Is it worth trying to sell or should i just close?

[Forest Magic]

Hi everybody
i have a retail unit selling Pet Supplies.
The lease runs out (with an option to extent) in September 2024.
Turnover is £3800 per week with a 45% GP
I don't have a set of accounts for this business as it was part of a 2 shop set up where the lease for the other shop ended last June and not renewed.
is it worth trying to sell (and what costs are involved) or should i just have a big sale and shut up shop

What would you do?

 

[HFE Signs]

This really comes down to time, selling the business will be the best option financially, however the process takes several months once you find a buyer. Ideally, you'd grow the business over 3yrs with some good solid accounts and then sell. Is this a Ltd company?

 

[Forest Magic]

This really comes down to time, selling the business will be the best option financially, however the process takes several months once you find a buyer. Ideally, you'd grow the business over 3yrs with some good solid accounts and then sell. Is this a Ltd company?

Yes it is a Ltd Company, but i want to retire when the lease is up

 

[HFE Signs]

Yes it is a Ltd Company, but i want to retire when the lease is up

You have time to sell if you can find a buyer, I'd certainly give that a try first

 

[Mark James]

What’s your nett profit per week ?

 

[WaveJumper]

i would have thought it’s going to be a pretty difficult sale with no accounting and the current time scale your looking at. As above what’s the net profit, what do you think makes this business attractive to someone else.

 

[Forest Magic]

Net profit is roughly about £750 a week

 

[Mark James]

What do you do for this £750? ie work yourself 50 hours a week or have a employee whose wage you’ve already accounted for etc.

 

[Forest Magic]

i work myself with a part time member of staff who works 12 hours - his wages accounted for - the rest is my drawings

 

[Mark James]

And how many hours do you work ?

 

[Forest Magic]

about 50

 

[Mark James]

And if you did a fire sale and walked away are you liable for the rest of the rent until Sept 24, if so how much?

 

[pentel]

£750 a week for 50 hours is a £15 an hour job.

There will be some people who would be interested in buying this, unfortunately they quite often have no money to buy it.

Running the business down with the intention of closing when the lease expires may result in ever decreasing returns, you need to have stock to sell and if you don't replenish then sales and profit will reduce.

Be very wary of sales agent contracts. You can become liable for high fees if they don' sell and you close the business.

 

[Forest Magic]

And if you did a fire sale and walked away are you liable for the rest of the rent until Sept 24, if so how much?

I would continue to stay open until lease is finished

 

[Mark James]

Thanks Magic, ok if you sold all your current stock would it cover the rent until September?

 

[Forest Magic]

£750 a week for 50 hours is a £15 an hour job.

There will be some people who would be interested in buying this, unfortunately they quite often have no money to buy it.

Running the business down with the intention of closing when the lease expires may result in ever decreasing returns, you need to have stock to sell and if you don't replenish then sales and profit will reduce.

Be very wary of sales agent contracts. You can become liable for high fees if they don' sell and you close the business.

Not really looking for much investment - just fixtures and fittings, cost value of stock etc.and maybe a little of goodwill - i wouldn't run it down in stock until final 3-4weeks - then have a huge sale at the end

 

[WaveJumper]

Will there be a rent increase if and when a new lease is agreed, if so does this still make it viable for a new owner if found.

 

[Forest Magic]

Thanks Magic, ok if you sold all your current stock would it cover the rent until September?

yes, comfortably

 

[Mark James]

I would do just that then, sell your stock clear your lease shut down and do something more lucrative and exciting. Good luck whatever you do Magic and have a happy new year.

 

[Forest Magic]

Will there be a rent increase if and when a new lease is agreed, if so does this still make it viable for a new owner if found.

as far as i believe there won't be a rent increase

 

[Forest Magic]

I would do just that then, sell your stock clear your lease shut down and do something more lucrative and exciting. Good luck whatever you do Magic and have a happy new year.

Thanks Mark for your input, i too wish you a Happy New Year

 

[IanSuth]

I'd tell the pt worker your plan and give them 8
9 months to see if they can/want to take it over - give them visibility of the weekly £ from now telling them you want an idea of if they will take over by end of March.

If not you can sell up stock then covering the remaining lease, if so you have 6 months to do the full handover and sort out your payout based upon the value of the stock which you will both be aware of

 

[Jass T]

Hi Forest
Your pretty vague about the landlords plan for the new lease. Unless you know about his intentions to grant a new to lease and at what terms. A buyer is unlikely to pay goodwill. The potential buyer could obviously wait for you to leave and just agree a new lease to take over without paying goodwill. He would obviously have to pay for new fixtures and fittings. So its going be about whats going to be cheaper for him.

You need to be able to present something in writing from the landlord to the buyer.
Is it a protected lease..? Is there any clauses in current lease about the current tenant having first option option on a new lease.

You could get a new longer lease in your own name. The advantage being you could ask for more goodwill. The disadvantage being you can't walk away until you find a buyer and if you don't the added liability.

 

[Forest Magic]

Hi Forest
Your pretty vague about the landlords plan for the new lease. Unless you know about his intentions to grant a new to lease and at what terms. A buyer is unlikely to pay goodwill. The potential buyer could obviously wait for you to leave and just agree a new lease to take over without paying goodwill. He would obviously have to pay for new fixtures and fittings. So its going be about whats going to be cheaper for him.

You need to be able to present something in writing from the landlord to the buyer.
Is it a protected lease..? Is there any clauses in current lease about the current tenant having first option option on a new lease.

You could get a new longer lease in your own name. The advantage being you could ask for more goodwill. The disadvantage being you can't walk away until you find a buyer and if you don't the added liability.

Hi and thanks for your response

I have an under lease with my landlord who has the lease with his landlord on a peppercorn rent. I have just heard this afternoon that my landlord is handing his lease back in the next few weeks so i will then be having a new arrangement (although the same terms, rent etc,) with the overall property owner - just got a lot messier now.

 

[Jeff FV]

I am no expert, but perhaps something to consider:

If you do close down, will you have to pay your part time worker redundancy?

 

[Forest Magic]

I am no expert, but perhaps something to consider:

If you do close down, will you have to pay your part time worker redundancy?

there is no redundancy due to the part timer as he will not have worked long enough to qualify

 

[Jass T]

Hi and thanks for your response

I have an under lease with my landlord who has the lease with his landlord on a peppercorn rent. I have just heard this afternoon that my landlord is handing his lease back in the next few weeks so i will then be having a new arrangement (although the same terms, rent etc,) with the overall property owner - just got a lot messier now.

Leasehold and Freehold are not common in Scotland where I live. So can't really advise. I think you should speak to lawyer.

 

[fisicx]

@Forest Magic - does this 50 hours include all the time outside the shop spent doing the books, sorting out orders, chasing up and all the other admin tasks?

Either way, just run the stock down, have a sale, flog off all the fittings and walk away. Trying to sell the business could take a couple of years and could cost you more than you will ever make on the sale. Far easier to just walk away.