SME Building Company - money trouble.

Discussion in 'General Business Forum' started by Bay, Mar 11, 2019.

  1. Bay

    Bay UKBF Newcomer Free Member

    9 1
    Hi,

    I'm sole director of a small building company. We offer a specialist service delivering high-end residential home additions and have completed some new-builds. I am from a trade background and have self-taught the commercial aspect of the business with some help from personal contacts who are construction professionals.

    I am nearing the end of my third year of trading and have a growing customer / architect client base. We are doing some really great work which is being well responded to.

    I have recently hit some financial problems and Im looking for some advise from anyone who has experience in this sector (or any relevant) to help make sensible decisions moving forward.

    Our annual turnover last year was around £500000 and will be similar this year. I have never made considerable profits but manage to grow the business / support the family. I have slipped into an insolvent position of around £20,000, as indicated by my accountant although my cash flow position feels worse (I have had to set up terms for last VAT quarter) . I have a 20k OD which Im in-and-out-of and am looking to extend. The company doesn’t have considerable assets.

    I believe this is predominantly down to a large contract we are undertaking (£250K+) which I have underpriced. It's a stand-out job I was hoping would be the making of the company. We are two thirds of the way through and money-aside is going well. There are obviously problems I need to address in general to reach healthy profitably. I put this mostly down to a lack of bargaining power as a young business. Also in selling our work for the correct price and my lack of experience in estimating (it seems the better I am at estimating the higher our price and the more work I loose).

    I'm experiencing very high levels of stress and anxiety and wondering at what point I should accept a failed project? I have dependents and feel I need to ‘tread carefully’. I have never received any investment or put any of my own money in having built-up from being a sole trader.

    I have a good skilled workforce, good branding / website with ever improving portfolio. I do think the company is worth fighting for but I don’t have my head in the clouds as to its value.

    Should I relax and see this as a dip in the road. Perhaps look at lending options etc or should I accept that something isn't working and move on?

    I realise there’s allot of factors in understanding my position and offering accurate guidance. however I feel I would greatly benefit in receiving advice from others that can help put my position in perspective. Im highly skilled on the tools and a fast learner of them, however certainly ‘green’ to the business side of things.


    Many thanks in advance,
     
    Posted: Mar 11, 2019 By: Bay Member since: Mar 6, 2019
    #1
  2. The Byre

    The Byre UKBF Ace Free Member

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    Posted: Mar 11, 2019 By: The Byre Member since: Aug 13, 2013
    #2
  3. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Ace Free Member

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    Thanks @The Byre - although I read this post and thought the question was about something other than business loans!
    Been going more than 2 years, so there would be options to get a loan, but its hard to tell from the detail above if that's really the right thing to do...
     
    Posted: Mar 11, 2019 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #3
  4. HomeWrking

    HomeWrking UKBF Contributor Free Member

    34 5
    My husband just heard me read this thread aloud and wants to speak to you. He helped as marketing consultant build a similar business in Wandsworth which had crazy growth but similarly crazy exposure to debt. He was marketing for them but they underestimated his advice and counsel due to his background as IFA, and business management. At the time the phone was ringing and pinging but the business was not necessary being engineered for profit and a few clouds on horizon. You need general business management advice - PM me if interested to speak by phone or Skype.
     
    Posted: Mar 11, 2019 By: HomeWrking Member since: Mar 9, 2019
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

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    Slipping into an insolvent position - time to get professional advice from an insolvency practitioner.
    It may be that there are multiple options that can be looked at.
     
    Posted: Mar 11, 2019 By: Mr D Member since: Feb 12, 2017
    #5
  6. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    You should take advice from an Insolvency Practitioner whilst exploring other options, such as funding.
     
    Posted: Mar 11, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #6
  7. The Byre

    The Byre UKBF Ace Free Member

    8,520 3,295
    The last time I commissioned a build, I did a "You build a bit, I pay a bit; you build another bit and I pay another bit."

    Every month or so, the builder presented an invoice that listed the work done so far and we handed him a cheque. We knew that he had cash-flow (Cash Floe - Gadd, how I loved that woman!) problems and it is ridiculous to expect a small company to stomp-up huge sums, so it seemed only fair.
     
    Posted: Mar 11, 2019 By: The Byre Member since: Aug 13, 2013
    #7
  8. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

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    It is worth speaking with @Gordon - Commercial Finance about potential loans; however I must re-stress the absolute need for a full (slightly negative) cashflow P *& L projection to be sure that you aren't just throwing money into a black hole.

    At risk of being negative, pretty much every business that goes bust believes all they need is funding for another 6 months. Those that get the funding all too often go bust 6 months later & deeper in debt...
     
    Posted: Mar 11, 2019 By: Mark T Jones Member since: Nov 4, 2015
    #8
  9. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    ...and a risk of wrongful trading claims being brought about...!
     
    Posted: Mar 11, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #9
  10. estwig

    estwig UKBF Legend Full Member

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    This was me twenty years ago, then again ten years ago, large residential projects. The business has no value beyond you, it is not a business because it's all about you, no one is going to buy it, therefore it has no value.

    Strip everything you can out of the business, pay your men and your favoured suppliers, draw for yourself, everyone else can join the list of creditors waiting for their piece of nothing. Take a little time out and start again with your portfolio, a new website and new marketing. Don't flog a dead horse and don't kill yourself trying, put yourself, your family and your men first.
    Live to fight another day.
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #10
  11. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    Definitely do not do that unless you want to get sued by any incoming Insolvency Practitioner...!
     
    Posted: Mar 11, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #11
  12. estwig

    estwig UKBF Legend Full Member

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    I know, you gotta be careful, take good advice, etc, etc. But it's not hard to do.
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #12
  13. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    ? the advice you have given is not good advice... (imo!)
     
    Posted: Mar 11, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #13
  14. estwig

    estwig UKBF Legend Full Member

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    Having done it twice already, seen others do it too and it's mine, I think it's great advice!
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #14
  15. Mr D

    Mr D UKBF Legend Free Member

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    Even if its preferential treatment of creditors?
     
    Posted: Mar 11, 2019 By: Mr D Member since: Feb 12, 2017
    #15
  16. estwig

    estwig UKBF Legend Full Member

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    When there isn't enough money to go around, decisions have to be made by whoever has hold of the purse strings.
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #16
  17. Mr D

    Mr D UKBF Legend Free Member

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    And if another creditor disagrees with that? If an IP disagrees with that?
     
    Posted: Mar 11, 2019 By: Mr D Member since: Feb 12, 2017
    #17
  18. estwig

    estwig UKBF Legend Full Member

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    It's not hard to deal with these things in a certain way. When you have a family to feed and bills to pay, you make choices, you take risks out of necessity.
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

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    Yes, and some make different choices than you. Treating creditors equally.
    Its not hard - they can all moan equally regardless of giving them part or nothing.

    Directors responsibilities? Becoming personally liable?
     
    Posted: Mar 11, 2019 By: Mr D Member since: Feb 12, 2017
    #19
  20. estwig

    estwig UKBF Legend Full Member

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    Homelessness or paying the vat man!

    Have you any idea of the running costs of an RS7? Absolutely shocking!
     
    Posted: Mar 11, 2019 By: estwig Member since: Sep 29, 2006
    #20