My Ltd Company run out of money because ebay close me down - Help Please

[BarryW]

Hello All!

I have read some of your comments with great interest and wondered if anyone could please advice me with my position.

I have a limited company that sold DVDs/CD/books on ebay. We were doing ok, and had a back log of around 600 orders due to some problems in the past. This represented about a weeks orders. Because of some issues of slow shipping that happened over xmas, we started getting alot of bad feedback and to cut along story shut ebay suspended all our 5 accounts with them. This meant that all revenues streams were immediately stopped.

We do not hold any more stock as we mainly dropship orders - so we have no money left to satisfy these remaining orders.

We immediately stopped trading.

Our Debts are :

£500 overdraft.
£6000 ebay Fees
£4800 paypal negative balance
£1400 Royal Mail
£170 Employess

I owe HMRC and VAT nothing - in fact I believe the VAT will be a small credit of a £100

We dont really have any assets - I use me garage to operate from and have 2 printers 2 computers and a bit of office furniture and thats it.

I have had a letter of intent from royal mail stating pay within 7 days or it will go to court.

I had one letter from iQor (I beleive ebay use for debt collecting) stating to pay debt with 3 days of collection procedures will be enforced. They addressed this in my wifes name, so I wrote back and told them to address it to the company.

I have numerous emails of customers accusing me of fraud and the odd one saying they have reported me to the fraud squad.

I know the customers can get there money back via paypal/ebay protection policy. Then paypal just try to claim back of me hence the negative balance above.

The company has just ran out of money and no way to fund anything.

Can anyone please advise as i am really worried and stressed, that aside I have a family of 4 with no income coming in and we are already 3 1/2 years into a personal IVA.

 

[appyammer]

As long as you have not committed a crime and stopped trading once you realised you were insolvent (although i understand its quite hard for anyone to prove/prosecute you for tarading insolvently, then the umbrella of the limited company should protect you financially.

 

[Scalloway]

If you were trading through a limited company the debts are the company's, not yours.

 

[fisicx]

Sorry to here about your problems but that's how eBay operate. It's all in the T&C. If you were trading through the ltd company then as suggested then the debts belong to the company not you.

I'm surprised that your only source of income was eBay, that's a very precarious situation to be in. You are going to have to find a job now because eBay aren't going to let you trade again for a long time.

 

[BarryW]

Thank you for your intial comments.

I am not sure what to do now - should I send out a letter to my creditors, ie ebay, paypal and royal mail or just wait until they send heavy letters.

I cannot afford a liquidation - should I hang out for a strike off ?

As previously said the assets of the company are worth about £500.

 

[fisicx]

What business insurance do you have?

What has your solicitor suggested?

Are all the bills in the company name or do you have any personal guarantees?

 

[bizloanservices]

To be honest I fail to see how ebay can be blamed. You have taken customer's money, failed to honour orders and despite this you still have debts outstanding ... so what happened to the money?

Either your expenses or the money you were drawing out of the business were too high or your costings were totally wrong. It's clear you were not trading profitably from day one.

I do sympathise and wonder what advice, if any, you had when starting out.

Based on what you say, and given that personally you are already in an IVA, there is no hope of you getting re-finance or sufficient working capital to start again. Even if you could I wouldn't advocate it as there was clear a flaw in your business model.

Luckily you were trading through a Ltd company so you have no personal liability (unless a creditor decides to pursue you for wrongful trading/fraud - specialist advice needed here).

I see little option other than shutting up shop completely, let events take their course, reflect on what went wrong and learn from it.

 

[Scalloway]

You should write to all creditors saying you have ceased trading. If you look through this forum for posts by a user called spongebob who has losts of useful advice from someone who has been there.

 

[BarryW]

Thank you for the advice.

The busniness model was working fine, I had been trading for over 4 years no problem - it all went to pot from October, when costing all went wrong.

I have no business insurances or solictor. To be honest I am just a 1 man band - that cocked up!

I know I need to find a job now, but not sure which way to wind the company up. Things are a little desperate at the minute.

I have conflicted advices though. One person had said do not write to the creditors until they write to me, and then the some advice above said write to the creditors.

I have already stopped trading as soon as ebay closed all my shops some 3 weeks ago.

 

[10032012]

Hello All!

I have read some of your comments with great interest and wondered if anyone could please advice me with my position.

I have a limited company that sold DVDs/CD/books on ebay. We were doing ok, and had a back log of around 600 orders due to some problems in the past. This represented about a weeks orders. Because of some issues of slow shipping that happened over xmas, we started getting alot of bad feedback and to cut along story shut ebay suspended all our 5 accounts with them. This meant that all revenues streams were immediately stopped.

We do not hold any more stock as we mainly dropship orders - so we have no money left to satisfy these remaining orders.

