I am hoping someone could help advise me, I have a client who financially needs helping out with their stuggle.
The situation is this:
Chef and his partner lives above the pub and recieves £123 roughly a week (g/f does not work at the pub just lives there with her b/f the chef)
Pub manager - takes home wages of anywhere between £500 - £1,000 a month depending on sales as he gets paid on a percentage. He also has been given 20% shares in the pub and on top of all this the pub is paying his domestic rates! Surely this is not usual practice - the only bill seperate to the pub is the council tax (as there is no business rates) and yet the pub are paying his council tax, surely this would be his responsibility - or should i say all three of them to pay this!! Would it also not be acceptable to ask to contribute to the rent which is over £1,600 a month
Not sure what the question is in there? Or who the client is?
Be careful that you do not slip into a position of advocacy.
Your client is just a client (I am assuming at the moment that the client is the chef?). Their personal financial matters are not your responsibility unless you are being paid to review such and in such scenario the facts need to be more formal.
In this scenario what does it have to do with the people who live upstairs how much or little the pub manager makes?
Could you rephrase the question to make the situation and your position in relation to it and who you are represening clearer please.
many thanks,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Sorry - I am just asking for peoples take on it really as the client is the pub - they are needing more finance I was merley wondering was the 3 people living above and paying nothing to the pub (being the manager the chef and the chefs girlfriend who does not work there anyway) was it unreasonable to suggest they paid their own council tax and a little towards the rent as between the 3 of them they live rent free, bills free and take home about two and a half thousand a month.
Ah, I understand now. Sorry, I couldn't work out who the client was from the first post.
Are you actually the clients accountant? If not you should not be giving any advice at all to the client.
If you are the accountant then the following are just pointers to consider.
past practice of the existing payment arrangements have caused a valid and legally enforcable contract ragardless as to whether such is in writing.
Variance to the existing arrangments will not go down well with the staff members (or chefs girlfriend). That said, staff are not exactly difficult to find but it is the quality of staff that is difficult to replace. Are these staff members good at what they do?
It sounds as though by more finance they are looking to keep the existing business going rather than expand it and need support for that... The market that the pub is in is not the healthiest so expect that to count against the application (and be reflected in offered interest rates if the financial establishment is willing to consider taking on the risk).
That the pub needs refinancing means (to my understanding) that the pub is not making enough to maintain its existing commitments. Would additional interest payments even if taken over a longer period so reducing immediate outgoings really make that better or just defer the issue?
The business basically has three options, the first two make it look better on paper, the third often needs to be considered even where owners do not wish to look at such :
1) Make more money
2) Reduce costs
3) withdraw from the market
Invariably businesses first look at option (2) where they should be looking more to option (1) or (3).
The scenario you describe the pub manager is running the pub and his income is directly related to profit giving goal congruence. If bad feeling is caused with the manager then if they are responsible for making the pub profitable (or more profitable than it would be without them) they are likely to take their skills elsewhere. (for the hours that they will be doing is sounds as though they are barely making minimum wage anyway!).
Plus of course the owners would have 20% of the pub to buy back from the manager... Is this really a 20% gift or did the manager purchase 20% of the busienss or is this 20% to make up for poor salary?
If the pub is viable then I would suggest using a Kaizen approach of improvement in small incremental steps.
Analyse what the business strengths and weaknesses are using SWOT analysis.
Look at the market that the pub works in using Porters five forces (Be honest in the appraisal. I am not expecting the results of that one to look pretty in the current climate).
Divide each area of the pub down per porters value change and look for synegies that can reduce costs.
All in all though do not approach this from the angle that the person making the money is expensive as (a) they are not, and (b) that approach is more alligned to appraoch (3) where one is looking to withdraw from a market.
Really the pub needs to not just look better but actually be better before approaching a financial establishment for refinancing (which I appreciate is the angle that you are coming from). This will take time so if they are looking for immediate refinancing they are already too late for an approach that will take six months plus before seeing any obvious improvements that can, quite litterally, be taken to the bank.
Worst case scenario. If the owners are determined to keep the pub open and they know what they are doing then, if the pub is not paying for itself they need to consider the last option scenario of losing the manager and running the pub themselves... Could they run it better than the manager? Would they lose the existing clientel if the manager left? Can the owners afford to buy back the 20% owned by the manager?
As I said at the start of this reply. If you are not the accountant do not offer any advice as if you get it wrong you can be sued to put the client back in the position that they would have been in had they not acted upon such advice.
If you are the accountant then the ideas above are simply meant to prompt your own thoughts and should not be confused with or considered advice either to yourself or the business in question.
As mentioned yesterday, be careful not to slip into advocacy. The pub is a client, it is not your business. Ensure that there remains clear demarcation.
Hope that helps to start getting our thinking on the right track with this.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
