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Paying for the privilege of running your own business

The Big Bang Theory is a very popular and successful American sitcom. ‘Stuart Bloom’ is the character who owns The Comic Center of Pasadena, a comic book store the main characters often visit.

Throughout the series, Stuart makes numerous mentions of the fact the store is struggling and that he now lives there as he can’t afford both a home and a business. Indeed, in one scene when it is suggested that it must be exciting to run and own a comic book store, Stuart sarcastically reveals it is ‘so great’ that he gets to work 70 hours a week and clears an average of $1.65 per hour.

While enjoying the light-hearted series, there is a serious message for some director/business owners. Here at Begbies Traynor we find ourselves meeting many directors and business owners in a similar circumstance to Stuart, but often not with Stuart’s self-awareness. Still passionate about their business, they find themselves in a situation where continuing to trade provides little financial reward but is at least better than the perceived alternative of closure.

Such a perceived alternative may simply mean the director/owner avoiding personal guarantees to secured lenders, a loss of work for other members of the family, and/or at least the chance to remain busy. Maintaining the status quo may put off any tough decisions for another day, but with the need to invest additional incremental loans, coupled with limited salary reward, some directors may indeed find themselves ‘paying for the privilege’.

One recent example has seen the directors injecting their personal savings and funding from their property equity into the company when nearing retirement. They then found themselves without the anticipated rewards as the core business of the company has been unable to trade out from the downturn; the company has simply run out of cash before advice and guidance on any alternatives can be sought. In some cases, those directors have now realised that for the last few years, the equivalent hourly rate earned has been well below any minimum wage – if they have taken a salary at all.

At Begbies Traynor, we have already helped, and continue to assist many directors and individuals by providing a financial health check to help them understand the immediate needs of the company/business, while offering advice on restructuring as well as more formal insolvency options. This may involve revisiting business plans or simply going back to the basics of what it is that directors/business owners are trying to achieve. In one recent case, we were able to find alternative investment following a business marketing campaign.

In most cases, we work in conjunction with the current professional advisors to provide that ‘tough love’ message and try to find those alternatives. More often than not, the alternative is not as bad as first anticipated and we can help directors regain control of the situation with an identified plan of action.

For more information, call a member of our team on 0161 837 1700.

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Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland
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