We immediately stopped trading.

Our Debts are :

£500 overdraft.
£6000 ebay Fees
£4800 paypal negative balance
£1400 Royal Mail
£170 Employess

I owe HMRC and VAT nothing - in fact I believe the VAT will be a small credit of a £100

We dont really have any assets - I use me garage to operate from and have 2 printers 2 computers and a bit of office furniture and thats it.

I have had a letter of intent from royal mail stating pay within 7 days or it will go to court.

I had one letter from iQor (I beleive ebay use for debt collecting) stating to pay debt with 3 days of collection procedures will be enforced. They addressed this in my wifes name, so I wrote back and told them to address it to the company.

I have numerous emails of customers accusing me of fraud and the odd one saying they have reported me to the fraud squad.

I know the customers can get there money back via paypal/ebay protection policy. Then paypal just try to claim back of me hence the negative balance above.

The company has just ran out of money and no way to fund anything.

Can anyone please advise as i am really worried and stressed, that aside I have a family of 4 with no income coming in and we are already 3 1/2 years into a personal IVA.

5 ebay accounts?!

 

[BarryW]

Yes 5 accounts, one was for the australian market - 2 were book related and 2 were DVD media related.

 

[10032012]

I understand the Australian account - but surely the rest should be under one account?

I didn't think it was permitted to have more than one account. I think its bordering rogue trading... were the accounts made to give the impression that there were 4 sellers competing against each other?

Or were they 4 different brands of your business with it clearly being stated this was the case?

 

[BarryW]

4 Different divisions within the same company.

 

[TCCuk]

Can your business not file for bankruptcy and wipe out all of the debts, this is why I hate using eBay, they have complete control over your business, they can just shut down the biggest sellers within minutes.

 

[smo]

How do you fall behind with 600 orders from christmas when you dont hold stock and simply operate as a point of order passing this onto a dropshipper?

 

[Homshaw]

How can you lose any significant amounts of money selling DVDs on ebay out of a garage?

 

[BarryW]

We have always has a small backlog of orders, but at xmas we got a block on border trading because some of the packages took loonger to get to our interntational customers. This is turn meant our automatic pricing system (this runs 24-7 making sure the price is always up-to-date based on the dropshipers price changes) was failing to update - and we ended up selling over a 1,000 orders at a lost.

We took nearly 11,000 orders in December and could not fulfil them quick enough. This eventually meant customers were not get there orders as quick as they wanted them, and this meant our DSR Rating started to deteriate.

January saw massive ebay invoices - which I must admit were bigger than I expected. By February I was starting to catch up and improve the ratings when into the start of March eBay then started to close my shops down 1 by 1 over a period of 3 days- and all source of income was stopped.

From Peak to bottom in just over 2 months.

 

[elaine@cheapaccounting]

Sorry to hear about this ....

Maybe to help others you could do say five bullet points of what you thought went wrong and what you would have done differently if you had your time again.

 

[10032012]

We have always has a small backlog of orders, but at xmas we got a block on border trading because some of the packages took loonger to get to our interntational customers. This is turn meant our automatic pricing system (this runs 24-7 making sure the price is always up-to-date based on the dropshipers price changes) was failing to update - and we ended up selling over a 1,000 orders at a lost.

We took nearly 11,000 orders in December and could not fulfil them quick enough. This eventually meant customers were not get there orders as quick as they wanted them, and this meant our DSR Rating started to deteriate.

January saw massive ebay invoices - which I must admit were bigger than I expected. By February I was starting to catch up and improve the ratings when into the start of March eBay then started to close my shops down 1 by 1 over a period of 3 days- and all source of income was stopped.

From Peak to bottom in just over 2 months.

I think you should have invested in obtaining wholesale and liquidation stock... store them in your garage!

It appears through the 5 accounts that you were able to obtain orders, and assuming you had a business (i.e. one making profit), although the initial capital outlay, it would mean cheaper items and full control on dispatch not relying on a dropship company.

The problem with dropship companies is everyone are using them these days, and many of them are over capacity: no longer able to dispatch as quickly as they claim (i.e. typically the same day can be a few days later) Especially at peak periods in the year. They also prioritise traffic (well, orders) on the client and location - choosing to dispatch items locally first rather than on a first-come-first-served basis.

Selling internationally always opens up more problems. Less superior mail services than Royal Mail more likely to lose or damage products. Buyers receiving items without tracking feeling that because they didn't get it in the timescales suggested that although they have received the item, they didn't get it. There is also a law issue selling outside the UK.

eBay is a problem in itself... enough about the site and the high listing prices.... many sellers wait a week or so for paypal payments to clear as if it was a cheque! This knock back delivery times as buyers they think its either x days after the day of purchase, or x days, 2 days after purchase. There is no reason why anyone selling by e-commerce on ebay, shouldn't have their own website selling some of their items.

