put me off.

    You also dont know anything about my self or my finances. This is one company I run and I invest heavily within property where I will be using the proceeds of this company to expand my portfolio and developer other properties. I dont expect to be talked down to like I am a child when I am seeking genuine advice.
     
    Posted: Jul 9, 2019 By: PCLTD Member since: Aug 3, 2018
    #6
  7. Clinton

    Clinton UKBF Big Shot Full Member

    4,135 1,473
    Good luck. I'm out.

    <Added: Before I get a flood of DMs - no, I don't sell companies!>
     
    Last edited: Jul 9, 2019
    Posted: Jul 9, 2019 By: Clinton Member since: Jan 17, 2010
    #7
  8. billybob99

    billybob99 UKBF Regular Free Member

    1,017 210
    It's part of the package.

    Think of it as a meal deal.
     
    Posted: Jul 9, 2019 By: billybob99 Member since: Apr 23, 2013
    #8
  9. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Thank god your out, move on to the next one now.

    Hopefully some genuine helpful advice from fellow members to follow.
     
    Posted: Jul 9, 2019 By: PCLTD Member since: Aug 3, 2018
    #9
  10. Mr D

    Mr D UKBF Legend Free Member

    14,924 1,630

    So a high end online shop rather than across the board or budget for the type of goods.
    It's a niche and by the sound of it works pretty well so far.

    More than some businesses ever manage to achieve.

    Just be aware that selling, the agreed price may not be close to the advertised price. Some people
    can take a business and take it to the next level - as you say adding a bricks and mortar shop, adding lower price level etc.
    Or maybe some other business able to bolt a business onto theirs by acquisition.

    Hope it works out for you.
     
    Posted: Jul 9, 2019 By: Mr D Member since: Feb 12, 2017
    #10
  11. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    4,235 853
    I imagine that a bricks and mortar shop will actually help your business, as customers will be able to try, test and feel products before purchasing.

    It can be in a secondary position, or on an industrial estate which can also be your warehouse and hub.

    If you are in to property, buy an investment to trade from.

    Add your own brand of cycling clothing and shoes.

    It’s a rapidly growing industry!
     
    Posted: Jul 9, 2019 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #11
  12. kulture

    kulture UKBF Legend Staff Member

    7,912 2,152
    I actually think that Clinton's advice was good, if a bit abrupt. This is not a franchise oportunity. You should perhaps consider a third option. What is a shop? What is stopping you opening one by appointment only? It would be a place to store stock, and a place to set up and adjust bikes when/if someone makes an appointment. It does not have to be in a prime location. Indeed you could combine it with your warehouse if the location is suitable.

    No supplier is going to check your opening hours. It could be an added product to sell the service of a personal adjustment and set up of a new quality bike.
     
    Posted: Jul 10, 2019 By: kulture Member since: Aug 11, 2007
    #12
  13. The Byre

    The Byre UKBF Ace Free Member

    8,635 3,353
    But not willing to listen to @Cinton's sobering bucket of cold water?

    OK, here's my common-sense approach -

    Rule One in Life - BS beats brains. Never forget that rule!

    You said it yourself -
    And there's your answer!

    Make your warehouse into a shop of sorts and get the rep to come round, place a nice order with them to satisfy all concerned and that's all they want. They need to have seen a full-time shop, but they only want to see the damn thing once!

    Back in 1979 I opened a music shop in Germany and bought stuff from Europe's second-largest MI wholesaler at the time after Yamaha, Music Meyer. After a year, I moved the shop and continued to buy from them. Then I closed the shop entirely but continued to buy from them. I only ever saw the rep once at the original shop.

    The World's largest musical instrument retailer is a relatively small village shop in South Germany. It employs now some 1,600 staff and even has robotic package processing. What OTC sales they have are really just a spin-off of the online shop - people coming in just to see the B&M behind this large operation!

    Scan Computers has a small showroom that is fairly quiet and hardly sees many customers toddling about the place. More often than not, an abbey-like silence reigns, punctuated only by staff talking to themselves on headsets. Maybe 100 sq m and about three or four attendants who have other duties. But they will have a turnover of about £150m this year and a staff of about 280. That's a turnover of nearly £600k for every working day - or nearly £66k per hour.
     
    Last edited: Jul 10, 2019
    Posted: Jul 10, 2019 By: The Byre Member since: Aug 13, 2013
    #13
  14. TheoNe

    TheoNe UKBF Regular Full Member

    135 12
    As a small business owner myself, you have done exceptionally well starting with just £1500 to the point where you are turning over a healthy £400K! In my opinion, you should took for a buyer at this point & plug the money into your other project - which seems to excite you.

    I hope this helps.
     
