Pub Accounts

[Russell2010]

I hope someone can help
I am putting together a business plan for a family member who is planning to purchase and run a freehold pub.
Turnover likely to be £170K-£200K
Gross margin is known historically
I would just like to have some idea of the likely level of non property overheads ie how much would glassware / cutlery+crockery cost etc etc

If anyone has some anonymised accounts so much the better

 

[David Griffiths]

There are no set figures for these things, and they will vary from year to year. The set that I completed yesterday spent £3k last year and £7k the year before.

One thing that I can tell you is that I don't have any clients who come anywhere near making a profit (allowing for a modest wages for themselves) with turnover of £200,000 or less.

 

[Russell2010]

Thanks David for your comments
This is a pub that historically has achieved 60% GP so I am potentially looking at £100K+ GP
Property costs such as heat, light ,power, rates and water are known and finance costs can be calculated.
I am also getting an insurance quote
What I am trying to do is make sure the potential owners can make a living out of it!!!

 

[elaine@cheapaccounting]

What I am trying to do is make sure the potential owners can make a living out of it!!!

They will be bucking a trend if they can at the moment! Good luck with it.

 

[Russell2010]

PS
I should perhaps add that this is planned to be a 2 person operation with little or no use of casual staff
Also external finance will be limited to around 25% to 30% LTV, so I am allowing £7K max for finance costs (at present rates)

 

[elaine@cheapaccounting]

two staff managing a pub open all hours, plus ordering, cleaning, stock control etc and t/o £200k - are you sure?

Wow they are going to be very busy.

Have they done this before?

 

[accountancyextra]

PS
I should perhaps add that this is planned to be a 2 person operation with little or no use of casual staff
Also external finance will be limited to around 25% to 30% LTV, so I am allowing £7K max for finance costs (at present rates)

Really?? The owners will have to work 7 days a week with no breaks/ holidays etc....sounds more like a prison sentence (but then at the moment that's what running a pub seems to be!)

 

[accountancyextra]

two staff managing a pub open all hours, plus ordering, cleaning, stock control etc and t/o £200k - are you sure?

Wow they are going to be very busy.

Have they done this before?

Great minds........you beat me to it

 

[elaine@cheapaccounting]

Great minds........you beat me to it

I can't imagine having to work that hard - there must be a better return to be achieved on that level of investment in time / money.

 

[KidsBeeHappy]

Working hours for a pub start around 8am and finish around 1am. That's 17 working hours a day, 7 days a week. Which even if 1 of them works on their own all the time, is still a 60 hours working week each.

Need to put in for some wages!!

 

[sysops]

Have to echo the above concerns - pubs turning over 200k don't make a profit, they make a loss. You may be thinking this will be different for this pub, but it won't - it will struggle to pay the owners minimum wage.

 

[KidsBeeHappy]

FOOD, FOOD, FOOD, FOOD.

This is where the profit is in a pub. (and also what brings the punters in and keeps them drinking).

 

[helpful accountant]

Hi Russell

I worked for a large pub chain so if you want a proforma P&L to ensure you have covered all costs types please let me know.

Tony

 

[KidsBeeHappy]

Also, don't forget to allow a good contingency for licensing fees, renewals and all the other crap that is now attached to running a pub. eg, you need to submit architects drawings now on a license renewal. And I think that you have to renew every 2 years now (well, in Scotland at least).

 

[Zeno]

"It's always been our dream to own our own pub. We know it will be a lot of hard work but it will be a lot of fun too. We will have a better quality of life and have more time with the brats".

The poor, deluded eejits.

 

[Jenni384]

I have to echo the comments above. Running a pub is so rarely profitable and, if it is, it's such hard work.

It definitely needs thinking about very, very carefully and the figures going over with a fine tooth comb.

 

[Russell2010]

By way of background
1 the prospective buyers are very young for landlords... under 30

2 they are likely to get lots of free family help in getting it onto a good footing before having to employee outside staff, including providing cover for hols etc

Historically before downturn caused by smoking ban, supermarkets etc the pub has hit £250K+ turnover.
It is currently turning over £170K run by a manager (and from personal experience very lack lustre)

They have lots of ideas for building up the business which the family will support.

Failing all else the value of the building as a private residence rather than a pub is probably 40-50% higher than the asking price!!!

 

[sysops]

By way of background
1 the prospective buyers are very young for landlords... under 30

2 they are likely to get lots of free family help in getting it onto a good footing before having to employee outside staff, including providing cover for hols etc

Historically before downturn caused by smoking ban, supermarkets etc the pub has hit £250K+ turnover.
It is currently turning over £170K run by a manager (and from personal experience very lack lustre)

They have lots of ideas for building up the business which the family will support.

Failing all else the value of the building as a private residence rather than a pub is probably 40-50% higher than the asking price!!!

You're not by any chance selling them this pub, are you? You seem awfully determined to ignore the (very real) negatives and focus on the (possible) upside.