 

[QuickHomeBuyers]

I wouldn't worry, reg up a new domain, new company and bingo. Back to eBay.

 

[Spongebob]

I have conflicted advices though. One person had said do not write to the creditors until they write to me, and then the some advice above said write to the creditors.

I have already stopped trading as soon as ebay closed all my shops some 3 weeks ago.

I am very much a believer in taking the initiative and writing to creditors before they take any action. Use the following template;

I am assuming that all your Ebay and Paypal accounts are in the company's name and not in yours or your wife's. If so then you will be completed protected against any personal liability.

In three months time apply to Companies House to have the company struck off. It will be interesting to see if either Ebay or Paypal object. Keep us posted.



I can't see any reason why you can't set up a new company and open a new Ebay account.

 

[SamStones]

I believe you may still have problems getting back on eBay as its likely your name on the account that is banned rather than the company? Let us know how you get on though.

As has been said here: I would like to hear your opinion on where it went wrong and why so others can learn.

 

[Blood Lust]

Hello All!

I have read some of your comments with great interest and wondered if anyone could please advice me with my position.

I have a limited company that sold DVDs/CD/books on ebay. We were doing ok, and had a back log of around 600 orders due to some problems in the past. This represented about a weeks orders. Because of some issues of slow shipping that happened over xmas, we started getting alot of bad feedback and to cut along story shut ebay suspended all our 5 accounts with them. This meant that all revenues streams were immediately stopped.

We do not hold any more stock as we mainly dropship orders - so we have no money left to satisfy these remaining orders.

We immediately stopped trading.

Our Debts are :

£500 overdraft.
£6000 ebay Fees
£4800 paypal negative balance
£1400 Royal Mail
£170 Employess

I owe HMRC and VAT nothing - in fact I believe the VAT will be a small credit of a £100

We dont really have any assets - I use me garage to operate from and have 2 printers 2 computers and a bit of office furniture and thats it.

I have had a letter of intent from royal mail stating pay within 7 days or it will go to court.

I had one letter from iQor (I beleive ebay use for debt collecting) stating to pay debt with 3 days of collection procedures will be enforced. They addressed this in my wifes name, so I wrote back and told them to address it to the company.

I have numerous emails of customers accusing me of fraud and the odd one saying they have reported me to the fraud squad.

I know the customers can get there money back via paypal/ebay protection policy. Then paypal just try to claim back of me hence the negative balance above.

The company has just ran out of money and no way to fund anything.

Can anyone please advise as i am really worried and stressed, that aside I have a family of 4 with no income coming in and we are already 3 1/2 years into a personal IVA.

Going bust isnt a crime so dont worry about the police.

If you trade as a sole trader then cant you start a new ebay business up selling the same products?

As for finance I'm sure if business was good the bank will give you a loan. Make sure you have a plan to avoid the same problems in the future for them.

 

[MikeJ]

Given he's managed to run up a £20k debt as a limited company, I wouldn't advise he has another go as a sole trader.

 

[Scalloway]

Hopefully he has learned form his mistakes.

 

[BarryW]

The Debts were more in the region of just under £12000

The paypal one has reduced due to them taking a reserve of over a £1000 in case of this type of situation happening.

We had been trading fine for the last 5 years. Just became too much from November onwards - In fact orders increased by 200% and I couldnt cope, even though I had a couple of helpers.

I misjudged the huge ebay invoices that came in at the start of the year - Nearly 8ks worth from ebay and 3ks worth from royal mail. The failure of our automatic pricing routine (happyly working for 2 years) meant we had sold alot at a loss.

If I was to do it again I would not get as big and definetely not rely purely on ebay as I have read so many horror stories.

I do appreciate all your advice and comments though.

 

[elaine@cheapaccounting]

Thank you for the feedback - it may help others.

The very best of luck for the future.

 

[BarryW]

Going bust isnt a crime so dont worry about the police.

If you trade as a sole trader then cant you start a new ebay business up selling the same products?

As for finance I'm sure if business was good the bank will give you a loan. Make sure you have a plan to avoid the same problems in the future for them.

Starting a new ebay business would mean having a complete new identity - ie name, address, bank details, email, domain - in fact everything that will not link you to the previous account.

I will not be able to get finance as I am personally in an IVA, but I did not have a bank loan before only a £500 overdraft.

Plus no HMRC debts.

I have learnt alot over the years. One of my biggest problems was I always had a back log of orders. I would never allow this to happen if I was to start again, and would not get as big as we were (for a 1 man band)

 

[UrbanRetail]

If I was to do it again I would not get as big and definetely not rely purely on ebay as I have read so many horror stories.

