Business and financial advice?
Discussion
Ok , similar to a previous post I thought I’d throw this out to the Pistonhead masses and ask what they would do in my place. I’ve been a long time Pistonheads member but I’ve started a new account for obvious reasons.
I have an opportunity to buy another building to expand my business but it’s not cheap.£400000 plus most likely a further £100000/£150000 to extend it and fit it out. More importantly by expanding further I would need more key staff and in my business it’s very hard not just to get staff but retain them.
I would probably need to remortgage my home to raise a large enough deposit to buy the building and fit it out. I know that my business would flourish in this particular area resulting in substantial further profits but by doing so I’m going to have to dedicate yet again at least 4/5 years of my life to achieve it. Simply put I’ve hit a milestone in my life. Do I really want this level of stress taking my business to the next level which really will be the start of a proper commercial chain or do I finally sit back and try to enjoy what I’ve achieved already ( I want a manual 991.2 GT3 )
My current business situation is pretty much the sweet spot. It’s myself , my brother in law ( who I’ve known since he was 9 ) and a part time team member who joined me and has no wish to run her own business. My wife who I’ve been with since school does the accounts while trying to run the household with our two young children aged 9 and 5. We also have 7 part time receptionists.
So here is my current situation.
I’m now 40 and my wife is 41
We started a pension at the start of this year and we are currently putting maximum contributation in £6666 for my wife and I. Tbh this seems a scary amount but we went Ltd a few years ago and so using it to reduce our tax burden.
We have £8000 in an isa .
Our main property is worth around £600000 with a mortgage outstanding of £110000 with the RBS. It’s offset based on 4.0% and we have £120000 in a savings account so we don’t pay interest . We like to have this in the account for emergencies and so I can sleep at night.
There is 15 years left on the mortgage but it will be paid off within about 8 years as I’ve been paying it down.
I have bought 4 other commercial buildings all of which are in good market towns and high demand. We use three of them for my business but the forth is currently rented out on a new 10 lease for £13000 per annum.
We have two mortgages left on those properties . They are commercial loans from the RBS. One is for £112000 on a tracker product and is currently 4.0% with 18 years left and the other is a fixed coming to the end soon of £135000 which I believe is 4.5% with 17 years left.
All the commercial property is worth between £700000 to £775000
I have one vehicle on a pcp payment for £600 per month but apart from that have no other debt.
I have about £300000 in the Ltd company .
So my business has for many years been doing well but for the last two years we have become a specialist in a further field that is changing my industry. I’ve spent my working life investing into the buiness and really speaking there is hardly anybody who has anywhere near my set up or knowledge.
Due to this new business that is linked to the old we have done before tax £500000 profit.
The question really is seeing as I’m doing well should I stop pushing the business , take the profits and invest in isa’s ,combine all three outstanding mortgages and just try to enjoy life or try to create the next John Lewis in my field ?
I have an opportunity to buy another building to expand my business but it’s not cheap.£400000 plus most likely a further £100000/£150000 to extend it and fit it out. More importantly by expanding further I would need more key staff and in my business it’s very hard not just to get staff but retain them.
I would probably need to remortgage my home to raise a large enough deposit to buy the building and fit it out. I know that my business would flourish in this particular area resulting in substantial further profits but by doing so I’m going to have to dedicate yet again at least 4/5 years of my life to achieve it. Simply put I’ve hit a milestone in my life. Do I really want this level of stress taking my business to the next level which really will be the start of a proper commercial chain or do I finally sit back and try to enjoy what I’ve achieved already ( I want a manual 991.2 GT3 )
My current business situation is pretty much the sweet spot. It’s myself , my brother in law ( who I’ve known since he was 9 ) and a part time team member who joined me and has no wish to run her own business. My wife who I’ve been with since school does the accounts while trying to run the household with our two young children aged 9 and 5. We also have 7 part time receptionists.
So here is my current situation.
I’m now 40 and my wife is 41
We started a pension at the start of this year and we are currently putting maximum contributation in £6666 for my wife and I. Tbh this seems a scary amount but we went Ltd a few years ago and so using it to reduce our tax burden.
We have £8000 in an isa .
Our main property is worth around £600000 with a mortgage outstanding of £110000 with the RBS. It’s offset based on 4.0% and we have £120000 in a savings account so we don’t pay interest . We like to have this in the account for emergencies and so I can sleep at night.
There is 15 years left on the mortgage but it will be paid off within about 8 years as I’ve been paying it down.
I have bought 4 other commercial buildings all of which are in good market towns and high demand. We use three of them for my business but the forth is currently rented out on a new 10 lease for £13000 per annum.
We have two mortgages left on those properties . They are commercial loans from the RBS. One is for £112000 on a tracker product and is currently 4.0% with 18 years left and the other is a fixed coming to the end soon of £135000 which I believe is 4.5% with 17 years left.
All the commercial property is worth between £700000 to £775000
I have one vehicle on a pcp payment for £600 per month but apart from that have no other debt.
I have about £300000 in the Ltd company .
So my business has for many years been doing well but for the last two years we have become a specialist in a further field that is changing my industry. I’ve spent my working life investing into the buiness and really speaking there is hardly anybody who has anywhere near my set up or knowledge.
Due to this new business that is linked to the old we have done before tax £500000 profit.
The question really is seeing as I’m doing well should I stop pushing the business , take the profits and invest in isa’s ,combine all three outstanding mortgages and just try to enjoy life or try to create the next John Lewis in my field ?