 

[KidsBeeHappy]

But virtually impossible to get change of use!! Bear in mind that now the owner has to prove that there is no possible commerical purpose for the building in any other commerical format - not simply that it's not a going concern as a pub.

 

[Zeno]

I would not class two wet behind the ears kids running the business as a positive. I shudder to think what their "good ideas" are - they run the very serious risk of alienating the regulars.

You cannot rely on anyone but yourself, families included. I bet after 6 months they won't even be speaking to each other, never mind the outlaws.

 

[helpful accountant]

Although it is tough out there at the moment there are always opportunities. If the licensee is a good character who can energise the pub then trade can be built. It needs somebody who has perseverance and one who genuinely wants to create a good atmosphere in a pub. I've seen it many times. We had 700 managed houses and 1200 tenancies. The following are / can be important depending on the character the pub wants to create.
· Good standards of cellarmanship
· Food Food Food - maybe local / good value / quality
· Entertainment tailored to what the clientele want. Do not alienate your existing ones to get transient new ones.
· Selection of real ale, with one regular well kept beer.
· Garden that has smokers section and family friendly section
· Try to nurture local groups / community - Rotary meetings, football teams, classic car meets
· Appreciate the locals and look after them, complimentary sandwiches etc
· Hard Work - Hard work - Hard work
· Ask for another £30K off the freehold cost, it's a buyer's market
All just an opinion. I've missed out loads

 

[KidsBeeHappy]

Don't change the barrels at midnight, it really annoys your neighbours, and you have to remember that they're your customers.

Also, sounds simply but a landlord I know never really got this one - don't swear at your customers

 

[elaine@cheapaccounting]

Food is great - but that means staff.

I stand my original comments - running this with 2 people is totally unrealistic.

Even more preparing a business plan based upon free help with no wages is suicide!

Yes I am being harsh - but this is a lot of money to invest / lose here.

My advice - get someone to prepare a solid business plan with a number of what if scenarios built in.

Age can be an advantage - lots of energy but a disadvantage - lack of experience / wanting a social life

 

[Zeno]

wanting a social life

A what...?

 

[elaine@cheapaccounting]

A what...?

Well it's not something you would be familiar with - like the term friends. Bet you have never come across that either

 

[devilmaycry]

Zeno, stating that people that are under 30 are 'wet behind the ears', along with some of your other comments are just ignorant!

I'm 23 and have 3 companies all doing exceedingly well. If I am 'wet behind the ears', I can't wait to hit 30 and reach my potential...

 

[sysops]

I'm 23 and have 3 companies all doing exceedingly well. If I am 'wet behind the ears', I can't wait to hit 30 and reach my potential...

That's exactly the kind of comment I've come to expect from you young whipper-snappers. And for some reason it's always "I've got 3 companies". Always 3. Why 3? I don't know. Just is.

 

[Zeno]

Zeno, stating that people that are under 30 are 'wet behind the ears', along with some of your other comments are just ignorant!

I'm 23 and have 3 companies all doing exceedingly well. If I am 'wet behind the ears', I can't wait to hit 30 and reach my potential...

Fair enough, I was generalising which will be unfair to some but I am afraid it is borne out of experience.

 

[devilmaycry]

That's exactly the kind of comment I've come to expect from you young whipper-snappers. And for some reason it's always "I've got 3 companies". Always 3. Why 3? I don't know. Just is.

I can't possibly comment for other young whipper-snappers, as I'm smarter enough not to generalise...

Oh, and it's soon to be 4 companies. But let me guess, that's what everybody in the age bracket of 25-30 comes on here and says? I must be ahead of schedule? sysops, you can go ahead and answer that, as you instantly know more about me than my mum...

 

[elaine@cheapaccounting]

You might want to get some tax planning to see if having 4 companies is the best way to structure because of the impact on the CT for each company - have a word with your accountant who should be able to take you through all of this.

Some times it doesn't work out best to have multiple companies.

 

Just to offset the negatives, I have personal experience of friends who bought a failing pub just before the recession and have turned it around without by dint of hard work, imagination and personality.

However, to reinforce a few of the nagatives:

- The hours & workload are hideous (and certainly not manageable by 2 people)- standing serving beer & chatting is the easy bit..

- Your people skills will be tested to the full, including the need to bar people and handle drunks.

- A pub can stand or fall by the quality of its food, but good & reliable chefs are extremely hard to find.

- Eveyone will think you are interested in their ideas on how to run a pub.

Finally, as already stated, there is always a negative premium on pub freeholds because of the difficulty in getting change of use.

In short, it can be done - but be prepared for the battle!

 

[devilmaycry]

You might want to get some tax planning to see if having 4 companies is the best way to structure because of the impact on the CT for each company - have a word with your accountant who should be able to take you through all of this.

Some times it doesn't work out best to have multiple companies.

Thanks for the tip elainec100. The problem is, is that they're completely different businesses. Two are children's play centres, one is a gym and the other is a series of websites. I bought the second play centre recently as a going concern, where is was currently trading as a partnership. I am going to incorporate that into my limited company as I am looking to get more play centre's. I am assuming there is nothing else that I can do, as the other businesses are so different? Thanks again elainec100. It is hard enough to get taken seriously in business at my age. I didn't like coming on here and getting slated as well!

