Closing Help

[lostone]

Hi everyone,

Posting as looking for some advice. I run a Ltd company retail shop/bakery that has been going for 8 months. During that time we saw strong initial trade but every month since that has weakened. We are now looking at the following options:

1. Continue and hope it starts to pick up again - continue the marketing we have and hope that we can both start taking a wage (we need to take double current sales to do that).

2. Sell the business as a Ltd company or just the assets and lease to new occupier - there is just over 4 years remaining on the lease with no break clauses. It is set in the Ltd company name with no personal guarantees. This would mean losing as the shopfitting costs also included electric, water and even plastering etc...

3. Sell the assets and dissolve the Ltd company - very little would be received by us for that.

Thank you in advance.

 

[BelindaChong]

There is a very popular bakery/patisserie near our shop. Speaking to the owner least week she said business is always very slow for her at this time of year. I know our sales are very slow recently.
Are you able to continue for another six weeks to see if Xmas shoppers start boosting your sales?

 

[Billmccallum]

8 months is nowhere near long enough to establish a bakery shop, I suspect that 2 -3 years would be needed.

if you can, keep going.

 

[lostone]

Maybe it might help if I put some figures down. The focus originally was on our home made cakes and traybakes.
We also sold exotic and locally sourced meats. Our local meat supplier stopped supplying us due to lack of sales within 3 months (lucky to sell £40 a week).

Everyone that walked through the door wanted was asking for home made breads (we had used a local artisan baker). Over 2 months we succumbed and started making some. We make 4 small loaves and 8 rolls a day. Our weekly bread sales would typically be £6-£10 - only one or two people come regular for it now.

We currently break even but that is without taking any wage each for 8 months - as we live at home that would be Okay if our Dad was not also made redundant at that time and the only other wage is equal to a part time wage (again runs her own business so can only take minimal amounts).

Our average sales are around £2500 a month - rent it £650 (our total bills before food costs are just over £1000 a month - again not including a wage). Our first month took far more than this with August and October being around £1800 each - open 6 days a week so some days only taking £30.

Our retail side was a complete waste of time. Sales average less than £20 a week - so after 8 months a lot of stock has either been thrown out because it has become out of date or will in the next 3 months.

There is one person who can bake and drive so even with some outside business lunches (the biggest order to date has been for 12 people) there is limited room to expand that side.

 

[lostone]

From the 3 options, I don't believe staying open is possible. Speaking to business transfer agents they would want turnover of £1000 a week (if we was taking that we wouldn't need to think about closing).

We have had only good comments about our food, yet people that came in several times a week when we opened we haven't seen since before the summer holidays (and there has been no new people to take over).

We believe that a focus on outside buffets, or maybe even a typical greasy cafe might work - neither of which we want to run.

My understanding is with a Ltd company, any leases or tied contracts are counted as debts? Each creditor would get a % based on money owed. Is this correct and how does that get worked out? (basing it on a CVA)

 

[businessfunding]

Key question here - what have you done about marketing?

You can promote at fairly low cost in your local area with editorial, fliers, street presence, Facebook etc - - that's before you even start on the sophisticated real marketing stuff.

 

[lostone]

Thank you for the reply. True marketing is normally key. We have tried the following forms:

1. Launch day with samples (continued to use samples throughout after opening)

2. Launched a new 'gourmet' menu with more speciality sandwiches)

3. Leaflet drops

4. Fetes and markets locally

5. Facebook page updated at least once a day (until recently) with 432 likes. Also facebook groups/discussions

6. Provided food for networking events

7. Paid facebook ads

8. Twitter

9. Groupon

10. Local Secrets page and new loyalty system (£50 a month)

11. Google Adwords

12. All directories online

13. Cake of the month (different cake for £1), sandwich of the month(different sandwich each month) and special offers

14. Newspaper ads with promotional voucher

15. Sandwich van with leaflet drops to businesses (no longer running due to low takeup and businesses letting us down)

16. Linking with other complimentary businesses (no interest from other businesses)

17. Ad in local parish magazine.


Our 2 best forms have been groupon (although little repeat) and facebook. Nothing else has really developed interest - literally not one person came with a voucher from the paper for example (half price cake)

 

[mhall]

Step 1 - : Don't worry too much. If it's all in the Ltd company at least you won't lose too much personally

Step 2: What does your heart tell you? Have you already lost the heart for the business? If so, you may as well get out now

Step 3: If not - Understand that it takes time to bring value to a market place - every shop we have ever opened starts off well, goes down quite a bit and then starts a slow crawl upwards. You need at least 18 months to make a proper go of it and decide if the business will last (which is why 12 month break clauses are a bit daft in my opinion as you can't really judge)

If the business is not costing you too much, decide how long you can go before you pull the plug. Then just get your head down and do it but if you get to the point where you have lost the maximum you are prepared to lose, get your assets out, close the Ltd and "do a spongebob"

 

[Unshoesual]

I really feel for you as in that first year, I thought about what I would do if the business didn't take off.

