Sense check, new business
Discussion
Firstly, I know this is a new account but I’m not trying to obfuscate anything. I’m a long standing member, sebdangerfield and I always logged in with username/password until recently when the site required email/password and for the life of me I can’t remember which email I set up my username with.
I’m at a point in my career where I may be able to take early retirement. I’m not enjoying my job as much as I’d like and I’m keen to find a business to tide me over until I retire proper. I’m a cop by trade, in leadership working as a senior investigating officer. I half decent if you need something investigating but completely naive to business and more specifically, funding one.
I’ve seen a small business for sale in my village that has turned my head. I’d really appreciate advice on if it’s viable and how these things tend to be funded.
The business is a caravan storage site with space for 90 vans. The spaces are rented at between £65 and £70 per month depending on the size of the van. The site totals about 1 acre and is formed of a very long, thin parcel with a choke point in the middle meaning it’s probably of limited value for anything other than storage. It’s bordered on two sides by a field and another side by railway lines leading to the village station which is next door. There would be no opportunity to fit on more vans. There is a telecoms mast on one corner with a 20 year lease from 2017 at £6000 per year.
The land is freehold and for sale, with the business at £675,000 which feels very high but I am also very naive here. Given 90 spaces at £65 and £6k pa for the cell tower the total revenue would be £76,200. Does this sound a reasonable price. How are these things normally funded? Whatever funding they tend to require, how much capital would be expected of me?
As I say, I’m towards the end of my career and really want something completely different to start up my next career. The idea of a small business really appeals.
I’m at a point in my career where I may be able to take early retirement. I’m not enjoying my job as much as I’d like and I’m keen to find a business to tide me over until I retire proper. I’m a cop by trade, in leadership working as a senior investigating officer. I half decent if you need something investigating but completely naive to business and more specifically, funding one.
I’ve seen a small business for sale in my village that has turned my head. I’d really appreciate advice on if it’s viable and how these things tend to be funded.
The business is a caravan storage site with space for 90 vans. The spaces are rented at between £65 and £70 per month depending on the size of the van. The site totals about 1 acre and is formed of a very long, thin parcel with a choke point in the middle meaning it’s probably of limited value for anything other than storage. It’s bordered on two sides by a field and another side by railway lines leading to the village station which is next door. There would be no opportunity to fit on more vans. There is a telecoms mast on one corner with a 20 year lease from 2017 at £6000 per year.
The land is freehold and for sale, with the business at £675,000 which feels very high but I am also very naive here. Given 90 spaces at £65 and £6k pa for the cell tower the total revenue would be £76,200. Does this sound a reasonable price. How are these things normally funded? Whatever funding they tend to require, how much capital would be expected of me?
As I say, I’m towards the end of my career and really want something completely different to start up my next career. The idea of a small business really appeals.
I’ll talk about the mast as that’s my business nowadays.
A 20 yr 2017 lease is the dream ticket before the government crashed the market. Look for rent reviews. Rpi great, open market means it will be a long time before you see an increase. There is likely to be some movement on the market due to the vf3 merger but no one knows how that is going to play out.
Look at the termination clause. Most funders are not keen on telecoms sites as they tend to give much more options to break.
Contractors are sometimes stupid. If it’s hard standing it limits the damage they can do, but they can be inventive.
There are a couple of firms who will buy the mast lease and effectively give you a capital sum to receive the rent. I work for what I consider to the the market leader certainly in the uk and probably the world.
A 20 yr 2017 lease is the dream ticket before the government crashed the market. Look for rent reviews. Rpi great, open market means it will be a long time before you see an increase. There is likely to be some movement on the market due to the vf3 merger but no one knows how that is going to play out.
Look at the termination clause. Most funders are not keen on telecoms sites as they tend to give much more options to break.
Contractors are sometimes stupid. If it’s hard standing it limits the damage they can do, but they can be inventive.
There are a couple of firms who will buy the mast lease and effectively give you a capital sum to receive the rent. I work for what I consider to the the market leader certainly in the uk and probably the world.
albrighton said:
The business is a caravan storage site with space for 90 vans. The spaces are rented at between £65 and £70 per month depending on the size of the van. The site totals about 1 acre and is formed of a very long, thin parcel with a choke point in the middle meaning it's probably of limited value for anything other than storage.
Hmmmm, see if you can guess why it's for sale.If you're even 2% serious about this just put a low ball offer on the table and leave it there. It sounds like a business with no "value" so all you've got is the cash flow. And given you can make 4% tax free in an ISA you need an absolute minimum of 10% return, after tax (preferably 20% given it's going to require time and attention) to go within a country mile.
albrighton said:
The land is freehold and for sale, with the business at £675,000 which feels very high but I am also very naive here. Given 90 spaces at £65 and £6k pa for the cell tower the total revenue would be £76,200. Does this sound a reasonable price.
