Advice on next step

[J Arnold]

I'm after some advice please on what would be the next couple of steps I can take,

Short version - I was brought on board to grow a new side business to an already established business. I've 25 years in the industry with all the supplier contacts, technical know-how, product knowledge. They have zero knowledge in this side business.

I've taken the sales from 50k to 350k in 18 months, all through cold calling and my existing customer base. This was all done on my own, so ordering stock, unpacking, delivering, quoting, sales calls, returns, the lot.

One of the owners of the main business wants to sell and take me and the side business with him. However, it will be me doing all the leg work and they will just be taking money out of it so I don't see the benefit to me and why should I.

So, I'm going to go it alone and set up as a Sole Trader with a VAT number first, use quick books for paper work and get moving. The supplier have said they will let me buy from them albit pro forma to start which I understand.

I'm sitting quietly on this for the minute slowly working on it in the background but looking to "go live" March next year.

Anything I need to know, look out for that others in this position have come across?

 

[Newchodge]

Check your current emoloyment contract for restricrive covenants, non-compete clauses and so on.

 

[J Arnold]

Check your current emoloyment contract for restricrive covenants, non-compete clauses and so on.

I have none, nothing of the sort is in my contract.

 

[Socio South West]

If I was to guess your margin at 30% and assume the unlikely scenario of you capturing 100% of the existing customer base, sales of £350K is going to get a GP of just over £100k - is that enough for all your fixed costs and to get you and anyone else you take on board a suitable wage?

Have you got a budget and business plan together for this?

You are in quite a strong position to re-negotiate your deal with the director that wants to move on - don't throw that option completely away until you have examined it: You don't have to reveal your plans to him, although he would be an idiot if he didn't see that as a possibility.

 

[Paul Kelly ICHYB]

it will be me doing all the leg work and they will just be taking money out of it so I don't see the benefit to me and why should I.

So, you will be doing exactly what you do now!

The first thing to do is speak to the potential purchaser and see what is in it for you - if you are as important to the ongoing business as you feel, they should reward you to stay.

Without knowing the business, if you break away, do you need to invest everything?

Assume that you will not take all £350k of business and might get half, what is the profit/return on that?

Do you have the money to pay the suppliers PI?

As mentioned, start writing a business plan asap.

 

[J Arnold]

If I was to guess your margin at 30% and assume the unlikely scenario of you capturing 100% of the existing customer base, sales of £350K is going to get a GP of just over £100k - is that enough for all your fixed costs and to get you and anyone else you take on board a suitable wage?

Have you got a budget and business plan together for this?

You are in quite a strong position to re-negotiate your deal with the director that wants to move on - don't throw that option completely away until you have examined it: You don't have to reveal your plans to him, although he would be an idiot if he didn't see that as a possibility.

I'm at 45% margin on average.

I've had a business plan for a long while

 

[Paul Kelly ICHYB]

I'm at 45% margin on average.

Based on what? have you included operational costs and your salary in this?

 

[J Arnold]

So, you will be doing exactly what you do now!

The first thing to do is speak to the potential purchaser and see what is in it for you - if you are as important to the ongoing business as you feel, they should reward you to stay.

Without knowing the business, if you break away, do you need to invest everything?

Assume that you will not take all £350k of business and might get half, what is the profit/return on that?

Do you have the money to pay the suppliers PI?

As mentioned, start writing a business plan asap.

I'll be doing what I do now but I will own the company, big difference,

Need a small van and a small unit/garage/office space to start to receive and unpack deliveries. Nothing fancy to start with.
I also understand I will have some late nights/early mornings to begin with but that's part of the fun.

Currently on average making 45% margins

I have money to pay the suppliers for the first few months until the customers start paying their 30 day end of month invoices. I used to work for two of the suppliers and get on great with them. They can see the difference I have made and happy to support me where they can.

I've been in this industry a long time, this business plan is ingrained in my head as I've been sitting on this idea for about 10 years. With certain life changes (divorce being one) now, at 45 seems it's time to pull the trigger.

