Contract to permie maybe minor shareholding/director
Discussion
Current client is a relatively small business, in a very niche technology market. They have 4 directors. The majority of shares are held by the founder and his wife. The others by his university friends brother.
And a silent angel investor.
They have managed to get contracts bigger than they are so need to grow. I've been doing 2 things. Project Managing 2 projects and procedures. With an aim.to get some certificates on the wall. They have nothing. The reason they've been successful is partly because of their can do attitude. Or maverick. Pull it out of the hat at the last minute attitude.
Whilst this makes project management "fun" it's clear that for each project they should have gone out and got more people. The founder doesn't delegate too well, becuase he's a live wire and technically brilliant.
I don't know why but I'm really enjoying working for them. They are 140 miles away so mostly from home. Although I have a second property about 40 miles away.
Anyway they had a board meeting and they woukd like to discuss me going permanent.
They would also be open to the the package including shares, larger pension contribution, (I'm 54, so if they paid s
tless into pension, I could benefit from that in a tax free way in the nearish future, car, declaring my normal place of work as home etc.
They also suggested that if I wanted to invest, that potentially was an idea (my LTD company is sitting on a small buffer, plus the Bounce back loan that I took out when I could in May. )
Obviously I could put my head in the sand, and stay contracting for another 11 years, but After 11 years, the market is changing, and IR35 is causing volatility.
So I could probably get a contract renewal, and keep going with them for a year or more.
The problem with going permie, is they want me to pitch what I want.
If I just compare my net salary, net pension and net dividend, the in the hand figure over the last 5 years has been about £50 to £65k but at current rate is 57k.
Now if I reverse that, manipulate the pension so i stay in the 20% tax bracket. It needs a salary plus pension contribution of £80k
But that costs them closer to £90k.
So effectively they pay £70k now, and for me to maintain the same lifestyle, it would cost them £20k more.
So if there's a possibility of investing, what's it worth now?
As far as I can see, the assets aren't of high value. The workshop is rented. Some expensive electronic equipment, but guessing not more than £50k
The value is in the potential. And that comes with risk. The IP is all in the founders head really. Okay you could take the things they've been paid to develop them, but the company isn't big enough for it to have much value without him.
The projects I'm managing result in a turnover of £500k. But potentially woukd result in a 10 year product life of £500k a year with a decent margin, with spinoffs into other customers costing very little to apply it to thier problem.
The other projects they have probably have a combined turnover of £200k, but have a very high margin.
The plan seems to be, to become £5m turnover company with 20 employees, and get a big player to buy the technology once it's proven.
A bit dot com bubble. Value is in the potential.
Anyway, just looking for ideas.
As an aside. I applied for a contract in Oct 2019, and eventually it has come through, so,
I'm holding in my back pocket a contract at a massive defence company, SC clearance is now through, but they now say it's inside IR35, So the rate after tax is a bit st for the hassle of the commute. And working away.
They know about it because I told them, I've now got SC clearance and that will help them in future, once I can get it transferred.
And a silent angel investor.
They have managed to get contracts bigger than they are so need to grow. I've been doing 2 things. Project Managing 2 projects and procedures. With an aim.to get some certificates on the wall. They have nothing. The reason they've been successful is partly because of their can do attitude. Or maverick. Pull it out of the hat at the last minute attitude.
Whilst this makes project management "fun" it's clear that for each project they should have gone out and got more people. The founder doesn't delegate too well, becuase he's a live wire and technically brilliant.
I don't know why but I'm really enjoying working for them. They are 140 miles away so mostly from home. Although I have a second property about 40 miles away.
Anyway they had a board meeting and they woukd like to discuss me going permanent.
They would also be open to the the package including shares, larger pension contribution, (I'm 54, so if they paid s
tless into pension, I could benefit from that in a tax free way in the nearish future, car, declaring my normal place of work as home etc.They also suggested that if I wanted to invest, that potentially was an idea (my LTD company is sitting on a small buffer, plus the Bounce back loan that I took out when I could in May. )
Obviously I could put my head in the sand, and stay contracting for another 11 years, but After 11 years, the market is changing, and IR35 is causing volatility.
So I could probably get a contract renewal, and keep going with them for a year or more.
The problem with going permie, is they want me to pitch what I want.
If I just compare my net salary, net pension and net dividend, the in the hand figure over the last 5 years has been about £50 to £65k but at current rate is 57k.
Now if I reverse that, manipulate the pension so i stay in the 20% tax bracket. It needs a salary plus pension contribution of £80k
But that costs them closer to £90k.
So effectively they pay £70k now, and for me to maintain the same lifestyle, it would cost them £20k more.
So if there's a possibility of investing, what's it worth now?
As far as I can see, the assets aren't of high value. The workshop is rented. Some expensive electronic equipment, but guessing not more than £50k
The value is in the potential. And that comes with risk. The IP is all in the founders head really. Okay you could take the things they've been paid to develop them, but the company isn't big enough for it to have much value without him.
The projects I'm managing result in a turnover of £500k. But potentially woukd result in a 10 year product life of £500k a year with a decent margin, with spinoffs into other customers costing very little to apply it to thier problem.
The other projects they have probably have a combined turnover of £200k, but have a very high margin.
The plan seems to be, to become £5m turnover company with 20 employees, and get a big player to buy the technology once it's proven.
A bit dot com bubble. Value is in the potential.
Anyway, just looking for ideas.
As an aside. I applied for a contract in Oct 2019, and eventually it has come through, so,
I'm holding in my back pocket a contract at a massive defence company, SC clearance is now through, but they now say it's inside IR35, So the rate after tax is a bit s
t for the hassle of the commute. And working away. They know about it because I told them, I've now got SC clearance and that will help them in future, once I can get it transferred.
rog007 said:
This reads as quite an exciting prospect.
You’re right to pause and do your due diligence.
What comes to my mind is your own risk appetite.
Is this worth a punt, or are you risk averse and just want to continue as you are.
If you take a punt, I’d have no qualms in upping your figure to take account of that risk. They’ll either say yes or no, so not much to lose?
Keep us posted!
I think there's also my wife's attitude to risk, which is possible as low as you can go. You’re right to pause and do your due diligence.
What comes to my mind is your own risk appetite.
Is this worth a punt, or are you risk averse and just want to continue as you are.
If you take a punt, I’d have no qualms in upping your figure to take account of that risk. They’ll either say yes or no, so not much to lose?
Keep us posted!
I'm not about to start borrowing money to buy shares, (although my wife woukd argue that by not paying off the Bounce back loan and not using spare cash to pay off mortgage on a Buy to let, I'm effectively risking money that is borrowed)
Well it all went a bit quiet, and they decided to employ 2 permies. An Engineering manager and a "Sheldon", it was clear that they'd take me on as a permie, but the pay would be sub £50k and there's not a possibility of becoming a shareholder......
and then...
Out of the blue...long story short, I've accepted a permie job, on a salary that is equal to the average of my Turnover for the last 3.5 years.
If you factor in the pension, and commuting costs, I'll be on less money. But the actual job is much more in my comfort zone.
Wife isn't happy as she thinks it will be longer hours and less working from home. (She's right).
and then...
Out of the blue...long story short, I've accepted a permie job, on a salary that is equal to the average of my Turnover for the last 3.5 years.
If you factor in the pension, and commuting costs, I'll be on less money. But the actual job is much more in my comfort zone.
Wife isn't happy as she thinks it will be longer hours and less working from home. (She's right).
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