I for one hope you do start again, Barry. Business is a constant learning process and unfortunately, not always a positive one. But now you have learnt what to avoid and how to spot a problem if it occurs.

I wish you the best in your future endeavours.

 

[Blood Lust]

The Debts were more in the region of just under £12000

The paypal one has reduced due to them taking a reserve of over a £1000 in case of this type of situation happening.

We had been trading fine for the last 5 years. Just became too much from November onwards - In fact orders increased by 200% and I couldnt cope, even though I had a couple of helpers.

I misjudged the huge ebay invoices that came in at the start of the year - Nearly 8ks worth from ebay and 3ks worth from royal mail. The failure of our automatic pricing routine (happyly working for 2 years) meant we had sold alot at a loss.

If I was to do it again I would not get as big and definetely not rely purely on ebay as I have read so many horror stories.

I do appreciate all your advice and comments though.

I would go have a chat with your bank, explain the business generates business but that supplier problems led to Ebay closing you down.

You will need to present a plan the bank are happy with for them to loan you money. You'd be looking at building up a buffer stock for Christmas each year to prevent this happening again or finding more reliable suppliers.

You might need a new account with a differant name on it.

 

[Spongebob]

Starting a new ebay business would mean having a complete new identity - ie name, address, bank details, email, domain - in fact everything that will not link you to the previous account.

So?...

You could set up a new company, get a bank account, and have a new website up and running within a week.

Your hard won experience will make it far more likely that you will succeed next time. What are you waiting for?

 

[lesliedocherty]

I would go have a chat with your bank, explain the business generates business but that supplier problems led to Ebay closing you down.

You will need to present a plan the bank are happy with for them to loan you money. You'd be looking at building up a buffer stock for Christmas each year to prevent this happening again or finding more reliable suppliers.

You might need a new account with a differant name on it.

Like thats going to happen, in dreamland maybe

 

[MH1]

Best of luck if you manage to start again, but this story shows your previous busnisses major flaw, being totally reliant on ebay for income, anyone who trades on ebay knows within a few months how fickle they can be.

Never put all your eggs in one basket.

 

[bizloanservices]

Like thats going to happen, in dreamland maybe

Absolutely - it's just not going to happen so put it out of your mind about approaching a bank. Instead focus your attention on the future and move on. So good to see such a positive response from you .. seen threads in the past which by now would have plunged new depths.

Follow the great advice and above all else learn from everything that has happened both personally (your IVA) and now this ... don't let it happen a third time. Life is not going to be easy but stick at it.

Good luck.

 

[seobarbershop]

This is exactly why I will not commit my self to ebay...No matter what

 

[UrbanRetail]

This is exactly why I will not commit my self to ebay.

I tend to use several platforms, such as Amazon and Play, along side eBay. So in such a scenario, you still have revenue coming in, whilst rectifying the problem.

Although it only seems to be the minority of online retailers that actually put this into practice.

 

[Blood Lust]

Like thats going to happen, in dreamland maybe

Of course it can happen.

It sounds like he operated a just in time system so when supplier problems arose he went under.

He needs to keep safety stock as the suppliers are unreliable. He should look at how much he needs to have at different points in the year. He might only need safety stock during the Christmas period.

Its all part of the learning curve but sadly this one may have claimed his first attempt at business.

If the business works, if it sells, if it generates healthy profit but its gone belly up because of supplier problems there is every chance a bank will give him a loan if he has a plan that would realistically stop the problem arising again in the future.

 

[Homshaw]

Of course it can happen.

It sounds like he operated a just in time system so when supplier problems arose he went under.

He needs to keep safety stock as the suppliers are unreliable. He should look at how much he needs to have at different points in the year. He might only need safety stock during the Christmas period./quote]


Bit risky with DVD's and quick changing consumer tastes. He might be left with them

 

[glimpsemedia]

Definitely do not wait until last minute to speak with the creditors, that won't give the correct image of you at all. You have really got to co-operate with all of the creditors. Either ring someone or write them all a letter explaining what has happened and what position you are in. You need to write to all of your customers and explain to them what has happened and how they can get their money back.

You're lucky you were trading with a Limited Company so it is the company who has the debt, not you.

Go and speak to your Business Bank Manager to get their advice on what to do.

Look for another job in the meantime to support your family. Maybe even speak to your current account bank manager to explain that your business is not making any money so will struggle to pay bills etc, to get their advice also.

The only main thing you can do is to not worry about anything - it's just wasting energy.

Speak with HMRC as well to get their advice. Get as much advice as you can (but not from friends, I don't know who said not to contact the creditors until last minute!!!)

 

[Homshaw]

Go and speak to your Business Bank Manager to get their advice on what to do.

quote]


Speak to him by all means but don't take what he says as gospel.

His first priority is to protect the bank's position