One suggestion by my mum was for me to stick someone in the shop on minimum wage and for me to get a job as I could earn more than a staff member would cost me. We thankfully, haven't had to go down that route but could one of you go back to work and get an apprentice in the shop to help you?

It sounds like you've done a lot on putting your business out there. Have you continued networking? I find that if I stop networking for a few months, people forget I'm here. Perhaps continue with that and always take goodies with you (that don't cost you a lot) as people will start to remember you as the 'bread / cake lady' (or man!)

If you're still sure you want to dissolve, are you part of your local Chamber of Commerce? They might have someone you could speak to for advice.

Whatever you decide, I hope it's the right choice for you.

 

[lostone]

MHall, I think the real problem is that we are in a village location. Every business that has opened in the area has lasted no more than 2 years (based on hearsay).

They have 1 Nisa Local (20 odd years), I hairdressers (been operating over 20 years but closes Sunday, Monday, Wednesday and half of Saturday) and 2 pubs and a Skoda garage (owner also owns one of the pubs). All we hear normally are complaints about them (pricing mostly).

We have also been told we are expensive by one or two people (cakes cost between £1 and £1.60), but if we lowered prices we would need many more people in (most they wanted to pay was £1). I don't believe that would happen.

The village is 2 miles from the centre of a town, and so people I think go into there and do supermarket shopping at the same time. Today for example we have taken £38 and sold no bread at all (mostly sandwiches for lunch)

 

[mhall]

MHall, I think the real problem is that we are in a village location. Every business that has opened in the area has lasted no more than 2 years (based on hearsay).

They have 1 Nisa Local (20 odd years), I hairdressers (been operating over 20 years but closes Sunday, Monday, Wednesday and half of Saturday) and 2 pubs and a Skoda garage (owner also owns one of the pubs). All we hear normally are complaints about them (pricing mostly).

We have also been told we are expensive by one or two people (cakes cost between £1 and £1.60), but if we lowered prices we would need many more people in (most they wanted to pay was £1). I don't believe that would happen.

The village is 2 miles from the centre of a town, and so people I think go into there and do supermarket shopping at the same time. Today for example we have taken £38 and sold no bread at all (mostly sandwiches for lunch)

Don't worry about a couple of people telling you that they think you are expensive- you will always be too expensive for some, even if you gave it away. I well remember the day when I took £3.80 - its the roller coaster of Retail.

It sounds like you have chosen the wrong location, so its down to poor Market Research - something to remember in your next venture. If you can't become niche and make yourself a destination shop then it sounds like you are doomed. Learn your lessons and search on here for "spongebob" for the best way of getting out and salvaging what you can.

Then have a damn good cry, regroup, and go for it again somewhere else - don't take it personally, your second venture will be better than your first (and your third will be better still!).

 

[lostone]

If I am looking at it correctly, the spongebob system, is to clear the premises of what we can, and sell off what remains at the highest price to pay the creditors.

Having spent 27k on it, and not had any wages we would be the biggest creditor. There is a fridge engineer owed 450 ad besides that everyone else is owed purely through contracts (rent 4 years 4 months remaining, local secrets, phone, card terminal).

 

[herewegoagain.]

I really feel for you, good people like yourself graft hard and offer a great quality service and people dont support it -

You normally find it is this sort who are the first to whine saying, 'what a shame, another empty shop - I used to go in there all the while!' - well question is did you buy anything? probably not... through no fault of your own, you are trying your best as someone trying to earn a living, rather than claim benefits...

People out there should support small business and put their money where their mouth is !

In my previous shop, after having lots of hassle with staff bad mouthing me (sacked after thieving) I put a big poster in the window... USE IT OR LOSE IT !!

I get this problem from time to time, I hear people outside say: 'oh what a lovely shop, its so lovely in there!'... normally they have never been in and they never come in and buy !!! - they think it is a bl00dy museum !!

The general public need to understand that if they want variety (ie not another Tesco Town) shops need to make a living !
Good luck to you, whatever you choose to do...

 

[lostone]

If I am looking at it correctly, the spongebob system, is to clear the premises of what we can, and sell off what remains at the highest price to pay the creditors.