    Posted: Jul 10, 2019 By: TheoNe Member since: Jul 6, 2019
    #14
  15. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Thanks for the feedback guys. It took some time building the company up and I am confident the figures could double quite quickly in the right hands.

    Just to make it clear I never came on here with the intention of franchising it or thinking it was some top end company I can sell and retire on a yacht somewhere. I am realistic and understand at the end of the day its a website, suppliers and a customer base. In the grand scheme of things its not worth huge money but I was throwing ideas around my head and just wanted to bounce them off some people.

    In regards to the shop, suppliers in this industry and stupidly picky. To get an account with most you have to show opening hours, interior photos where the workshop will be, advertising space, stock a certain amount of products from low end to high end with everything in the middle and much more. Reps are always in the area and pop in every now and then for a chat and to keep up to date. I know a couple of guys locally who have shops and this is how they work, for me it would just would be a hinderance and from what I see in the other shops there empty 80% of the day so either myself or a paid employee would need to be there.

    In my opinion online is the way forward for this industry.

    Last year when I initially started thinking about long term plans I put a very brief advert on a free classified site and had a few companies get in touch, they were all similar in terms of industry. Basically out door style shops and it seemed like they wanted to add a cycling sector without the hassle. Perhaps this will be the best route.

    As mentioned I haven't really looked in to this properly and will need to speak to some brokers, get a valuation and plan what I am going to do.

    Thanks again for the advice
     
    Posted: Jul 10, 2019 By: PCLTD Member since: Aug 3, 2018
    #15
  16. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Starting my own brand with components would be the way forward & something I would like to do. However it would be a new company and it takes time to build this customer base up plus not an easy task designing them and finding a reliable company to manufacture the products.
     
    Posted: Jul 10, 2019 By: PCLTD Member since: Aug 3, 2018
    #16
  17. Financial-Modeller

    Financial-Modeller UKBF Regular Full Member

    315 87
    Why not buy a shop unit (personally, via your pension or PropCo) and lease it to your e-commerce company, then get somebody to run it on a profit-share basis, perhaps with the manager incentivised to buy shares from profits?

    You have the means/structure to do so:

    And you know people who could run it for you:

    The transfer might take more than your 12-month suggestion, but this would enable you to step down from day-to-day responsibility, receive an income until the sale is complete, and retain a residual rental income per the Property model that you are moving towards.
     
    Posted: Jul 10, 2019 By: Financial-Modeller Member since: Jul 3, 2012
    #17
  18. PCLTD

    PCLTD UKBF Contributor Free Member

    31 4
    Thanks for the input.

    I did look in to buying the unit we currently lease but there was a few of problems (which can be overcome):

    1 - The purchase price was too low so I would have to put it part cash and part long term loan which isn't ideal.

    2 - If we purchased the unit there was a few jobs which need doing, at the moment the electricity is ran from a pay as you go meter in the unit, its fine for us as we just use it for storage and an address so rarely there and usually just put a few pound coins in now and then but if it was a shop and was purchased it we would need to get a proper meter put in which will be a few thousand I would imagine as the current industrial meter feeding the units its about 20m away over the road.

    3 - The money I was going to use as a deposit on the unit mortgage would be better spent on a residential BTL property for a higher yield. Its not to say I wouldn't buy the unit and do the above but I would need a solid plan before putting money in to the above as it wont come cheap. Failing that I could look elsewhere for a unit as we can work from anywhere to be honest, we dont need to be in this location/town.
     
    Posted: Jul 10, 2019 By: PCLTD Member since: Aug 3, 2018
    #18
  19. Financial-Modeller

    Financial-Modeller UKBF Regular Full Member

    315 87
    At the risk of going off topic, you seem to finding problems rather than solutions.

    Responding to your points in order:

    1. too low? surely most property is purchased with a combination of cash and debt - unsure what you mean?

    2. reflect the cost of upgrading the meter in your offer price.

    3. structure the lease (you will effectively be in the unique position of being on both sides of the agreement) to provide the net risk-adjusted return that you want. This could be above or below the target net return from residential BTL, and might provide a return that is less-closely-correllated to a BTL portfolio.

    In any case, why buy the space that you currently lease if (as you say in your first post) its currently not needed? Buy a space that is fit for the purpose of running the business going forward; perhaps in consultation from your new manager. There might even be a deal to be done buying premises that your new manager currently occupies or aspires to occupy.
     
    Posted: Jul 10, 2019 By: Financial-Modeller Member since: Jul 3, 2012
    #19
  20. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    4,235 853
    Start with accessories:

    Cycling clothing

    Cycling Shoes

    Helmets

    Water rucksacks

    LED rucksacks

    Stainless Steel water bottles

    Fingerprint Locks

    Phone holders

    Bike bags

    The list is endless . . . .

    Start with one product with your brand.
     
    Posted: Jul 10, 2019 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #20