Who wants to confess to a business disaster?

I'll start

Didn't find your answer?

As an aside to my day job, I decided to invest in commercial property. (and I bow to DJKL's expertise here :))

At the time I bought the first one, I worked in a standard construction warehouse - and thought "how hard can this be"

Oh - and I have no trade skills whatsoever..

First purchase - office - this went fine, and rents out easily

Second purchase - steel portal frame warehouse - again, went fine,

Third purchase - cafe premises, with long leashold residential flats over. Floor is rotten, no rent, big repair bills, etc etc.

(when I say big - not 'bankruptcy' big, but just big enough to make me wish I hadn't bothered.)

Did I forget to mention not getting a survey...

I still like commercial property though. Personally I don't really like BTL residential.

 

Replies (26)

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ghm
By TaxTeddy
16th Feb 2022 09:13

On occasion I have thought that my worst business decision was to start my own small practice.

As you all know, the stresses can be immense and I look back at the many years where I worried if I would meet the mortgage payment on our home each month.

If I had my time over would I do it again? Probably not. Particularly when I now look at local government workers who, let's be honest, don't do much work to start with - now based at home and having a very nice time thank you very much. I think these people have got it right - why sweat for a living every day when you can make a reasonable salary for very little effort.

So, business disaster? Not quite, but mistakes were made.

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Replying to TaxTeddy:
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By Calculatorboy
16th Feb 2022 12:18

Spot on ..avoid accountancy

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By SXGuy
16th Feb 2022 09:24

A client came to me once, with his ebay cosmetics shop, loved it because he was under cutting everyone and making loads of money. To much in fact that he was heading towards the vat threshold.

When I asked him what his profit margin was he told me 20%.

I then asked him how he expected to make a profit once vat registered, considering the fees PayPal and eBay charge on top of the vat you'll have to pay over.

He ignored my advice, continued on and being vat registered, ended up owing thousands to hmrc and disappearing from the face of the earth.

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Replying to SXGuy:
RLI
By lionofludesch
16th Feb 2022 09:37

Presumably he had input tax to recover so he'd only need to increase his prices by maybe 4% to cover his increased costs and maintain his profit levels.

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Replying to lionofludesch:
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By SXGuy
16th Feb 2022 11:56

He refused to increase his prices at all.

To be honest it was a total mess, he'd round up all sales to the nearest pound when handing over the details, no amount of instruction would change the way he operated.

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Slim
By Slim
16th Feb 2022 09:36

i did a self build house and went in with the how hard can it be..

it cost me so many hours of my life

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Replying to Slim:
ghm
By TaxTeddy
16th Feb 2022 12:27

Ouch. Thought about that at one time.

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paddle steamer
By DJKL
16th Feb 2022 09:40

My views on property

I concur with you re residential, yields are too low, too much possible future government regulation and tenants can need far more hand holding, however they do stay full with few voids. (when we had 61 flats my annual occupancy percentage was circa 98%) and generally are easier to sell if required.

Whilst for smaller stuff it may not be possible we have tried over the years to always buy with a plan B in mind, so say buy offices but know if offices become difficult to let they can likely be converted into flats.(check local plan/look what has happened in similar properties in area)

Get yourself a decent agent, ours is long in the tooth but at least he trained as a CS back when training covered everything, these days they all seem to niche so can say do valuations/leasing but could not recognise a mullion if it fell on them (we nearly had that with some stonework a few weeks back) I suspect that might have saved you from the floor.

Nobody develops everything perfectly, we have had some right lemons, have overpaid by mistiming business cycle etc, don't beat yourself up, the secret is to not to let one property be so big it risks the business if it goes wrong (Easier said than done when starting out)

Be wary of the property that has been on the market a long while, there may well be good reason.

Sound advice is always needed so a good team helps, we have one director with a sales background, another was an architect, our agent trained as a QS and I deal with numbers and other admin nobody else wants to touch, so we can tap a range of skills, but even if not big enough for FT staff an assembled group of trusted pros is useful (though may take time to use some and discard the weak/useless etc).