Edited by Player1again on Friday 28th December 18:42
You are asking some very good and important questions.
Growing an already profitable business can be fun and rewarding. However, it can also be stressful and financially unrewarding (as costs also increase).
Turnover and profit are (obviously) not the same thing. Chasing a higher turnover for a lesser profit margin and higher stress factor is rarely a good idea.
Increasing your turnover to fully establish (or protect) your profit margin may be very worth while though, given your age.
PM me if you like. I went through this at the same age as you (7 years ago) when I could either retire or grow things. I tried to step back, but was bored ridged so went for growing things further (and buying other businesses).
It is stressful, but for me it is not as stressful as doing nothing (if that makes sense)!
Growing an already profitable business can be fun and rewarding. However, it can also be stressful and financially unrewarding (as costs also increase).
Turnover and profit are (obviously) not the same thing. Chasing a higher turnover for a lesser profit margin and higher stress factor is rarely a good idea.
Increasing your turnover to fully establish (or protect) your profit margin may be very worth while though, given your age.
PM me if you like. I went through this at the same age as you (7 years ago) when I could either retire or grow things. I tried to step back, but was bored ridged so went for growing things further (and buying other businesses).
It is stressful, but for me it is not as stressful as doing nothing (if that makes sense)!
I'm at a similar point in my life too. How much is enough?
Sufficient income to be comfortable. Not enough to consider myself "rich".
I've decided on a consolidation strategy for the time being - so concentrate on maintaining the income from my main business. Maybe do a few side projects, but nothing too big, and crucially nothing which demands too much of my time.
10 years ago, I was much more gun-ho, happy to work 7 days a week, keen to move up the property ladder etc etc.
Now my priority is trying to find some kind of work/life balance (which never bothered me before). With that in mind, I've rented a ski chalet for the current season, and I'm currently focusing on trying to get my skiing (and my two sons) to be as good as it can be from now until April. Plus I would like to start to learn to sail in the coming year.
So that doesn't answer your question as to what you should do. But trying to find a path which offers the potential for some level of satisfaction is what I would aim for.
Edited to correct typo
Sufficient income to be comfortable. Not enough to consider myself "rich".
I've decided on a consolidation strategy for the time being - so concentrate on maintaining the income from my main business. Maybe do a few side projects, but nothing too big, and crucially nothing which demands too much of my time.
10 years ago, I was much more gun-ho, happy to work 7 days a week, keen to move up the property ladder etc etc.
Now my priority is trying to find some kind of work/life balance (which never bothered me before). With that in mind, I've rented a ski chalet for the current season, and I'm currently focusing on trying to get my skiing (and my two sons) to be as good as it can be from now until April. Plus I would like to start to learn to sail in the coming year.
So that doesn't answer your question as to what you should do. But trying to find a path which offers the potential for some level of satisfaction is what I would aim for.
Edited to correct typo
Edited by anonymous-user on Friday 28th December 22:29
Just going through your figures this morning a few questions arise;
Why do you consider your maximum pension contribution is £6,666 a year?
Why are you paying c. 4.3% on £245k of commercial property lending when your company has £300k in the bank and has made a £500k pre tax profit?
Why would you need to remortgage your home for a deposit and the works on the potential new property given the cash situation above and available equity in the commercial properties?
Again, why pay a high rate of PCP interest given the cash situation?
I can understand the need to retain cash for cashflow purposes and this may well answer part of the above, but on the surface it seems an expensive and tax inefficient approach.
Is the profit figure after your drawings?
Who owns the shares?
Cheers
Sorry, it is £6666 per month towards the pension for my wife and I.
The £500000 is including our salaries and the pension contributions.
I think what I’m going to do is combine all three mortgages on a fixed 5 year rate against my house by paying them down to a lump sum of £300000. As for the PCP it was more the fact I didn’t want to keep taking money out of the business.
The £500000 is including our salaries and the pension contributions.
I think what I’m going to do is combine all three mortgages on a fixed 5 year rate against my house by paying them down to a lump sum of £300000. As for the PCP it was more the fact I didn’t want to keep taking money out of the business.
Edited by Player1again on Saturday 29th December 20:32
Player1again said:
Sorry, it is £6666 per month towards the pension for my wife and I.
The £500000 is including our salaries and the pension contributions.
I think what I’m going to do is combine all three mortgages on a fixed 5 year rate against my house by paying them down to a lump sum of £300000. As for the PCP it was more the fact I didn’t want to keep taking money out of the business.
Be careful how you structure this so you don't end up paying the corporate mortgages from taxed income or lose the ability to offset repayments against your corporation tax bill.The £500000 is including our salaries and the pension contributions.
I think what I’m going to do is combine all three mortgages on a fixed 5 year rate against my house by paying them down to a lump sum of £300000. As for the PCP it was more the fact I didn’t want to keep taking money out of the business.
Edited by Player1again on Saturday 29th December 20:32
Equally, do you really want to use your home as collateral for what are in effect business loans?
If I were you I would be looking to get as much money as possible into your SIPPs and then use these to purchase the properties, with your businesses paying the rent straight into your pensions.
Highly tax efficient as you are using untaxed money from the business (that is also offset against your corporation tax bill) to effectively take personal ownership of company assets through your pension.
This is a reason I asked who owned the shares BTW.
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