 

[sysops]

You might want to get some tax planning to see if having 4 companies is the best way to structure because of the impact on the CT for each company - have a word with your accountant who should be able to take you through all of this.

Some times it doesn't work out best to have multiple companies.

This is one of my main criticisms of the "I have 3 companies" comments we frequently get. The majority of my business activities are under one limited company. We use over 30 trading names under this one company. This allows losses in one area to be offset against profits in another area. It also allows easy sharing of resources across different business activities.

There are situations when it is desirable to separate activities and run them under separate limited companies, but in my experience this tends to be the exception rather than the rule.

 

[sysops]

I am assuming there is nothing else that I can do, as the other businesses are so different?

There is no reason at all why they shouldn't all be owned by one limited company.

By the way, no one is slating you, lighten up.

 

[devilmaycry]

This is one of my main criticisms of the "I have 3 companies" comments we frequently get. The majority of my business activities are under one limited company. We use over 30 trading names under this one company. This allows losses in one area to be offset against profits in another area. It also allows easy sharing of resources across different business activities.

There are situations when it is desirable to separate activities and run them under separate limited companies, but in my experience this tends to be the exception rather than the rule.

I do have seperate limited companies for different businesses! One is a gym, one is a children's play centre and another is a series of websites. The 4th is another play centre, which admittedly will be put under the other Ltd. Thanks for assuming I was another person on here claiming to have 3 businesses.

 

[KidsBeeHappy]

Point being made is that you don't NEED to have seperate ltd companies for each business. Even if the trades are different. See the Virgin group - one overall corporate owner, stuctured as a group, allows for offsetting tax etc. If you have seperate companies all owned by you/shareholders, can't plan as efficiently and end up paying tax on one of them whilst the other sits with unused losses.

 

[patientlady]

I hope someone can help
I am putting together a business plan for a family member who is planning to purchase and run a freehold pub.
Turnover likely to be £170K-£200K
Gross margin is known historically
I would just like to have some idea of the likely level of non property overheads ie how much would glassware / cutlery+crockery cost etc etc

If anyone has some anonymised accounts so much the better

Hi Russell2010
Where does one start! Please read & digest everything that is said on this thread. All the above is excellent advice. You do have a positive here and that is that the property will be freehold and to be honest ther it lies! The price of the property I can only summise is in deepest Wales, The Midlands or perhaps Scotland. How many other previous owners has the business had out of interest. With the tunover you have mentioned it would be virtually impossible to make a living wage unless purchasing outright with no mortgage. The pub could not be run by two and it would be unfair to ask relatives to help FOC unless they dont like them!
Have either of this young couple managed a bar before at all or worked out margins etc. Has it been wet led before?
The glasses are the least of there problems as the brewerys or wholesalers will be pleased to give you as many branded glasses you like...
Serious overheads are the couple, (eating, drinking, living, transport for C & carry), free drinks offered to regulars, electricity, wages, Performing Rights Society, SkyTV, rates, stock, food waste, waste disposal, pest control, gardener, cleaner, entertainment, advertising, building repairs, refurbishment, new glasswasher, oven & fridges (because I guarantee the existing ones will break down in the first week) just thought of those in a few minutes...

 

[Call Assistant UK]

Hi, I believe one of your question was about overheads.

Though the pub game is extremely risky at the moment, there can still be money made - especially if you are not a tied pub.

I sold out of a partnership in a pub back in July, and should still have some P&Ls kicking about that your more than welcome to have a look at.

I should have some more info available.

Drop me a pm with your email address and I will forward some useful reading over to you.

 

[elaine@cheapaccounting]

Thanks for the tip elainec100. The problem is, is that they're completely different businesses. Two are children's play centres, one is a gym and the other is a series of websites. I bought the second play centre recently as a going concern, where is was currently trading as a partnership. I am going to incorporate that into my limited company as I am looking to get more play centre's. I am assuming there is nothing else that I can do, as the other businesses are so different? Thanks again elainec100. It is hard enough to get taken seriously in business at my age. I didn't like coming on here and getting slated as well!

You really do need some planning here.

Plan for vat, your turnover, your exit strategy for each business .... etc etc

Have you taken professional advice on your various businesses?

There is not reason not to have everything under one company but a review of where you are at, your future intentions will help to get this all set up correctly.

Age should be no barrier to business, taking advice, deciding your exit strategy etc

 

[*Lexxy*]

i wish them luck in the new venture, if it goes ahead, but i have to say this particular bit of info puts the fear of god into me!

"they are likely to get lots of free family help in getting it onto a good footing before having to employee outside staff, including providing cover for hols etc"

from my own experience, working with family/friends has the potential to be the most stressfull experience, ever. throw in "doing it for free" & you can multiply the stress level by 100%. hand on heart, do NOT do it!