Having spent 27k on it, and not had any wages we would be the biggest creditor. There is a fridge engineer owed 450 ad besides that everyone else is owed purely through contracts (rent 4 years 4 months remaining, local secrets, phone, card terminal).

Is that the correct way of looking at it? And are the contracts classed as creditors?

The landlord lives in the village in question, so he knows the equipment we had. How does that side work also please?

 

[Dogsbody]

Hi Lostone,

I'm truly sorry to hear this as I believe I know who and where you really are.

Sadly I think it comes down to one thing which is something you cannot change, and that is location.

Were you in the main town centre two miles away you would not be here as your business would be flying. Similarly were you in the same town as mums business, or rather certain areas of it (not where mum is) then you would be flying even higher as your products would be selling out every day. Your location, I believe, will never support a business such as yours. You have made a valiant effort, your product, marketing and promotion deserve better, but where you are there is simply insufficient customers to provide the turnover.

Linking up with the Skoda dealer to offer a free cuppa whilst their customers cars are having a service would get some additional sales, but as you say, he has the pub and if he isn't already doing that he's missing a trick. But I bet he is already doing it.

Could you try a mobile sales cart in the main town centre? On-line postal sales, but obviously you'd need next day delivery.

I'm sorry but I struggle to see how you can make your offerings sufficient of a 'go to' to get enough people to go off the beaten track to go into your village.

Good luck, I hope you can sort it.

 

[Down not out]

Hi,

Sorry to hear about your troubled times. I was in a similar position and made the decision to close my business within a year of opening.

Whether sales will improve over time is something you will have to think hard about. The cost of keeping your shop open should be your deciding factor. If you can keep going without making a loss, perhaps you should.

If, after all the marketing you've done, it's made little or no difference, perhaps you should think about closing and moving on.

Sometimes, when you're in a remote location outside of town, once the initial curiosity period is over, sales can slump.

Deciding to close can be a very difficult decision but you have to weigh up the cost to your sanity also!

Good luck in whatever you decide!

 

[mhall]

Is that the correct way of looking at it? And are the contracts classed as creditors?

The landlord lives in the village in question, so he knows the equipment we had. How does that side work also please?

The landlord may know what equipment you have but he doesn't know who owns it - and it's none of his business. His only concern is the lease.

I would empty the place and then tell him. If you are lucky he will take it on the chin and move on. From the sound of it everything else you owe is tiny and I very much doubt anyone will pay to take you under. Make sure you tell the council as soon as you can and try and make sure the Business Rates are paid up to date - Council idiots will hound you to doomsday while wasting public money.

Once you have been closed for 3 months you will be able to decide whether to follow Spongebobs closure process completely, just go dormant or re-open in a different location. Your decision will be based on how any creditors have acted in the 3 months having been invited to take you under.

 

[lostone]

Dogsbody, thank you for the reply. You are right in your thinking, I doubt it would make much difference in that town either - be open 7 days a week employ staff and they are deciding if a Subway can open before Christmas. The gluten free etc... was to draw people like yourself in, but that hasn't worked either.

Down not out, thank you also. We are not in much personal trouble so just one or two paychecks would sort us out, but yes deciding to close before the year was something we hadn't considered even.

Mhall, thank you also. True, he doesn't know what we own/rent. We don't pay business rates due to the location (beside rent our biggest bill is the accountant). We only owe £450 to a fridge company and everything else is in contracts (although mostly they would probably just cancel services). It does help in knowing what to do next

 

[MOIC]

Hi Lostone

You have done everything correctly in trying to make the business work, with marketing ideas that most retailers would not have tried.

I suspect you know what to do, but are emotionally tied to the business, given the hard work and enthusiasim you had at the start.

Business is all about making decisions, and I feel that the best thing to do is to cut your losses, given what you have said in this thread is accurate.

Your time can be utilised more in starting a new business which will generate an income that your efforts deserve.

It is evident, that this business, in this shop and village, will never work, due to the lack of potential customers.

Close it ASAP and move on.

Best of luck.

 

[mhall]

Just double and triple check that you are aware of any personal guarantees you have on anything in the company name.

If there are none- relax and do it !

 

[lostone]

Hi, thanks again for the replies. We have made the decision to close, and are removing bits and pieces until the next rent is due.

Hopefully there is a deli opening close by who might be interested in some of it.

 

[MOIC]

Hi, thanks again for the replies. We have made the decision to close, and are removing bits and pieces until the next rent is due.

Hopefully there is a deli opening close by who might be interested in some of it.

Brave, and Correct decision.

Sometimes business does not follow what you thought and time to make a decision.

