Friday 8 January 2016

Last one out - turn off the lights

BQi closed its satellite operation today. Everyone was laid off with a weeks notice and sent on their way. The landlord is putting the premises up for auction. I have pick of of the fixtures, which is not of much real interest or value to me, and then that will be that.

Regulars may recall I took over an ailing competitor back in September. After a few weeks it looked like it was going to be a lot of hard work and {worse!} hard cash, to make it right.

In the end it never performed to the levels required. Although each month had a better set of figures, any retail focused business heading to December ought  to have an improving set of figures.
Too much business had been lost in the time this one closed and BQi took over. Clients need their stuff. And in the very small interim period they went elsewhere. And people hate, just hate, constantly changing suppliers. So a loss is often a permanent one.

The inherited staff could not get on with BQi appointees. Bickering and bitchiness was the order of the day, almost every day. Errors and SNAFUs were commonplace. Service was mediocre to poor.
Discussions with the landlord for purchase of the freehold, which can transform a small business from small to large profits, fell through on the amount of restoration work required to make good the premises.

At the end of the day, after everyone was paid, bills paid, expenses, utilities taxes and the rest, it was going to net to me about 10% of what it was costing to run.

That's a return that you can get just by putting your money into a buy to let. Or a landlord of a leasehold retail. 5-10% is about right. And for that , you need do almost nothing at all.
Where as I was looking at a quad paracetamol headache every morning.
 I found the whole experience wearisome.

However, 10% isn't to be ignored in these difficult times. It was heading the right direction. I could have let go of the troublemakers. Could have done much more to attract new business. I have done these things many times before. That 10% could, quite probably have been 15-25%. And that's worth doing.

But two things caused the plug to be pulled.

One was an almighty and costly  F*up that meant the profit for the key December trading is now close to zero. That is depressing. And worrying in that I wasn't convinced it couldn't occur again.

But number two was the real camel strawback

CU said he had "A bad feeling about this 2016..."
But for the employer, its a definite bad year...its nailed on.

Changes to pensions means employers must pay a % of a pension to all workers. That's quite a cost. Even in its embryonic form. It still adds about 2% to costs. 
Wages Are on the rise. George Osborne has decided he isn't going to pay for tax credits anymore. Employers must pay for them instead. This will increase wages by another 7% - 10% for 2016.
On top of the 3-5% increase we had in 2015. And with a further set of rises that will increase wages another 20-30% by 2020.
And the changes to business rates don't look very beneficial. They give powers to local authorities to raise or lower rates. Which will they chose , I wonder?

So ...That 10% profit is going to be around 1% in just 4 years time. 

That's without factoring in any of the other real costs. Utilities, transport, interest rates, employment law changes. New codes or restrictions. Paternity and maternity payments. Health and Safety demands. Insurance cost rises ..internet online competition...That pension cost which as we can all see is going to rise from 2% to 10% of wages like N.I. did or even 'the bloody weather' which has done for all our winter hats and gloves sales so far this year. {Currently running at a feeble 25% of usual volumes. And that's on much lower margins to shift the stuff.}

Osborne said that the Office for Budget Responsibility (OBR) claimed the national living wage would have only a “fractional” effect on jobs. The OBR said that by 2020 there will be 60,000 fewer jobs as a result of the national living wage, but almost one million more in total.

My former employees have joined the 'fractional' effect today. That's the reality. If someone can make much more money, much more easily,  by investing in a holiday home; why on earth would they bother running a company?


Anonymous said...

Don't worry BQ,
they will be coming for your holiday home eventually. Just give them time.

Anonymous said...

You should, er, write to your MP. Seriously.

Sackerson said...

Not just a problem for businesses, BQ, though I commiserate. Since education has started to adopt the business model, it faces the same problems. I'm told that our particular part of the service - which looks after volatile, school-excluded children - is facing a real-terms 15% cut in the next couple of years, and we're already cut to the bone in staffing. Further staff reductions? - think nuclear piles with fewer damper rods.

But, haha, we have a Conservative government so all will be well. Cam-ou-flage's jolly Syrian capers will balance the books. Blair's confidential Senior Stateman helpline - he calls Cam frequently - will tell him how to get us out of this mess - or alternatively, how he can get himself out.

I can only hope Julian of Norwich was right, but I don't think she meant secular things when she said all will be well.

Steven_L said...

So you're saying things would have been better for you with Ed Balls in charge, not changing any of Brown's schemes? LOL

phil5 said...

"George Osborne [i.e. the taxpayer] has decided he isn't going to pay for tax credits anymore. Employers must pay for them instead." - but surely this is an absolute must? We cannot have Starbucks/you/whoever paying people low wages and the taxpayer automatically making up the shortfall? (Yes I know the taxpayer pays for housing benefit etc. but that is not so direct a link.)

Sackerson said...

@Steven_L: Please read. I didn't say that. Both sides have buggered up the country, since at least the 70s.

andrew said...

"That's a return that you can get just by putting your money into a buy to let. Or a landlord of a leasehold retail. 5-10% is about right. And for that , you need do almost nothing at all."

"If someone can make much more money, much more easily, by investing in a holiday home; why on earth would they bother running a company?"

I have been saying that the returns on BTL will soon turn negative since 2001.
One day I am going to be right.

Steven_L said...

Sackerson: I was talking to BQ actually :)

But happy new year all the same!

