Is Clay Pidgeon ready to start? Clay makes an appointment to see me on Wednesday morning. He already has an accountant, so why meet us? It’s an odd one, but best foot forward, we are here to help. I’m curious. All ears, to match the sizeable nose! Let’s look at
- Clay’s story
- Clay’s solution
- We can help
- Is Clay ready to start?
Clay’s Story
Clay is in his early 50s. From down Clonmel town. His dad, Tom, started a construction company, Pidgeons Matter Ltd, 40 years ago in the town. At the start, it was housing. Then they branched into commercial and now have a niche in the pharma industry. Building factory extensions and units for some of the larger players. Plenty of work, good profits, and great customers.
Clay is doing well. He’s on a six-figure salary. Plus, the company is making large monthly pension contributions for him. He has a pension pot of €1.5 million, and he knows what amount that can get to. There are no flies on him, as the saying goes. The company has a loyal and long-serving workforce. On the face of it, everything is rosy in the garden, but scratch the surface and there are issues. The reason why he’s here.
Business Issues
He has two main business issues. His senior management team, a finance person, and a buyer are sixty-five and seventy. Both want to retire after giving long service to the company. And both are vital to the business. The finance lady looks after the payroll, VAT, accounts, banking, and minds the money. The buyer is a wily old fox with lots of experience in the industry. As Clay puts it
“He’d buy two screws for the price of one”
Without them, the business wouldn’t function.
The second issue is Clay’s own. He works like a lunatic. As he says, we are a victim of our own success. The company is delivering projects in 7 months that should take a year. The demands of the industry they work in. Early starts, late finishes. He might see the wife for a few hours at the weekend. Even when he’s on holidays, which are few and far between, the phone is beeping. A savage worker, but it isn’t sustainable.
Clay’s Solution
Clay’s solution is to wind down the business. Close it at the end of 2025 when the current projects are done. Leave the twenty staff go and pay them redundancy, the cost of which would be €400,000. He’d tip away on smaller projects and generate a salary for himself but would have a life again. Liquidate the company and take out the cash reserves and pay the Capital Gains Tax. All doable and a sensible solution in his mind.
“Hold your horses here a second, Clay, I’m thinking. What about selling the business?” Does it not make sense to explore this option?
For me, here is a long and well-established business, in a niche area, delivering projects to A+ customers. It makes about €300,000 a year. And if you strip out Clay’s pension contributions, the profit would be €450,000. Surely, it would be a valuable business to another player in the Pharma construction space! Applying a very basic business valuation, using a multiple of 4, the trade would be worth about €1.8 million. Add existing cash balances to that, it brings the company value to €3 million. [Apologies to Ger, who loves a company valuation project, for my very crude calculation.]
In my mind, Clay is leaving over 2 million on the table by closing it down. The value of the business and the redundancy costs.
We can help
We can help in two ways. Firstly, help Clay to put a proper valuation on the business. Enter Ger with his company valuation skills. If Clay wants to explore the sale option, he needs to know a fair asking price. So, step one is to value the business. At least by having a proper valuation, Clay can decide knowing what his business is worth.
Secondly, we can help Clay with the finances through our outsourced finance function. Businesses can survive and thrive after the exit of a senior finance person by using us to look after the numbers. This works best if there’s a good person in the business who can feed us the information we need. Clay was curious to find out more. His main worry is to ensure payroll is right, VAT returns are right, and on time. He doesn’t want any hassle with Revenue, as that’s the way they operate.
Masterblaster Ltd
I told him about what we do for a client, Masterblaster Ltd. They had a senior finance person who left the business, and we filled that gap for them. It is a combination of the basics and the higher-end management accounts, too. The basics include
- Payroll
- VAT returns
- Bank reconciliations
- Debtors and Creditors control
While I say basics, I don’t mean to undersell those services. They are the foundations or nuts and bolts in relation to the numbers. Those must be right to get the value from the higher-end stuff, like management accounts and analysis. That’s why inserting a quality bookkeeping service into your business will pay off. Even more so, in Clay’s case, because the business runs smoothly. He’s not worried about the numbers and finances. All looked after. It’s a finance process.
The win for Masterblaster is they got a better finance service for less than the cost of the finance person. And the cherry on top is a 33% saving. The business owners had the vision to see the benefits of cloud accounting. Plus, they have invested the time and money to nail on that process.
Payroll
Take one service like payroll. Izabela wrote before that payroll isn’t easy, and we are lucky to have a specialist like her. She loves everything payroll and loves Collsoft, her favourite package. There are so many aspects to payroll that are complex. To name a few, you have
- Enhanced reporting requirements – ERR
- Holiday pay
- Public holidays
- Sick pay
- Benefit in kind
Get this wrong and you’ll hear about it from your employees. In a time when it’s so difficult to keep quality staff, messing with their pay will have them running out the door. And into the arms of your competitors.
Is Clay Ready to Start?
I asked at the outset if Clay is ready to start. By coming to the first meeting, he showed that he’s looking for the right help and advice. But this isn’t something he’s going to decide after a one-hour meeting.
“Right, that lad is sound, so I’m moving everything I have over to Comerford Foley.”
There isn’t that level of trust there yet. He has a long-standing relationship with his current accountant.
At the same time, he didn’t have this meeting with his accountants either. So, there’s a disconnect there or a feeling that he won’t get the answers he’s looking for. From our point of view, Clay and his company would be the right type of client that we’d love to help and work with. He’s honest and hardworking. and wants to do things right. And why wouldn’t you when you are only paying corporation tax at 12.5%?
Next Steps
The next step for Clay is to meet Ger in the middle of next month. He is doing a rare thing at the end of this one by taking a holiday. I suppose he has to reintroduce himself to the wife!
In that, Ger will delve further into his options, and they will look at a company valuation and what we need for that. It’s an opportunity for us to find out more about his business to see how we can help. If we do some work for him, it will increase the level of trust, and we can build from there.
How he found us?
I’m a curious sort, so I asked Clay how he found us.
“I had an issue with the close company surcharge. We were cashing in some investments, and we got caught for it. The accountants didn’t cop it. So, I was researching it and found your blogs.”
For me, it was nice to hear that some of the stuff we write is useful. And for business owners to find us this way is brilliant. A lot of the stuff we do seems complicated, but we love doing it. I know that sounds a bit crazy that people can like tax and accounts, but we are that rare breed. The buzz we get is working with people who are growing their businesses. Helping them on their business journey.
If we get more business from Clay, that’s super. If we don’t, that’s ok, too. I got a story out of it, and had the pleasure of meeting a very successful businessman. I’ll leave you with the words of Ready to Start from Win Butler and the Arcade Fire crew
“Now I’m ready to start
My mind is open wide
Now I’m ready to start
Not sure you’ll open the door
To step out into the dark
Now I’m ready.”
The song is about opening your mind, stepping out into the dark, and being ready to start. Being open to the passions of life. Outsourcing the numbers to us will give you more time to explore the things that excite you.
Are you ready to start? If so, start here