 

[Mark T Jones]

I'll be doing what I do now but I will own the company, big difference,

Need a small van and a small unit/garage/office space to start to receive and unpack deliveries. Nothing fancy to start with.
I also understand I will have some late nights/early mornings to begin with but that's part of the fun.

Currently on average making 45% margins

I have money to pay the suppliers for the first few months until the customers start paying their 30 day end of month invoices. I used to work for two of the suppliers and get on great with them. They can see the difference I have made and happy to support me where they can.

I've been in this industry a long time, this business plan is ingrained in my head as I've been sitting on this idea for about 10 years. With certain life changes (divorce being one) now, at 45 seems it's time to pull the trigger.

Does the plan include a detailed cashflow projection (including worst-case assumptions)?

That's the really telling bit!

 

[J Arnold]

Based on what? have you included operational costs and your salary in this?

No salary and operational costs to come out of that margin.

 

[NickGrogan]

until the customers start paying their 30 day end of month invoices.

If you're going to give that long, people will take longer, so add another 30 days to that, at least.

Or don't offer credit and demand upfront payment.

Now how does the plan look?

 

[J Arnold]

If you're going to give that long, people will take longer, so add another 30 days to that, at least.

Or don't offer credit and demand upfront payment.

Now how does the plan look?

All my customers pay on time. Always have done. May get the odd invoice query from time to time but mine never appear on the late payer's naughty list.

 

[J Arnold]

No salary and operational costs to come out of that margin.

Sorry, amazing what a missing comma can do to a sentence!!

No, salary and op costs to come out of the margin

 

[NickGrogan]

All my customers pay on time. Always have done. May get the odd invoice query from time to time but mine never appear on the late payer's naughty list.

Excellent, but thats at your current company, not when its just you. Assume they will and if they don't then you'll beat your plans.

If you don't, and they pay late, your plans will come undone quickly.

 

[WaveJumper]

When you say:

"One of the owners of the main business wants to sell and take me and the side business with him"

What's in it for you, pretty sure this was mentioned above a conversation needs to take place, perhaps joint ownership is on the cards etc etc. Although if they have no experience to bring to the table, and as you say, you are going to be doing all the work (I hate partnerships) personally I would jump ship and go it alone.

However do make sure you have your numbers right on overheads especially storage / unit costs if anything like around here just getting on the waiting list is an achievement let alone the ridiculously high rents. Best of luck.

 

[Socio South West]

There's nothing wrong with confidence, but I am reading your responses to the posts that have been made as having a degree of over confidence that I have seen on a number of occasions from sales orientated employees wanting to set out on their own.

At the moment you enjoy protection from the financial and adminstration umbrella of your employer: If you strike out on your own you lose that - every day, every problem, every payment, whatever, becomes your responsibility.
At some stage a customer will go bust on you.... something will go wrong. Your customers are customers... not angels, and I am not seeing this awareness in your responses. You make it sound too perfect which is very dangerous.

Please don't think I am knocking your enterprise: I am just saying you need to take off the rose tinted specs and prepare yourself to deal with the deeper harder facts of running a small business /company on your own.

 

[Mark T Jones]

All my customers pay on time. Always have done. May get the odd invoice query from time to time but mine never appear on the late payer's naughty list.

It's often said that a good business partnership includes a sales person & an accountant - and I feel you would definitely benefit from a cynical accountant peering over your shoulder & twisting your ear.

You didn't answer re cashflow projections, but they are invaluable for understanding your own business & challenging assumptions.

'Everyone pays on time' is a little too good to be true - even if it's the case now, it can always change.

when looking at projections, where credit terms are offered, I jump straight onto:

1. Projected payment days - invariably projections show payment being made within the 30 day term. Even stretching that to just 40 days can make a significant difference.

2. Credit control budget - essential!

3. Bad debt provision. (or credit insurance costs). Don't kid yourself, at some point a customer will go bust, or will just refuse to pay.