To be overwhelmed at taking over a business

[maudesid]

I am unexpectedly in a position where I will be taking over a family business soon. I have no business experience but currently work in said business and have done for several years. I will be moving up to management day to day and owner of the business.
Obviously I have a lot to learn in terms of parts of the job that I currently don't do myself and also the business side, book keeping, tax, wages ect.
Have any of you started/taken over a business with little experience? Are any of you self employed and can tell me the pro's? or even the cons?

Can you negotiate a handover period? It seems a bit harsh to be dropped in it all at once.

As far as the book-keeping/tax/wages part goes, does the business currently employ/use the services of a book-keeper? If not, I would
recommend you do so at least for a few months while you are finding your feet. The sort of stuff is quite time consuming and you could spend a lot of time looking at it instead of managing the business. Much better to outsource it.

As far as the business goes, you need a good strategic oversight.

What are your fixed overheads (people, premises etc)? Where and when can you expect cash to come into the business from orders? You need at least a 12 month working cashflow. Watch the cash like a hawk at all times and remember most businesses fail due to cashflow problems.

Sounds daft, but really understand the difference between net and gross (I have known really smart people fail to grasp this). A £20k order does not look so good after you have deducted tax, a pro rata part of the costs of the employees who made it, a share of premises costs, materials etc.

Understand how many widgets you need to sell at what price in order to pay outgoings and break even. How many more before you turn a profit and can pay yourself, how many more before you can think of expanding. You must know what it costs you to fulfil an order and how profitable that order will be for you.

Many, many businesses fart about fulfilling orders which are simply not worth it for them financially. Being busy is not enough - busy AND profitable is the aim. Be ruthless, prune the clients who are difficult and the clients who are barely profitable. You want clients who pay on time and are profitable and preferably are regulars.

Then look forward, how many orders are coming down the pipeline? At some point, if you are not bringing in new business, you will come to a grinding halt. What is your plan for getting them in. Try and achieve a smooth timeline so you have a steady flow (Ironic laugh), what is your lead in time from first contact with a client to first order. Even if you are currently overrun with work a portion of your time must go into selling.

Six months down the line look at your staff. Are they the right people? do they all pull their weight? If it is a family firm I can more or less guarantee you will need to make some changes.

All DH got was a list of things to do at month end and his boss emigrated! We've had it for more than 10 years and in that time expanded, but it's been true graft.

Keep a strong eye on your costs. Small things mount up so look for better deals.

Make a list of things that need to be done monthly, quarterly and annually Eg. PAYE, auto enrollment pensions, wages, VAT, stock takes, insurance, H&S reviews, asbestos management plans, fire risk assessment, HR reviews etc. Your no.of employees effects various things under 5 and you won't need a qualified first aider etc (helpful to have one though).

We found it helpful to work out the weekly costs to stay open then we knew how much money we needed to make. Things like rent, business rates, wages generally come most expensive, plus utilities, advertising, corporation tax etc.

Remember turnover usually sounds great, but it is profit that you need to pay the bills, the wages, your wages and stay open.

Settle your accounts on time and stay absolutely on it in not allowing any account customers to go beyond their terms for late payment.

Do not commit to any big outlay until you find your feet and know exactly what you have.

There's benefits to be had if you have good employees you can trust around you, but remember the buck stops with you and it can make you unpopular at times!

Lists and lots of them... get into a routine. Ask for advice from everyone, don't be afraid to try and get a few things wrong. Hard work and the Ability to keep bouncing back is the key.

Thank you so much for these replies, really helpful.
There will be a handover period, I'll become manager in around a month and won't own the business for another few months after that which is probably a good thing. Without outing myself too much it is a service we provide rather than a product but still hard to understand the profit after everything comes out.
Do you keep a specific percentage of your profits aside every month in anticipation of annual tax bill?
They currently have an accountant who sorts out the tax at the end of the year as far as I am aware but do the books themselves, though I am inclined to agree that it would be better for me to outsource this as currently I have no clue and probably not much time!