They've bundled the land and the business together so it's worth separating the two to determine whether it's a fair price.In simple terms, the start point of valuing a business is a multiple of its profits - anywhere between 5 or 6 times. Assuming a low overhead, then you're looking at somewhere in the region of £400k - £450k for the business meaning they're valuing the land at around £225k.
The value of the business itself is, I would say, too high. Whilst it's reasonably low-risk and low-maintenance, the revenue is pretty much fixed. Unless you change what the business does (such as halve the storage space and use the other half as caravan sales) then there's no real scope to increase profitability or even sales beyond filling the remaining vacant spaces - it is what it is and will remain so.
I would suggest that to determine if there's any viable value in the deal, you look at the land, not the business that's on it. Can you get planning permission to build on it? It's a good size plot and a few decent homes could net you a very nice return, even taking into account the need to buy the business as well. My guess is - as you have already spotted - that this isn't possible as the current owner would likely have done that already - but you never know and worth looking into.
albrighton said:
How are these things normally funded? Whatever funding they tend to require, how much capital would be expected of me?
Assuming you can't write out a cheque for the full amount from your existing savings:You can arrange an earn-out over time. You agree a down payment with the owner and the rest is paid from the profits of the business over a set period of time. The business (and land) will not be all yours until the earn-out period has completed - ownership split is determined by the capital each has invested at particular pre-agreed points in time This is the easiest and least burdensome option but carries risk in that you have the original owner still hanging around for a while and they will most likely want much more than they would take for all-up-front type deal.
You can borrow the money - but this will require some hefty collateral.
Or you can look for investors (unlikely for this type of business).
Is it viable? Well, I agree with others that it offers little in the way of lavish opportunity....... but can see the attraction.
As a Copper close to being able to retire, I'm guessing you're around mid 50s. So - potentially - in around 10 years time, the business would have paid for itself at which point, you have a circa £70k income on top of your pension from a business that doesn't require much in the way of effort or carry much risk, which as you've had no experience in running a business, is not to be overlooked.
Some operational risk does exist, though. Caravan owners may find a more attractive, cheaper option else where (or one may open). You would then need to increase service levels and decrease prices to compete, lessening the returns. Legislation may change which makes the business more difficult or costly to operate. But these risks affect all businesses to some degree and business management is often better called risk management.
The question is, is there better way to attain that £70k income? Are you prepared to wait 10 years to see the benefit?
You also need to think about why you want to own a business. If you're looking for something to occupy your time in a meaningful way that you can grow, then this business isn't going to be that.
Edited by StevieBee on Friday 8th May 06:48
A narrow strip of land with 90 caravans on it doesn’t sound like low maintenance to me. It sounds like constant back and forth for people to collect and drop off their ‘vans at all hours and days of the week.
I assume that for the purpose of security and to avoid them crashing into each other when parking up they cannot do this unsupervised?
Assuming the purchase has to be financed that will be at least £30k interest (@5%), say £10k maintenance, insurance on the site and £2m worth of caravans is going to be another £10k isn’t it?
So even if you are full to capacity that’s a max of £26k left over to cover you having to administer and collect payments of 90 people and deal with them every time they want to go away for the weekend and you are not even repaying the capital back.
Can’t a senior investigator get some nice consulting or contracting work at a few hundred quid a day that would earn far more for zero investment?
I assume that for the purpose of security and to avoid them crashing into each other when parking up they cannot do this unsupervised?
Assuming the purchase has to be financed that will be at least £30k interest (@5%), say £10k maintenance, insurance on the site and £2m worth of caravans is going to be another £10k isn’t it?
So even if you are full to capacity that’s a max of £26k left over to cover you having to administer and collect payments of 90 people and deal with them every time they want to go away for the weekend and you are not even repaying the capital back.
Can’t a senior investigator get some nice consulting or contracting work at a few hundred quid a day that would earn far more for zero investment?
I rent a unit on on a large site on the south coast. The greater proportion of this site is set out for storage - a good chunk of it caravans. It’s been like it for over ten years. It’s constantly full. They charge circa £80 a month for uncovered storage. It’s only accessible during day light hours via time locked gates and security passes. Owners are responsible for collecting/dropping off their own vans.
One of the downsides of owning a camper or caravan is storage - this solved it.
No idea what the value of something like this business is but it seems like a good viable business thats has good demand.
One of the downsides of owning a camper or caravan is storage - this solved it.
No idea what the value of something like this business is but it seems like a good viable business thats has good demand.
My thoughts:
It's over-priced as a business, depending on the value of the land.
£675k for a business generating less than £100k revenue a year is dreamland, unless the land is valuable and can be used for development.
But if you develop it, this is an investment, not a business.
Consider aswell what you are actually looking for. It seems like you're looking for something to keep you busy when you retire as a police officer.
