Sell business or lease?

[Denise Goodfellow]

Hi Lorraine

Hubby and I plan to retire in 5 years ( OK, semi retire) and have talked about a similar thing. As you say, times are hard and I`d be surprised if a Small business like ours would sell. After all. a £400 cutter off ebay and your a sign maker, right?

We talked about getting a manager in and having a Small % of the profits or a monthly rent, which sound good, until the equipment need replacing or repairing. What happens if the manager/leaser left and the next day a printer needed replacing…..

You could look at it like having a house to rent out, sooner or later you`ll need to do repairs or in this case replace equipment, so factor in some financial measures to do this.

Saying that, if you haven`t a printer, cutters, heat presses very rarely go wrong ( our cutter is 6 years old and the heat press is nearly 10 years old)

I don`t have an answer, but will watch this thread closely.

GL.

[Lorraine Clinch]

Hi, thanks for your reply. This is what I was thinking, but there will be a shedload of pitfalls to consider, if it is feasible at all. I also will be interested to see other peoples thoughts.

Lorraine

[Phill Fenton]

Interesting idea Lorraine – something I would never have thought of. There will come a time when we all need to plan our exit strategy and decide what happens to our business in the future. For a business that is trading successfully there is every reason to keep it running after you have left.

I have put together a list of plus and minus points to consider. Obviously it’s far from being exhaustive – but may be a useful starting point for discussion to build on

Plus points

1/You will gain a steady income whilst still retaining ownership of the business
2/ Easier to find a potential "Tenant" then a buyer
3/ You still have an option to sell the business on in the future
4/ If your "Tenant" does well the value of your business will go up

Minus Points

1/ Leasing rather then selling means you will not get a lump sum
2/ If your "tenant" does badly the value of your business will go down
3/ If your tenant does really badly your business may go bust
4/ Who is ultimately responsible for any business liabilities

For the "Tenant there are obvious advantages and disadvantages

Advantages for the tenant
1/ No need to find funding since the cost of leasing be funded from some of the profit made by the tenant
2/ Taking on an existing thriving business is less risky then establishing a new business from scratch
3/ If the business fails – the tenant will not have lost his initial investment money

Disadvantages for the tenant
1/ The leasing cost will never diminish and will always be an additional overhead over someone buying the business
2/ If the business does well and increases in value the tenant will not "own" the increased value.
3/ Less satisfying to be a tenant then an owner of the business

Overall, I’m not sure how something like this would be drawn up legally and all of the unforeseen pitfalls covered when this is not an established method of transferring a business

Have you considered taking on an employee to run the business in your absence? Perhaps a share option scheme could be built into the arrangement to act as an incentive to the right person to develop the business for the mutual benefit of you both.

Great topic for discussion :thumbsup: And it will be interesting to read other thoughts and suggestions

[Peter Normington]

"Have you considered taking on an employee to run the business in your absence? Perhaps a share option scheme could be built into the arrangement to act as an incentive to the right person to develop the business for the mutual benefit of you both. "

That advise from Phil is probably the most practical, the hard bit is finding the right person, who is willing to act in your and their best interest.
Perhaps an option to buy after 3 months may be an incentive?
If you can offer the training and encouragement for someone to take the business over. (you would need to confirm that they had funds to tae up the option though)

See you Easter. reseve us a spot

😀

peter

[Lorraine Clinch]

Phil, some interesting points, I will ponder over the next couple of days.

Peter, I have thought about getting someone else to run it for me, but a) I will have to have someone who knows their way around the software and equipment, ie, some experience as a sign maker, or it will sure as he’ll go bust, and b) there is so much scope to be totally ripped off by an unsupervised employee.

Maybe if I removed the Versacamm but leased the rest of the equipment, that would reduce the chance of a catastrophe occurring which would cost me dear. The plotter, an old Roland, is at least replaceable.
Anyone leasing from me could then add his/her own printer if they desired.

Hmmm, lots of ideas…

Lorraine

PS Peter, let me know your dates and I will book you in.

[Lynn Normington]

when ever easter is lorraine 😀 can’t wait

Lynn xx

[Lorraine Clinch]

I’ve been working at the pub today so not had the chance to investigate further the idea of leasing the business. I need to get it valued too.
Any further input appreciated!

Lorraine

[James Martin]

Hi Lorrainne

I would have thought it would have been alot easier to find a good Pub manager than someone to fill your boots running a sign shop.

James

[Nicola McIntosh]

if i was in the area id do it for you lorraine run………..the ‘pu…..sign business 😉

[Lorraine Clinch]

quote James Martin:

Hi Lorrainne

I would have thought it would have been alot easier to find a good Pub manager than someone to fill your boots running a sign shop.

James

Hello James

To be honest, I don’t know, I think that my being active in the pub brings an awful lot to the business, not because I know any great deal about the business (I don’t, 3 years as a publican, 7 as a sign maker, BUT I live in the pub, and it feels like I belong here – despite the fact that 10 years ago I told Geoff that I would NEVER be seen behind a bar – also there needs to be someone here who believes that the pub is any more than a complete drain, both on time & energy, and on finances.

Sorry, I am going on.

The fact is, that my sign making business, although doing well despite the economic climate is doing OK,could be doing so much better in the right hands, is being neglected in favour of the pub, which does have a major financial investment in it.

So, I know what I need to do, but I want to do it in the best way. After all, if I pull out of the sign shop without selling it on, apart from all the stock and equipment I will have to disperse, there will be someone who moves STRAIGHT in to take on all my old and potential customers.

There has to be a better way than to just give 7 years away?

Sorry, going on…….

Lorraine

[Denise Goodfellow]

I think this thread is very important, after all it`ll effect most of us sooner or later. What are your plans when it comes to retirement?

We did try to sell our business about 4 years ago. we brought in a company that specialized in selling businesses.

He look at our books and gave his suggested sale price. So i suppose there must be a mathematical equation.

At the time we turned over about £120,000, profit was at approx 65% and the suggested selling figure was £50K.

We placed large adverts in our local paper, and got very little response, apart from a couple of texts asking if it could be run from a bedroom….. even though in the advert we mentioned we ran it from a 2000 sq ft building.

I still haven`t an answer, we are thinking of bringing in my husbands son, letting him run the business, and having a small amount of the profits. i quite agree its hard to just let it go for the price of the machinery…

Forgot to mention, we had a competitor who set up in a small rented unit, cheap cutter, then sold it for £5K after 12 months, all he had was the cutter and software and a few bits of vinyl. ( I couldn`t help but not ring to be nosey LOL)