Fed Up!

[Legacy]

Hi Folks

Newbie here so apologies for any misdemeanours.

I'm 34

No real formal education and apologise in advance for the long ranty type post.

I'm in a partnership in a maintenance firm which I've started to hate. The spark isn't there anymore. I don't get a kick out of it and all I can ever think about is getting out of it.

It's been running for three years. I had another firm before that with partner 2 but when the partner 3 came along he wanted a new firm so we shut shop and opened another firm.

All was going well, everyone was getting along until we had a healthy bank balance then partner 2 & 3 decide that me running the firm from my spare bedroom is unprofessional and promptly signed upto a 3 year lease for a warehouse and office which costs the company circa £20k a year. Everything was going well until last year we overtraded and used all of our working capital then got into debt with hmrc and vat. Partner 3 resigns as director. I start ploughing my own funds into the firm to keep it afloat. Fortunately my own funds are being paid back to me.

I changed a few things round, some staff left us to work for themselves. I never replaced them but found that my turnover and profit had not gone down since their departure. I realised I employed three guys @ 40hr week for no reason. Ouch!

Anyway the lads are paid every Friday and imo I pay them well inc provide vans, fuel etc. They are relatively happy. I hope.

However problem being I entered into an arrangement with hmrc which ultimately failed. So I'm now waiting for a visit from the field agent to see what happens next.

Ironically I'm in a very fortunate and enviable position as we have a lot of work from agents, commercial and our own bank of private landlords/homeowners. If we could start afresh with no expensive warehouse or hmrc debt I'm positive things would be a lot better.

My issue is that I'm struggling with my workload. I don't have enough funds to take on an administrative person, my business partner who works daily with me is a dinosaur when it comes to IT which does not help. I'm working silly hours daily and it's not doing me any favours. I'm doing a job not running a business. I feel like I'm on my own.

Quotes aren't being sent out on time, materials aren't always ready until the last minute and sometimes the workmen can be sloppy (ie- take too long to do a job or miss out an item on their worksheet).

Today I went out to quote on some additional work to a property I was due to hand back in the morning. I realised one of the jobs were not done. It was only tightening a loose window handle but fact is if I invoiced it and it was picked up on I would look either incompetent or a plain fraud. My instant reaction was to put my paperwork down and go for a walk before I said something I regret.

I haven't had a weekend to myself or with my family for... well... I don't know the last time I did. My wife is supportive but isn't keen on me using our savings to pay the lads wages, then pay them back a week later only for the cycle to repeat.

I want to either start afresh somehow or just pull the plug on the firm and get the works carried out by sub contractors but stick a bit of margin on top for me on a self employed basis. I've simply got too many customers to just pass by/let down.

The other director is struggling financially big time due to the firm (personal rent and bill arrears) but never logs onto xero or looks at the bank. He won't agree to pull the plug which is ironic as he is on the tools and could earn 3x weekly straight away. The annoying thing is I applied for a business development loan for approx £50k which we were very near getting but failed as partner 2 did not get the paperwork in time and a couple of other issues primarily due to partners 2 and 3. Said loan would have bridged our cashflow deficit as at any one time we are owed £10-£30k. There seems to be a lot of wishful thinking on partner 2s part where things will get better if we do x y and z but I personally see no end to this hole other than bigger debts to hmrc and vat and further losses personally.

As you can tell I'm fed up and want to shut shop, monies owed to us can pay vat and hmrc and we can start again taking the customers over without a massive overhead of a warehouse (which is full of junk anyway).

Any thoughts folks

(Apart from go on a holiday)

 

[CAS-]

Hello

Looks like your having rough time...feel for you...

My advice to you will be to sit down and have a long think about what you want to do...try to see it from a business sense and not get your emotions involved in making any decisions...

Its difficult to keep positive and upbeat if you have been working 7 days a week...

Some times you just know deep down that you have had enough and just do not have the fight to continue and that it is not going to work out despite what your efforts.

All businesses have ups and down take it as a challenge and try to get through the rough patch you will come out a better person and a better business man...!!!

Cut down your costs as much as you can...Be ruthless if you have to its all about the end result...looks like it was a good business at one point I'm sure you can still recover it if you put your mind to it...

sorry couldn't be much help.