You will be stronger for this experience.

Get rid of as much as you can to the first offer (If its not needed), moving and storage will mount up.

Close the chapter and move on to your next venture.

Best of luck.

 

[Root 66 Woodshop]

Such a shame that you've had no alternative with the business... it's always annoying to hear people tell you that you're too expensive, especially when things are not when you look at it deeper.

If you do decide to open another shop later on, remember that not only all of the previously mentioned ways of advertising you did there is also network events... Contact the organisers and offer your services of providing a buffet - some may already have their suppliers but the new network groups are always looking for someone to provide this as it's one less hassle for them.

You get to network and prove to folk that your produce are of value.

Good luck for your future.

 

[Dogsbody]

Sorry to hear that lostone, but after reading the thread it's not a surprise.

I wish you the very best for the future, and I'm sure that all you did to make it a success was correct, it really was just the location that killed it - I was very surprised when I saw where you were.

But as has been said it will make you stronger and I hope your next venture does very well.

As you already have all that equipment, and certainly the knowledge and skills, could you not set up in a small place in or near Cambridge and sell buffets, sandwiches, cakes (they were so good) direct to companies? Or do a snack van. I know there's several about already but position yourself as a high end offering. I confess I don't know that market but would have thought there would be an opening for that sort of thing.

Good luck in whatever you choose.

 

[deniser]

Been there and done that in a village so have total sympathy.

We stuck it out for three years until the lease ended and just broke even but used everything we had learned to start a new better business in a town centre location.

So although it might seem disappointing now, the learning curve was better done there where the exposure to risk was much smaller than in the next more expensive location.

So you may look back and see that this experience hasn't been a bad thing. I truely believe that you have to fail at your first business to make the next one a real success.

Are you absolutely sure that there are no personal guarantees to the landlord - this would be unusual - but great if not.

Good luck.

 

[herewegoagain.]

All the very best to you for the future lostone, you have made a very brave (but in my eyes) a right decision, you have done your very best - you could not do no more - sending you my best wishes x

 

[lostone]

Thanks again everyone, to confirm, the best thing would be to write the letters to creditors at the same time as we apply to be struck off?

The landlord has no personal gurantee from us (he said as we was doing elecrtics etc... he didn't want one or a deposit).

There are not many assets, so as we paid for them before the Ltd company would that be classed as being loaned?

 

[lostone]

Hi again everyone,

So far the advice has worked well. We just have one question now. We received the above letter regarding settling payment before court action. We have received no letters before this one (we have no access to the former business premises now so could not received any sent there). We also wrote and called informing them we had to no longer receive the bins as we had no funds.

As it was a Ltd company do they have the ability to take money or demand it (considering the business will be null and void)?

 

[Down not out]

You mention a letter above but I can't see it?

If the account is in the Ltd Companies name there's zero they can do to you personally. They may apply for a CCJ, let them.

I would write to them explaining that you've applied to have the company struck off the register and invite them to apply for a winding up order through the courts. You probably won't hear from them again.

Best of luck!

 

[10032012]

I have been reading through this post, I didn't see it last year when it was started but it made me smile of how supportive everyone was; and how proud I am to be part of this community.

I think the OP did everything right, just peoples attitudes particularly on price (yes its more expensive but Tesco will cost you more if you include the cost of travel there and back to the next town! some people are too stupid) can make a venture unworkable. Some people think you can just open a shop and expect optimum trade... the OP clearly has done everything right in regards to marketing.

Towns are better due to a greater population but there is also stronger rivalry between competing shops including supermarkets (and their small local stores too) so sometimes a smaller location can be better if you have exclusivity where people are pretty much forced to use you.

Life is a learning curve, don't be ashamed of your "mistakes" (if you want to call it that) and brush it under the carpet... learn from it. I think one aspect I have learned as an entrepreneur is, this annoying figure about how many businesses fail in the first year... isn't so much solely about poor business sense, but sometimes you have to try a market to realise it doesn't actually exist. I for one, have always undertook market research, but things change, ... trends, attitudes, competition, environmental factors. etc. so just because a gap-in-the-market exists at day one, doesn't mean it will still exist in 6 months.

Going the limited company route is a credit to yourself, it allows you to clean up the venture easier without being chased for debts in the future. Its is difficult to let go, me myself had the problem of wanting to respond to every correspondence. once you take the Spongebob plan you just need to leave it alone as (in effect) it has ceased to be your responsibility. Court costs, CCJs or even bailiff costs it quickly snowballs... but you can smile that you had a limited company so none of the debts etc. is in your personal name.