Re professionals, namely architects (who I have a bit of distrust about- an architect, someone who wins prizes using his/her client's money), for small stuff a good architectural technician who knows the planning/building control system can be really valuable if you can get a good one.

Finally, leverage, whilst high leverage lets you grow at pace it is not a free lunch, post 2008 we could have been destroyed by our banks and we were only at circa 60% LTV, these days we carry no borrowing, we are smaller but easier to run and remarkably stress free- not to be sneered at.

Anyway good luck, my employers started into property in the 70s, partly be accident, and it has served them well such that neither has needed to do much work over the last ten years, being able to pay others (like me) to do it all for them; property embraces what Mr Buffett described as one of the Wonders of the World, compounding, buy well and let it carry the load.

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Slim
By Slim
16th Feb 2022 09:46

I also dont understand why everyone bets so heavily on res btl maybe it works in different areas of the UK but where I live you'll be lucky to see a 4% yield on a house and with it being easy pickings for the gov it seems mental to even try it.

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Replying to Slim:
paddle steamer
By DJKL
16th Feb 2022 10:11

Resale is far simpler, if in Edinburgh there are possibly 200 possible purchasers for an office we own there are likely 20,000 potential buyers re a particular flat, same with numbers of prospective tenants when letting- commercial letting voids of over a year are not impossible (we currently have one office that has been empty since last May)

On the plus side management, once let, especially if FRI but even if IRI, is far less work with commercial; boiler does not work, tenant's problem etc. (Until you get into the multilet unit/studios market where your rent inclusive of H & L)

I personally prefer commercial as in the main it tends to have less drama.

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Ivor Windybottom
By Ivor Windybottom
16th Feb 2022 10:10

I told the other half that touch screen technology was the future before it was a thing. Never got involved and now I'm not a multi-billionaire.
Still mention it when arguments about my judgement arise!

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Replying to Ivor Windybottom:
paddle steamer
By DJKL
16th Feb 2022 10:23

I once owned Wiggin Group shares, I held 1,000,000 that I had paid circa 1p each to buy.

After a time I got cold feet and sold, but later rebought far fewer ,circa 50,000 at 3p each.

Well I did fine with the later purchase, the shares climbed and I sold out in tranches right up to 40p a share, the share carried on climbing peaking at 75p before drifting back and later plunging into insolvency (Wiggins, amongst other things, had Manston Airport)

But I always think, if I had held my nerve with the million shares and say even sold out up to 40p with them , let alone the 75p peak, I would not be working now.

I cannot really complain, I made a profit, the funds likely got recycled into Aricom which also did well, but it still niggles, I sold shares at more than 10x their cost but it could have been so much better.

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Replying to DJKL:
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By Justin Bryant
16th Feb 2022 10:51

I bought about 5,000 Baltimore Technology shares when it was called Zergo around 1998 for about £1 each. They went to about £180 in the dot-com boom of 2000. My girlfriend told me to sell. I told her she was a fool. I was also worried about CGT, so I held them all. You can guess the rest.

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Replying to Justin Bryant:
paddle steamer
By DJKL
16th Feb 2022 10:53

I guess she is not currently your wife.

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Replying to DJKL:
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By Justin Bryant
16th Feb 2022 11:55

No. She was obviously way too smart for that.

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Replying to Justin Bryant:
paddle steamer
By DJKL
16th Feb 2022 11:44

Yes, marriage can be a tad akin to the infamous Groucho quote re Clubs

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Replying to Justin Bryant:
the sea otter
By memyself-eye
16th Feb 2022 11:21

Bloomsbury publishing was the first share I bought - for years it drifted along, paying a reasonable dividend but hardly setting the world alight - until Covid.
Now it's my biggest gain at £21k.

"To sell or not to sell, that is the question!"

I won't sell just yet cos I'm a greedy B*st*rd.......