Hope it works out for you...

Best of luck!!!

 

[JEREMY HAWKE]

Cost That's it really You yourself had the best business plan running it from home and controlling the costs tightly but you let yourself be controlled by muppetry
Tell your business partner how your going to reduce costs and he will have to go along with it as your the one bank rolling things at the moment

 

[pentel]

A couple of questions.

How long is there left on the lease? Can you survive until you can get rid off this millstone?

The "junk" in the warehouse, is there any value that could be recovered there? It will need clearing before you move out so why not make a start on it now recovering whatever value you can.

You mention partners and then a director resigning, is this a ltd co or a partnership?

 

[Chris Ashdown]

sorry but what you are saying is the grass is greener if you start again, but if you spent the same amount of energy on thinking this through for the old company you would see a way forward

Hire in someone part time to either do the books and office work or do it yourself and get someone to do your job

If a loose handle is all you worry about in Quality Control you team are not doing a bad job

Take a weekend off and look over the partnership with a fresh mind and see whats going wrong, you already found three people not paying their way look for other area's or how to get more business

In a partnership you don't have directors so is it a partnership or a limited company

 

[Legacy]

Hello folks and thanks for the replies.

Warehouse - it is literally junk, there are some materials we can and do use but they are often off-cuts or items bought and not used for whatever reason. Partner 2 has a scrap metal fettish which no matter how much explaining I do he won't accept it is a waste of time/space/invalidates insurance and our lease terms. Fact is that before deciding to take up the warehouse nobody realised or thought about who is to maintain it, tidy it and so on so fourth. Looking after the warehouse is a part time job itself. Well, it is the way I see it. We could sell some stock but doubt we will even crack £1k in sales. It is junk.

Lease - We are out of the fixed term, we are now rolling month to month.

The company - it is a ltd company with three partners and now two directors.

Quality control - I understand about the loose handle comment however that was one of the jobs I specifically mentioned and it was not done. To send someone to screw that one handle will cost the company £30 in wages (travel time, fuel, etc). There are other points but that's just a wee example.

 

[tony84]

Is there any way of getting rid of the warehouse/subletting some of it/reducing the rent?

 

[billmccallum1957]

Where are you based?

 

[Newchodge]

When you say 3 partners, 2 directors, do you mean 3 shareholders?

If you are renting the warehouse month to month, why don't you give notice and go back to your spare room?

 

[Legacy]

Based in Brum

Warehouse -

We could get rid of the unit but I'm the only one in favour. Hire some cheap storage for any tools and materials. I'm not in favour of moving back home as I'm soon to take on an administrative assistant to help me out however there are plenty of cheap offices around I could take up.

Subletting is not an option as it's against the lease and I know very well there will be arguments about space etc. No matter what is agreed it won't work out.

I need to really think about how it would work as at the moment we have a 24/7 skip outside the warehouse which we do need as we clear up after ourselves.


The company -

Yes three shareholders of a ltd company and two active directors.

 

[Newchodge]

You can resign as a director and start again. Otherwise, if your fellow shareholders can outvote you, you can't change anything.

 

[tony84]

If you are paying money to the business bank account to cover wages, tell them that unless they downsize the office space, you will not carry on doing what you have been.

Also maybe explain that as directors they have a legal requirement to do the best by the company, keeping an office to look like billy big ....... is not meeting that requirement, they (and you) could be held personally liable for any debts.

 

[Chris Ashdown]

On the lease running on over contract period

Can the landlord use this to up the rate and also back date it to the end of the old lease

Have a look on your council web site most councils have a list of commercial property both theirs and others which can be for unpopular sites at very low rents, everything from a portacabin on a small site to mega buck new buildings, you may find something to fit the bill

I think you need to call a shareholders meeting and try and make plans for next 2 or 3 years and see who agrees and who doesn't,

Don't put any more money into the company untill you have a fixed and agreed plan forward

Also agree exactly what each of the three of you want as a company and who is responsible to do what

 

[Legacy]

Just checked our lease.

Tied in until mid next year

I need a long hard think over the weekend.

 

[hardygirl30]

Stay positive, all will be well in the end, I'd love to help with all the admin stuff but I'm based from home in Yorkshire. Feel free to contact me if you need some help though.