This sounds like a very low input business - owners bring vans, drop them off and then collect them. What is there to keep you busy? Will you be offering additional services (maintenance/sales?)
If not, it doesn't seem like there'll actually be much to do. Therefore, consider if this is a job or an investment. If it's the latter, it doesn't seem a particularly good one, depending on the land (which you should have valued as an individual entity if you want to proceed with this)
It's over-priced as a business, depending on the value of the land.
£675k for a business generating less than £100k revenue a year is dreamland, unless the land is valuable and can be used for development.
But if you develop it, this is an investment, not a business.
Consider aswell what you are actually looking for. It seems like you're looking for something to keep you busy when you retire as a police officer.
This sounds like a very low input business - owners bring vans, drop them off and then collect them. What is there to keep you busy? Will you be offering additional services (maintenance/sales?)
If not, it doesn't seem like there'll actually be much to do. Therefore, consider if this is a job or an investment. If it's the latter, it doesn't seem a particularly good one, depending on the land (which you should have valued as an individual entity if you want to proceed with this)
I really appreciate the replies so far. It's exactly the though provoking questions I needed to consider.
To expand on the OP, the site has space for 90 vans and is fully occupied with a waiting list. The site is registered with CaSSOA which are a caravan storage accreditation organisation and stipulates the level of security and access for the site. Owners use card and keypad access to enter the site 24 hours so there's no requirement to operate a call facility for customer access.
But yes, the crux of why I'm looking for a business is what's important. I absolutely could get another job, there was a fantastic job working for the ECB as their corruption investigations lead only a few months ago which really appealed and there are myriad other roles that I could become passionate about. I could even stay doing what I do now. I just have an itch to run a business and be the master of my fate rather than PAYE. I completely understand the comments about the stress of business and the ease of taking another job but the appeal for me is moving away from corporate and learning something new with the safety net of a good career and pension income behind me if it fails.
That being said, my concerns about it being pricy seem to be fair based on comments here. The village is going through a period of development so perhaps the land would be good for that but I can't see it. It's too clumsily shaped and right next to a railway which in turn is right next to a noisy bypass. The field adjoining one side has been earmarked for development though so perhaps there's value in that.
In any case, it looks too expensive for not enough profit and also without enough involvement from me or the opportunity to expand. I'll pop the advertisement up https://www.rightmove.co.uk/properties/74605316126...
I have a request in with the sales team so I'll see what comes.
To expand on the OP, the site has space for 90 vans and is fully occupied with a waiting list. The site is registered with CaSSOA which are a caravan storage accreditation organisation and stipulates the level of security and access for the site. Owners use card and keypad access to enter the site 24 hours so there's no requirement to operate a call facility for customer access.
surveyor said:
I ll talk about the mast as that s my business nowadays.
Thanks for this, it's really useful to know, especially considering negotiation for the new lease. My background is forensic telecoms so it's a nice little touch back with my real job too!Panamax said:
Hmmmm, see if you can guess why it's for sale.
If you're even 2% serious about this just put a low ball offer on the table and leave it there. It sounds like a business with no "value" so all you've got is the cash flow. And given you can make 4% tax free in an ISA you need an absolute minimum of 10% return, after tax (preferably 20% given it's going to require time and attention) to go within a country mile.
I'm 99% certain the owner is a guy who worked for my dad many years ago and set this up in retirement. The surname on the contact us email is the same so I assume it's either selling up to further retirement plans or given the time scale possibly probate.If you're even 2% serious about this just put a low ball offer on the table and leave it there. It sounds like a business with no "value" so all you've got is the cash flow. And given you can make 4% tax free in an ISA you need an absolute minimum of 10% return, after tax (preferably 20% given it's going to require time and attention) to go within a country mile.
StevieBee said:
Hugely useful stuff
The question is, is there better way to attain that £70k income? Are you prepared to wait 10 years to see the benefit?
You also need to think about why you want to own a business. If you're looking for something to occupy your time in a meaningful way that you can grow, then this business isn't going to be that.
Thanks for this. I can't write a cheque for the amount unfortunately. I'd need funding for approximately 75% of the total value which is why understanding the cost of funding is important for me. That money would be coming from a S&S ISA so would need to perform well to make it worth while. The question is, is there better way to attain that £70k income? Are you prepared to wait 10 years to see the benefit?
You also need to think about why you want to own a business. If you're looking for something to occupy your time in a meaningful way that you can grow, then this business isn't going to be that.
But yes, the crux of why I'm looking for a business is what's important. I absolutely could get another job, there was a fantastic job working for the ECB as their corruption investigations lead only a few months ago which really appealed and there are myriad other roles that I could become passionate about. I could even stay doing what I do now. I just have an itch to run a business and be the master of my fate rather than PAYE. I completely understand the comments about the stress of business and the ease of taking another job but the appeal for me is moving away from corporate and learning something new with the safety net of a good career and pension income behind me if it fails.