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Replying to memyself-eye:
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By WhichTyler
16th Feb 2022 11:37

Logically you would hold on because you think it is going to go even higher. If you believe that then you can always sell some of it now so that you are either 'playing with the casino's money', or diversify, or enjoy a cruise.

If your starting assumption is right it will be back at £21k at some point (soon?). Rinse and repeat...

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By I'msorryIhaven'taclue
16th Feb 2022 10:43

Early days, I had a financial-adviser acquaintance whose wife I employed p/t around very tolerant school-run hours to get her through her AAT practical experience.

To repay that favour they surreptitiously canvassed my client-bank to promote their financial services, and in an effort to cover up commission trails even went so far as to persuade half a dozen or so of my better clients to move to their preferred accountant.

I still get the odd I told you so from Mrs I'mSorry over that one. She herself was something of a shark, and I guess it takes one to know one.

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Replying to I'msorryIhaven'taclue:
Slim
By Slim
16th Feb 2022 12:15

Some people!

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By legerman
16th Feb 2022 12:37

2 years ago I received the SBRR £10k grant. I have a few clients in a different location 50 miles away so thought it a good idea to give up my small office and take shop front premises on a busy main road in the other location, to expand my clientele. At the time I expected covid to peter out around July/August time.

In the 8/9 months I was there I gained 3 new clients, so nowhere near enough to cover my increased costs, and eventually the money ran out and I had to throw in the towel.

Luckily I was able to rent another small office back in my original location. Often think how I could have made better use of that 10k.

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Flag of the Soviet Union
By thevaliant
16th Feb 2022 13:33

Unlike almost everyone on this board, I'm not self employed.

I don't have the skills nor the inclination to be a partner in an accountancy practice, nor self employed one man band. Looking 'up', I think at least one of the partners don't either.

So maybe that is my biggest 'disaster'. Could've been a partner.

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By Michael Beaver
16th Feb 2022 17:02

I was working in the city as CFO for a fin-tech firm earning well into six figures. I decided that I didn't want to work for the man anymore and started my own accounting practice which was a long-held dream.

I went from being a high earner to maybe earning £15k in my first year (which I was quite delighted with at the time).

Unfortunately I also cashed in my stock options to fund the first year or two of my practice. That company got bought out two years later. I didn't have the heart to check the what the price per share was.

I've enjoyed having my own practice, and being my own boss, and my clients (for the most part) are lovely. But one can't help but think 'What if...?'

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By bluebaron
16th Feb 2022 17:15

When I was just starting my practice, I paid a four figure sum for advertising in the belief that it would lead to "a couple of enquiries a week" from potential new clients....well, after two years, I didn't even get a single enquiry! Total waste of money.

That, and taking on any old new work for a low fee in the early years.

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ALISK
By atleastisoundknowledgable...
17th Feb 2022 00:31

Like most small practice owners on here, starting a practice is in itself questionable. Had some disasters along the way (signed up to VirtualCabinet 3yr £3kpa contract, binned it off after 10 months. Still not sure how they let me get away without any penalty). Like someone else said, would I do it now? Probably not, especially the way HMRC are going. Get a nice cushty FC job instead, probably on similar money.

Anyway, the vat story above made me think about a (on the face of it very successful) restaurant client I used to have. A chef and a 6 figure earning friend decided to set up. They started drawing c£7kpcm each from the first month - “this is easy” the friend said, “I don’t know why I was worried about giving up my job”. I kept warning of the impending first vat bill for a 5 month period (most the F&F were bought second hand or off the back of lorries, so very little input to reclaim). I gave them the vat bill of (if memory serves) c£50k and watched the blood drain from their faces. “We didn’t know about vat, we’re not businessmen…”. 9 months later I present their first every CT bill and first ever SATR - again, taxes that they didn’t know about and they left for another firm. Looked the other year - they went into a CVL before their 3rd anniversary. Put a smile on my face.

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By Michael Davies
17th Feb 2022 09:46

You either have the Midas touch or you have not I have learned the hard way that I may be penny wise but I am definitely pound foolish.

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