 

[Legacy]

Thanks for the kind words.

The other director dropped a bombshell on Friday. He said he felt like hes losing control of the business. I asked why, he replied he doesn't understand the software we use or xero. This after many years of trading. I feel like its one big uphill struggle with nothihg positive to come out of it.

The company is worth nothing. Although we invoice 15-25K monthly we have the capacity for more but it requires better management which i cant deliver on my own. I can't look after finances, invoice, liase with customers, identify their needs and requirements, identify and resolve snags AND look after the workmen at the same time. I simply cant do it. I cant even sell it due to hmrc debts.

We made a mistake of overtrading last year. By my calculations we lost over 60k. We have never recovered.

I'm looking into the fact that if we continue to trade as we are (i believe insolvent) we will be breaking the law and personally liable for any debts. This is something i wont let happen.

In the meantime im looking at starting a builders supply business. We have a years lease left so im sure i can makd use of the warehouse.

 

[Pish_Pash]

I'm still at the place you were (trading from my home).... it's certainly very sobering to think I could make the same mistake(s) by...

1. Moving to a small unit (vast increase in outgoings)
2. Thinking "ok, I've now got the extra space - let's increase the stock & let's go for it'"

....as you've experienced/reported, that can get you in to diffs in short order.

I'm probably at that stage in my business's growth trajectory where I need to move out of the home, but frankly it's a step up in cost, effort, commuting time - and the biggie taking on staff (eeuggh) so I'm now starting to think "Perhaps my business is now as big as I need to be comfortable"

You certainly come across as being a realist with your head screwed on - I wish you well.

 

[Chris Ashdown]

Trouble is life does not stand still, if you are good work may come your way through others talking about you, can you turn them down? or will existing customers continue buying from you?

Sooner or later most will need some sort of help to manage

Pish how did your supermarket attempt work out in the end and any lessons we should learn dealing with multi nationals

 

[Pish_Pash]

Pish how did your supermarket attempt work out in the end and any lessons we should learn dealing with multi nationals

it turned out badly ....I gave them about £12k of stock on sale or return - delivered to their main (single) distribution centre. At the end of the 2 month trial they tried to stiff me for about £7k by saying "given that your stock is spread around the whole of the UK, rather than traipse around collecting it, you may wish to write it off " - nice(!) , fortunately - as is the case with large multi nationals, the left hand didn't know what the right was doing & their accounts dept had sent me a cheque (because I invoiced them on the dot!) & I banked it sharpish - they never pursued & I go away with it. Lessons learnt are...

1. Don't expect any favours or 'slack' if you're small scale - they'll still try to muller you.
2. Don't expect to make much money.
3. Don't expect a quiet time (i.e. send stock & that's the end of it)
4. Don't expect to see your money for ages, so be sure you're well funded (i.e, I purchase the stock from Asia, it arrives by boat....I deliver it to the customer - I receive the money from the customer about 100 days later...therefore about 160 days worth of my money being tied up!)

...I'm sure there's nothing of surprise in amongst that lot for most on here ...but neverthless it wasn't a pleasant experience & I'm happy to set my expectations lower & grow organically rather than trying to supercharge my growth by going for the big retailers.

 

[Legacy]

So i spoke to one of these business revovery blokes today who tried to talk me into closing said business and opening another for a wee fee of £4.8k yeah right.

I need to call a meeting pronto.

 

[Noah]

The other director dropped a bombshell on Friday. He said he felt like hes losing control of the business. I asked why, he replied he doesn't understand the software we use or xero.

Is this not an opportunity to propose bringing in office help (bookkeeping, administration, etc.) and suggest to him he take more of a role doing tools work/managing your team? Seems like he is acknowledging that he needs help.

The company is worth nothing. [...] we have the capacity for more but it requires better management which i cant deliver on my own.

While it may not be making money today, it seems that the business has real potential, as you have said - hope you can take this opportunity to start to realise that potential.

By the way, don't pay anyone to solve your problems for you apart from the role(s) you have already identified! That "business recovery bloke" might just help you dig the hole deeper.