That being said, my concerns about it being pricy seem to be fair based on comments here. The village is going through a period of development so perhaps the land would be good for that but I can't see it. It's too clumsily shaped and right next to a railway which in turn is right next to a noisy bypass. The field adjoining one side has been earmarked for development though so perhaps there's value in that.
In any case, it looks too expensive for not enough profit and also without enough involvement from me or the opportunity to expand. I'll pop the advertisement up https://www.rightmove.co.uk/properties/74605316126...
I have a request in with the sales team so I'll see what comes.
Completely understand the desire to do your own thing, but how much work will this actually entail? The owners let themselves in to collect their vans, there's a waiting list so no need to do any marketing, you can't expand so there's no growth potential - doesn't sound like it'll actually take much of your time up?
Yeah I agree. Probably too expensive and not quite what I'm hoping to get out of it in terms of a new career.
Prior to this my intended passion project for retirement had always been cycling. I had visions of me organising and supporting long distance cycling trips for riders doing Lands End to John O'Groats, the Alps and rides across France. My full retirement from the old bill is about 5 years away so I'll see what the vendor for the caravan storage says when I view and if it's not viable I'll leave the saving in the ISA and continue dreaming of messing around with bikes and driving up Alps until I leave proper.
Prior to this my intended passion project for retirement had always been cycling. I had visions of me organising and supporting long distance cycling trips for riders doing Lands End to John O'Groats, the Alps and rides across France. My full retirement from the old bill is about 5 years away so I'll see what the vendor for the caravan storage says when I view and if it's not viable I'll leave the saving in the ISA and continue dreaming of messing around with bikes and driving up Alps until I leave proper.
I can't get the maths to work
£675,000 in an ISA (choose your flavour) earns you, what, £30k per year (ish) for doing nothing?
Put it in this business, which costs you time and hassle (every business does) and you'll have a piece of land which by your own admission is fairly worthless and £76k per year in revenue.
Take off insurance (over £1m of caravans on site, presumably?) overheads (power, light), tax and so on and you're surely not far off what you're getting from a simple ISA investment?
This isn't even taking into account the fact that you're not putting 100% cash in, so you'll be paying back what you've borrowed with interest.
One thing I can see that could be beneficial is that the railway station is on it's doorstep. Is it a popular commuter station? You can get into Birmingham New Street without stopping. If so, could you convert it to offer additional parking for the station?
90 spaces at £5 a day is north of £100k in revenue per year for doing absolutely nothing.
£675,000 in an ISA (choose your flavour) earns you, what, £30k per year (ish) for doing nothing?
Put it in this business, which costs you time and hassle (every business does) and you'll have a piece of land which by your own admission is fairly worthless and £76k per year in revenue.
Take off insurance (over £1m of caravans on site, presumably?) overheads (power, light), tax and so on and you're surely not far off what you're getting from a simple ISA investment?
This isn't even taking into account the fact that you're not putting 100% cash in, so you'll be paying back what you've borrowed with interest.
One thing I can see that could be beneficial is that the railway station is on it's doorstep. Is it a popular commuter station? You can get into Birmingham New Street without stopping. If so, could you convert it to offer additional parking for the station?
90 spaces at £5 a day is north of £100k in revenue per year for doing absolutely nothing.
Thanks. That’s really sensibly summarised. It’s far too expensive. I can only assume they value the land higher because of the recent developments in the village.
It was a useful commuter station but the service has been reduced now so whilst it’s direct to new street, it’s only hourly and now goes via Walsall so takes much longer.
It was a useful commuter station but the service has been reduced now so whilst it’s direct to new street, it’s only hourly and now goes via Walsall so takes much longer.
Ive got a good friend who now runs a long standing family business of which a large part was caravan storage.
I popped in to see him recently and noticed there werent any caravans there any longer and he said it just wasnt worth it and he always had so much trouble with travellers so was pleased to see the back of this element.
I popped in to see him recently and noticed there werent any caravans there any longer and he said it just wasnt worth it and he always had so much trouble with travellers so was pleased to see the back of this element.
albrighton said:
Thanks for this. I can't write a cheque for the amount unfortunately. I'd need funding for approximately 75% of the total value which is why understanding the cost of funding is important for me. That money would be coming from a S&S ISA so would need to perform well to make it worth while.
eek!Well done for building up an S&S ISA. You've built a substantial amount that's totally sheltered from tax. But if you use it to fund a business venture, that's the end of it - you can't decide after a year or two that it's not for you, sell and put the money back into the ISA. Your profits from the site will be taxed. Capital appreciation of the land is taxed.
If you can't fund it some other way I'd walk away.
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