Business going under...

[mikevav]

Hello,

My business and I are dire need of some help at the moment, we have had a fair lot of trouble surviving since COVID + Brexit + Now Cost of Living and it seems like there is no way out, I am starting to get Court Judgements etc. The company doesn't even owe that much money its in the region of around £60-£70k (to suppliers) and around £40k to BBL off the top of my head and usual turnover was £500k+. We were surviving with cutting costs and staff and expenses that wasn't 100% required until eBay hit us with a store downgrade which reduced our £35-£45k turnover a month to £9k which then killed the money coming in which means i couldn't then pay the suppliers and bills on the day to day like i was "Robbing Peter to Pay Paul" as it were.

I can see a light at the end of this tunnel but without money coming in to pay Rent, Utilities and clear this debt i am stuck with stress and sleepness lights and this is honestly affecting my mental state, i don't want to just go bust and start again as I have been advised... I want to honor my agreements to pay people etc. I am a man of my word and will fight to my last breath to make sure this company survives and everyone owed is paid.

I set this business up for something to leave my children when I am gone and i do not want my legacy to have ever included "screwing people over" this is the worst example I can think to ever set to my children.

I have tried to get loans but without assets no one is willing to help, even the bank due to a director resignation a few months back won't do anything.

Any and all advise is greatly welcomed and thank you for your time.

Mike

 

[HFE Signs]

Sorry to hear this, what does the business do?

 

[mikevav]

We are an AV Company prio in B2C

 

[Paul Kelly ICHYB]

Sorry to hear about your issues (sadly, too common nowadays).

Specifically, what do you sell?
Where else do you sell, besides ebay?
How much sellable stock are you sitting on?

EDIT - I think I have found your website...

 

[HFE Signs]

We are an AV Company prio in B2C

So selling AV components via ebay?

 

[ChrisCallaghan]

Hi Mike,

I'm so sorry to hear about your situation. There are options that can be explored through a licensed insolvency practice. For example, you could explore a Company Voluntary Arrangement, which would consolidate your company's unsecured debt into an affordable monthly repayment plan.

For a further explanation of this process, please see the below link to our website:

Company Voluntary Arrangement (CVA) - Free Advice | Wilson Field® - Licensed Insolvency Practitioners

A Company Voluntary Arrangement (CVA) is a formal insolvency process, allowing your insolvent company to repay a portion of its debts monthly

www.wilsonfield.co.uk

Alternatively, you may wish to explore a liquidation, and what your options would be to start up again.

In either case, I feel it would be advisable to seek advice from a firm of licensed insolvency practitioners. To continue without out advice runs the risk of trading whilst insolvent, which can lead to personal liability issues.

Myself or any of the insolvency regulars here at UKBF would be happy to offer you a free, confidential and no obligation consultation to explore your options.

 

[ChrisCallaghan]

Added to the above, can I ask if you owe anything to HMRC at the moment? If so, may I ask how much and to which departments?

 

[mikevav]

Sorry to hear about your issues (sadly, too common nowadays).

Specifically, what do you sell?
Where else do you sell, besides ebay?
How much sellable stock are you sitting on?

EDIT - I think I have found your website...

The core of the company is AV products ie: anything to go around your TV, Speakers, accessories, amplifiers, TV Aerials, etc. etc.

The main business income was eBay as Amazon increased a lot of their fees to a point they were earning more than me per transaction and it wasn't smart to be sending them thousands of pounds of stock for them to sit on and sell for a higher margin than i was making.

Sellable stock could be in the region of £30-£40k

A lot of what we were doing was holding stock of the fast selling regular items and dropshipping the others.

A couple of our suppliers have agreed to "put aside the debt" and just continue to trade with us on a pro-forma basis to help us out but it is still just so hard with so little coming in now.

 

[Mark T Jones]

I'd definitely recommend you take up @Chris Callaghan 's offer.

Whilst it might seem like a good idea, borrowing money at this point is almost certainly a terrible plan - please avoid it!

 

[ChrisCallaghan]

A couple of our suppliers have agreed to "put aside the debt" and just continue to trade with us on a pro-forma basis to help us out but it is still just so hard with so little coming in now.

Added to my earlier message, these type of creditors are likely to be open to the CVA process I mentioned.

 

[japancool]

I'd definitely recommend you take up @Chris Callaghan 's offer.

Whilst it might seem like a good idea, borrowing money at this point is almost certainly a terrible plan - please avoid it!

This - if you're at the stage where you're considering borrowing to stay afloat, please don't. It's just digging a bigger hole for yourself.

Sometimes, it is better to fold and start again. I know it sticks in the craw after you've built up your own business, but it's better to start with a clean slate rather than throw good money after bad,

 

[Financial-Modeller]

Sorry to hear of your situation.

This point is relevant, and needs some careful thought, @mikevav

...I can see a light at the end of this tunnel...

You haven't mentioned how profitable you are/were, but what are the prospects for a return to profitability?

What needs to happen, to earn enough gross profit to repay debts and continue? Is it likely to happen?