 

[Gordon - Commercial Finance]

There is a lot to be said for sticking it out and not giving up, but it sounds a bit like your heart isn't in it so it could be time to call it a day and do something new. If all the issues described were resolved, would your passion for the business return again? I know if it was me, losing that feeling is often irreversible. Interested to hear the latest.

 

[Legacy]

Is my heart still in it? I don't know.

Last week we had a cock up where the customer was in tears. I looked at them and thought how have i allowed this to happen. It was a aimple job of stripping out a kitchen, replaster, fit new kitchen and paint the walls. It should have taken 4 weeks. We are on the 10th week. Kitchen fitter takes an age to fit the kitchen but his work is perfect. He went on holiday leaving a simple job of finishing off. One of the lads screwed it up. Telling the office that all is well just a day left. I went round and made a list of nearly 30 snags. To put it right i told customer that the decor is on us and now all is done and it looks perfect. These incidences make me want to just shut shop. On the other hand i had praise off another customer for doing a great job. The irony being that the guy messing up is paid the most.

I spoke to the other director and we agreed to pass on any large job leads to other folk and just deal with the smaller work which is a lot more profitable. At the same time i need to move the lads over onto monthly pay pronto. Finally set up factoring so that cashflow is there.

I spoke to my accountant and told him i feel we are trading whilst insolvent. He doesnt believe we are. He is gojmg to speak with a liquidator to see what we can do.

In the meantime im waiting for the VAT field force guy to come and shut us down.

My co director still thinks we can get out of this mess.

 

[Gordon - Commercial Finance]

My co director still thinks we can get out of this mess.

And it sounds like your accountant might agree with him? I think you're doing the right thing by taking some control and trying to force some movement. VAT and tax and things like that can be borrowed so if you're worried about the VAT guy closing you down then get that looked at sharpish.

 

[Legacy]

Today has been interesting.

I had a meeting with a customer. He gives me work puts a margin on and gets the job. We spoke about business and problems and he stated that he would make more money factoring my invoices.

We spoke about this for a while and worked out that he is to factor 95% of the net pre vat value. I'm to pay him 100% of the pre vat value when I get paid. The vat element goes into a separate account ready for vat man.

In short my solution is


Liquidate Oldco, take staff and customers over to newco.

Take all debts over to newco bar PAYE/VAT.
All debts bar hmrc are serviceable.
The monies due to oldco from debtors can be paid into the account and straight to HMRC.

I have been offered factoring personally from one of our clients who puts a margin on every job he sends us. He has figured out that he would make more by factoring the money to us and sending us the work direct.

I'm thinking along the lines of.

Invoice is for £100 plus vat (£120.00).
He deducts 5% of the pre vat price and pays us £95.
When the payment comes in we transfer the £100 to him so he makes £5.
The VAT element is put aside into the reserve account.
This will work out profitable for him moreso than what he makes uplifting invoices, win win in my opinion.

That would give us the cashflow we need in order to carry out works and make payments on time.

On top of this change the lads wages to monthly pay. This would allow for funds to come in before we can pay them out. Again as and when they come in put them into the reserve account. Timesheets still to be submitted weekly including mileage so we can identify any issues and resolve them before month end.

Get rid of the unit! Looking after it is pretty much a part time job and if H&S ever visited, we would be in trouble. It costs a lot of money to upkeep. I know it sounds like a step backwards but at the moment i need to fix this problem.

Get rid of the vans! Or sell them to the workmen. They can deal with all the costs associated with running them. We will happily pay the mileage.

Train and get in a bloke for admin and dealing with w/o's. The training would have to be documented. Ie - how to send a w/o, how things are to be done, list of materials, diaries ready for the morning, etc. This would give me time to actually manage the business rather than having a job here. I want to grow and get into the tendering side of things. A lot to work out and a lot of detail is needed here.

I will source and buy materials myself and a much cheaper than what we currently get them for. However to do this i will need someone to cover admin.

A lot can be done to make sure we are profitable the whole operation could be run from an office which there are plenty to rent.

It would mean setting up a newco but this way newco finances are in control and oldco gets to pay hmrc. If at the end of it there is still a shortfall then I can deal with it then.


Thoughts?

My investor isn't keen on oldco.

 

[Newchodge]

You are making a lot of assumptions about the co-operation of your employees. You need to talk to them and see how they feel.