Several people have mentioned to me that most people pay themselves minimum wage to minimise tax payments and then take more in dividends? If anyone is able to explain this to me in any detail that would be great!

Regarding the finance side of things, get yourself a ‘dashboard’ op.
This will encompass 2 spreadsheets:
Firstly, as you provide a service can I assume your clients are contracted? If so it makes it easier.
At the top of the sheet have the months
At the left hand side a list of clients
And the cells are the amount their invoiced (net figures) each month.
Totals on the bottom.
You can then have your projections for turnover and fill in your actuals.
On the 2nd spreadsheet of the workbook you have the months again at the top and the left side is split.
The first half is direct costs to the business, so if you supply say... security services you’d have the security personnel wages and any other direct costs.
The 2 nd half would be overheads.
This is your admin/management/sales wages & commission & I would put employer NI in there too.
You then go through the bank statements & any other overheads you list, things like:
Rent
Elec/Gas
Phone lines
Training costs
Advertising
Mailboxes
Broadband
Training costs
Vehicle leasing/depreciation if the company has vehicles
Uniforms
Machinery/equipment
Stationary

There will be more but these are just a few examples
You fill in the cells with the cost per month (net if vat deductable, gross if not)
Then at the bottom of your first half you have the total, then do a sum to deduct this amount from the total on the first page to give a gross profit.
At the bottom of the 2nd half, total & deduct from the gross profit, this is your net profit.

Cashflow is also important, so have a separate sheet listing the starting balance, the projected profit for that month and the end balance. (If the company is factored or financed on invoicing) if not, you’ll have to manually fill in the payments received instead of invoice amounts
I also find it useful to have a list of dates for invoicing (if invoiced on seperate dates & again, factored or financed) & a list of dates for the expenses.

The Dividends is because as a director you’ll have a tax free dividend allowance on top of your tax free paye allowance, but your accountant will be able to explain this to you.

Op before your handover, perhaps do a business course with a business consultant. You may find this most useful in regards to the day to day running of things.
Running a business is quite simple, but do make sure you are covered with essentials: the insurance is up to date & I would join the FSB (if not already) for any unexpected legal issues.

I run a small business and I outsource everything to do with accounting. I actually outsource almost everything that isn't core e.g. Computers, telephony, contracts

I think it's best to focus on the core business and really be on top with that.

Pinkgin that is all really helpful thank you for taking the time to send me that. Our ingoings and outgoings don't vary dramatically from month to month so this should help things I'm assuming? Will definitely look into FSB.
Iwouldrather that sounds very sensible and is definitely the approach I'm leaning towards, I am passionate about the job and it is a fantastic opportunity but I'm not business savvy and would do better focussing mostly on the day to day running, it is also a sector in which we have to be inspected so that is another daunting hurdle!

*Iwouldprefer sorry!

do you have to employ anyone else? if so I would also recommend outsourcing HR - its not too expensive and can save you a huge amount of grief.

oh and look at joining the FSB - as there are lots of forums for business advice .

I run a small business with my husband (+3 more employees). I use a programme called QuickBooks and pay an accountant £200 a month. The programme is fantastic, I use it for invoices, expenses, balancing accounts, PAYE, storing customers details ect, the accountant helps me with any queries I have and also submits all our tax / vat returns, deals with dividends ect.

SusieOwl there are 8 employees not including me who will remain working for me, we currently don't have HR as we're very small. Another recommendation for FSB will definitely look into that.
19lottie thank you for the recommendation, the current owner does their own books and pays an accountant to do the end of year tax return would quick books remove the need for them?

Quickbooks basically simplifies your own book keeping. I’d imagine you could do your own tax returns but I just get my accountant to do it for me. He also uses quickbooks so just gets all the info he requires from that. He’s also there is I have any queries or problems in relation to quickbooks and general accounting questions.

PS you also use it for invoicing customers, keeping records ect, it’s really user friendly and useful.

Second QuickBooks but I still have an accountant. Yes they pay yourself minimum wage (£713 a mo th) and take the rest as dividends - but get your accountant to explain this to you properly.