Also, if you are turning over one quarter of what you used to, does that mean that three quarters of your time is available for other employment whilst you rebuild?

If the answers to these types of questions are "no" it may be better to close it down and focus on something else.

 

[Paul Kelly ICHYB]

Amazon increased a lot of their fees to a point they were earning more than me per transaction and it wasn't smart to be sending them thousands of pounds of stock for them to sit on and sell for a higher margin than i was making.

I understand that feeling, however, if you were making a profit on the sales, you are cutting your nose off......

Do you have the email addresses of all the people you have sold to? Putting GDPR to one side, write to as many as possible with an offer if they buy direct from you. That can generate some funds and reduce liabilities and might give you a needed boost.

 

[brucegreig]

Assuming you are running a company (not a sole tradership / partnership): The whole point of the limited liability system is to allow a company to be wound down gracefully without destroying the people running it. As a society, we have set things up like this because we think it is better, overall, than having people go personally bankrupt and be put in debtors' prison like in the olden days.

There are scoundrels who abuse this process, and do dodgy pre-packaged deals where they, as directors, benefit from putting their own company into liquidation and starting again with the same assets. But the scoundrel label doesn't apply to directors of a company which just didn't work out, despite their best efforts.

If circumstances are such that your company can't continue trading, there is no shame in shutting it down. It isn't that you have personally taken money from the creditors. You haven't personally screwed anyone over. The other businesses understood the rules of the system when they offered credit to a limited company. As I said at the start, everyone benefits overall from the limited liability system.

Be careful of trading while insolvent. If the company can't pay its debts as they fall due, and you allow the company to continue trading, you run the risk of getting hit personally for any losses the company incurs after it became insolvent.

 

[pentel]

I sympathise with your plight.

It might be a good idea to create a balance sheet to clarify where you are, followed by a business plan to escape from your current predicament or even to see if it is worthwhile continuing or if it is better to liquidate and start again.

For example

Assets
Stock: at cost £20,000
Cash £?
Any other assets £?

Total £20,000 + other assets (P&E, F&F etc)


Liabilities
Debtors £60,000
BBL £40,000
Other debtors £?

Total £100,000 + other liabilities (HMRC, PAYE etc)


Shortfall £80,000


Turnover £500,000
%net margin 10%
Net profit £50,000

Time to clear 20 months


Only you can fill in the gaps and decide how this might pan out. Beware of trading whilst insolvent

 

[Ray272]

Well done to the OP for facing this issue head on and seeking help.

I would be interested to visualize your stocks.

Number of Skus?
Amount of space being taken up?
(Base it on pallet sizes or racks/shelves)

An ebay business is a digital operation, and forgive my assumption, but it sounds like you have lost a cog in your labour force with the director loss and that has maybe contributed to lower service levels which has damaged your ebay reputation and has now impacted your primary sales platform.

Your first worry is making rent payments in your post.

A digital business with the added duties of storing and packing goods is always going to hinder your progress.

Something needs to be sacrificed and a new method needs to be put in place to account for labour shortfalls.

My first thoughts are you need a reliable fulfillment provider to handle your storage, pick and packing operations and that may give you half a chance of getting out from under.

I know that type of change sounds crazy but if your a digital seller that really is the solution and you will find you then have the time you need to get your business back in shape.

Best of luck with this.

 

[Frank Wessely]

Hi Mikeav,

1. Can you clarify why EBay downgraded your store. Can that be rectified?

2. It could be that the director resignation has hit your credit rating which in turn led to the Bank declining to support. That could be an area I can help with.

One of the services we provide is to help businesses improve their company credit rating. It is risk free in that you would only pay on a results basis and it leaves no footprint on your credit file.

Have a look here https://www.quantuma.com/corporate-credit-rating

3. The concerns above around personal risk arising from trading whilst insolvent are valid.

4. Whatever actions you decide to take, make sure that you understand the implications.

5. Similar to other IPs in the forum, I’m happy to offer a no charge, no obligation call or meeting to run through all of the issues. My contact details are below.

Thanks.

 

[scstock]

Assuming you are running a company (not a sole tradership / partnership): The whole point of the limited liability system is to allow a company to be wound down gracefully without destroying the people running it. As a society, we have set things up like this because we think it is better, overall, than having people go personally bankrupt and be put in debtors' prison like in the olden days.

There are scoundrels who abuse this process, and do dodgy pre-packaged deals where they, as directors, benefit from putting their own company into liquidation and starting again with the same assets. But the scoundrel label doesn't apply to directors of a company which just didn't work out, despite their best efforts.

If circumstances are such that your company can't continue trading, there is no shame in shutting it down. It isn't that you have personally taken money from the creditors. You haven't personally screwed anyone over. The other businesses understood the rules of the system when they offered credit to a limited company. As I said at the start, everyone benefits overall from the limited liability system.

Be careful of trading while insolvent. If the company can't pay its debts as they fall due, and you allow the company to continue trading, you run the risk of getting hit personally for any losses the company incurs after it became insolvent.

What a great post - brilliantly put.