 

[Legacy]

Of course they aren't going to be filled with joy but it's a case of either lumping it or move on. If it wasn't for the employees I wouldn't have any qualms in shutting the whole thing down and moving on. It is their income I have been protecting the whole time, my own wage is a fraction of theirs. Every time they messed up I've footed the bill knowing full well that if I went down the whole 'take it out the wages route' they would struggle financially.

I suppose I could move the shift by going fortnightly for a few months first or perhaps giving them a couple weeks loan deducted from their wages so that they see to their financial commitments.

 

[Newchodge]

If someone is used to being paid weekly, going monthly in one go will probably cause them immense financial problems.

Also with regard to the vans - if the workmen don't want to be responsible for them, what will you do? Presumably you can't do the work without c=vans?

 

[Legacy]

So to conclude i have got nowehere useful with any of the directors/shareholders.

The VAT man turned up. He told me he finds it strange that i have been requesting his attendance as folk normally don't want to see him. I opened up and told him how things have been and that i'm getting nowhere in between the other shareholder/directors willy waving contest. He worked out a payment plan to which i told him i can't see it being paid but i'll try. He said if you don't we'll shut you down, which is what you want anyway.

I spoke to the workmen, some are going monthly, others can't afford to do so. The vans i'm selling to them at market value minus the cost of repairs to bring them upto scratch.

There isn't a newco. Both directors are starting their own companies but still getting on. I've bit the bullet and decided to set up on my own.

As for the current co with no resolution being reached in relation to liquidation and nobody taking charge i've decided to let customers and suppliers know that the company is in financial difficulty and will most likely be taken over by hmrc. I will then resign. If the other guys don't want to deal with their share of the problems then i have no interest either. Frankly i am so looking forward to walking away. Whatever investigation or issues that come out after that i'll pay for a solicitor to deal with.

 

[pen2670]

Talk to @The Resolver see if he has any ideas about getting the other shareholders to step up or step down. Sounds like without their input you'd be doing just fine now and could most likely trade out of the current situation wit more support or without their input.

The other thing that strikes me is you seem to be a little too hands off re staffing - 3 x unnecessary staff; staff not completing the job, paid well etc. Can you increase efficiency with some targets, checks and accountability.

An admin person sounds needed, BUT before employing someone new, you appear to have 2 spare shareholders not pulling their weight and possibly spare staff capacity...

 

[Root 66 Woodshop]

Sounds like you've been given a bit of a runaround by the other two Directors/partners of the business... what exactly do these two guys do? - sounds like bugger all TBH!

There's a couple of things that strike me that you know what you're doing, but you have little control over how, what and why things are happening, you're given the ability to deal with the crap but no ability to smooth it out... which makes me think that you're better off on your own and ditching the two notrights.

The chap that's being paid the most, is obviously being paid too much if he can't do the simplest of jobs in time... reduce his pay and explain to him why! If he values his salary he'll buck his ideas up... or he'll walk... either way, it would be a win win for you.

With all due respect to the financial commitments for your staff... that's not really your problem, if you're setting up yourself you tell them it's a monthly salary end of... if they don't like it, find someone who is happy for the money coming in.

You need to think about yourself - forget the idiots you've become accustomed to working with... move on and do your job the right way... as soon as anyone leaves you with a job with anything over 10 snags, either deal with it yourself and get rid of them or make sure the lads know what it means to the business and their salaries if they continue working like YTS.

 

[Legacy]

Thanks for the support folks.

The other director is more on the tools and the shareholder does nothing other than send long emails reminding me that my fiduciary duties lie with the company and shareholders.

So as it stands i have already set up my newco. Stopped trading from oldco (third shareholder is a bit peeved however i am not going to trade whilst being insolvent any longer, i have been doing that for over three months and i'm wary the debts are not getting smaller).

Shareholder now wants to buy the other two shares for £1 each and settle the companies £40k debt himself and take on all the customers, staff and assets. I naturally told him to go away. I've already P45'd the staff and now they are self employed working with myco and second directors co. Shareholder who now threatens that if i poach any customers he will sue me personally for current and future losses.

Oh the joy.

 

[Legacy]

To add to the above.

I'm just about to sign a lease to a new smaller office.