Steven_L said...

I have been saying that the returns on BTL will soon turn negative since 2001.

And without:

* rationing of planning permission
* very little rationing of immigration
* central bank action to make and keep interest rates very low
* a landlord friendly tax regimes
* a landlord friendly regulatory regime
* zero rent regulation
* non-regulation of BTL mortgages
* granting of BTL mortgages at as much as 15x rental income
* a policy and legislative environment that prevents social housing being built / retained
* housing benefit policy

they might have.

Sackerson said...

@S-L: and also to you!

Anonymous said...

We are fecked.

Bill Quango MP said...

Phil : You are, of course, correct.
But for anyone employing a lot of staff the options coming up are increase prices or reduce costs.

And staff costs are set to rise 30% since 2014-2020.Staff wages account for 75% of our business costs. So a 30% rise on the largest cost can only equal job losses.

There is a fair argument that these people should not have been employed in the first place..That wages should have been higher.
But its all relative.

For instance,today the price of the main item, the very best seller, we increased by 14%

First increase on that product since 2013. That increase, and others, will cover some of this April's wage increases.
But I doubt we can do it again next year unless there is a boom {there won't be}.
So already, instead of taking the best people from the business I closed,as would be normal practice, I let the whole lot go, with no offers of anything at all.

So its cuts to hours and redundancies for 2017

Jan said...

Commiserations BQ. It's dispiriting to have tried ones best but yet ultimately failed. However looking at the wider picture, there is far too much "retail". Shops are absolutely stuffed with merchandise and a lot just doesn't sell I should imagine. The Chinese need to do some tweaking away from manufacturing. Even M&S are stuttering and I can understand why. There is just too much average to poor clobber. I don't know when I last went in there.

Also I'd think hard before going down the BTL route. Lots of hassle for not a very good return and the tax treatment is changing (not well publiscised) so that highly leveraged landlords are soon to be bankrupted. Some of them think it's a business yet they don't pay NI. HMRC treat it as an investment yet you only need a void period/a lousy tenant who doesn't pay their rent or trashes the place and you'd be losing.

Time for a change of tack perhaps? How about being a full-time MP?

Mr Ecks said...

BQ--The time is coming for a grand alliance of all British business with one aim:

To tell the state to "Fuck Off" and make it stick.

How would it be if all business just said NO.

NO--we won't collect taxes or VAT any more.
NO--we won't adhere to minimum wage of any other bullshit rules. Our task will be to make money in a free market and we are declaring a free market. Wages/prices/competition/health and Safety/Pensions--if we decide to offer same it will be on out terms and you can stick all your laws up your arse.

The inflation caused by the state is a tougher one to beat--but you could buy gold and issue your own coins-as happened during the Industrial Reveolution-which would have real value to them not just the empty promises of polits. They would circulate in competition to the states shinplasters.

How much money could you make in a true free market? Well it will never happen by politics--so make it happen yourselves.

Of course the political and bureaucratic scum will fight back against attacks on their lucrative empire of thieving and dictatorial control. You will have to put cash aside for publicity campaigns and to hire whatever muscle is needed to counter the states costumed thugs. But you will be on the path to real wealth and if you can survive the initial hard times it will soon be the scum of the state running scared of you instead of the other way around.

Keeping going as now, being eaten down to nothing with each passing year, has no future. Sooner or later the political scum will destroy everything--including --ultimately--themselves.

Why not start the fightback now.

Nick Drew said...

I've mentioned here before that round these parts 'everyone knows' the going rate for work in the many Tamil-operated businesses - and it ain't the Min Wage

while they don't get MW £££, they do however, get MW paperwork, which they can present in order to get Tax Credits ...


Electro-Kevin said...

I looked into BTL quite recently and (admittedly I'd have to borrow a lot) the monthly margins were not comfortable enough. As it happens the value of the typical property has increased by about 10% over two years but the rental prices around here have not changed much at all. I would have struggled to cover incidentals like repairs and voids.

The MV/rental ratio is still well out of kilter and only those with a mahoosive deposit or a strong stomach should dabble.

May I say. THANK you for employing anyone at all. We owe much to people with the gumption to run businesses generating employment in these over regulated and litigious times.

James Higham said...

Bickering and bitchiness was the order of the day, almost every day.

Yes. Yes indeed.

Anonymous said...

Wasn't the core mistake to purchase a retail competitor in September whereas if you waited until the January/February bill were due to be paid, the previous owners who have taken the grief and you could have had it for a song.

Retail is changing fast. High streets will be showrooms / flagships and the products will be delivered direct to your door from "dark" stores close by. The delivery people will be self-employed Yodel contractors on less than the minimum wage.

And before you write off UK plc there are some obscenely profitable companies out there who pay massive Xmas bonuses but are based on property - which likely explains why you couldn't get the freehold.

I'm off to get my new car and expensive holiday.

dearieme said...

What if there are lots of people so stupid and useless that their market wages won't support them in the lifestyle that the Guardian and BBC view as their right? Wouldn't tax credits be a better idea than having these people unemployed and getting up to who-knows-what mischief?

Electro-Kevin said...

On re-reading BQ's post.

We have long been in fantasy land on wages propped up by the state.

The national debt is increasing at an astronomical rate.

Nick Drew said...

Poetic, Kev

Electro-Kevin said...

I hadn't finished... mate.

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