As soon as i've got the keys i will be resigning from old co and so will the other director leaving the company with no directors.

Before leaving i will put an auto respond on the email to the tune of.

'Thanks you for your email.

Oldco is currently insolvent and going through a possible takeover.

Whilst negotiations are taking place we will not be trading.

The old directors Mr X and Mr Y will personally honour the garuantee for any works carried out within the last twelve months.

Their numbers are

Mr X - 12345
Mr Y - 67890

We would like to thank you for your support over the last few years.'

With this in mind after we do resign me and the other director have agreed to honour any garuantee claims (it is the right thing to do and good karma) AND also personally settle all the sub contractor and supplier bills. It is the right thing to do, you never know where paths might cross in the future.

I have spoken to our landlord of the current unit/warehouse (massive national landlord) and put him in the picture. I told him i will be resigning shortly. The company might get sold or it might fold. I don't want to leave the landlord a load of rubbish to deal with. The landlord appreciated me letting them know and ask that even after i resign if i could hand the building back in a good state.

Now i'm fully expecting to be sued by the third shareholder. He is just like that. What i do want to do is limit my exposure of sueability to him. Does anyone think any of the actions above could turn around and bite me?

 

[Chris Ashdown]

Disaster you are admitting you have worked against the interests of the original company whilst a director allowing the other man to take lagel action against you with all the proof he needs

Resign and give him the shares and hope he goes away and think yourself lucky if he does

It's irrelevant about paying of the old bills it's the charge of competing against the old company and making it unable to continue business

 

[Spongebob]

You should resign as a director of OldCo immediately. It is a pity you didn't do so before setting up NewCo.

From what you say it doesn't sound as though your customers are on contracts with OldCo - but simply contact you when they need work doing. This is good - such customers are not "assets" of OldCo.

I would contact the 20% of OldCo's customers who were actually profitable and explain that you have set up on your own and would value their custom. If you have a good relationship with them they will go with you. The other 80% will have been loss-making so forget them. If you are not aware of the 80/20 rule of business Google it!

You will make far more money by concentrating on a smaller number of good customers and cutting your costs down to as near zero as possible.

If you are doing well after a couple of years you can think once again about empire building.

Personally, I would't bother!

 

[Legacy]

I understand your comment however said shareholder already took a very valuable client with him when he resigned as a director. Then he slandered us to another potential large client ensuring that door is closed for us forever. Fortunately I have proof of both of these actions.

I've been consulting a solicitor (expensive so far) about all the actions of both the other shareholders.

As it stands I cannot poach any customer however if customers decide to use me once they hear of myco there is nothing he can do.

Furthermore on top of that I've always had a bunch of customers that did not use oldco for various reasons however they are keen to work with myco.

So as it stands said shareholder will most likely go legal and I'll just have to fight it.

Thanks for the tip Spongebob

 

[Chris Ashdown]

He will have a straight forward claim that you damaged the old company by acting in your own interests and not your duty to the old company
He will I imagine be able to claim for all losses caused by your actions and the poaching of the old company staff and customers

I must admit I think your actions leave you very exposed to a hefty bill and his fee's if he takes legal action and so it should be as you appear to have a total disrespect for the company laws

 

[Legacy]

I don't see how you can make such a statement. So his actions that actually DID damage the company and our turnover means nothing but me ensuring the employees still have an income and settling all creditors personally means i am the one that should be sued? Really? I am the one that has no regards for the law? Every step i have taken has been off the back of advice given by folk with a lot more experience than me. Granted some of the advice has not been the best. Looks like we all have claims against each other. Seem's as if nobody has a clean sheet after all.

If both other shareholders/directors have companies in the same industry at the same time as running oldco and both have actively took away customers in the past, used customers jobs as their own, is this not 'damaging the company'?

 

[Chris Ashdown]

If you can prove the actions of the other two Directors then they would i assume be in the same boat, the same if they started their companys after the start of your old company

 

[Legacy]

Okay I understand.

The key point here is 'after'.

This is the bit I'm not sure of.

The really sad thing is before oldco we were all good friends, fishing, BBQ's, family outings together. I don't think I'd ever enter another partnership again. I suppose this is what a divorce feels like.