opinions on this

Discussion in 'Starting & Running a Business' started by Vertigo, 23rd Oct, 2019.

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  1. Vertigo

    Vertigo Well-Known Member

    Joined:
    7th Jul, 2015
    Posts:
    114
    Location:
    Nsw
    Hi

    I have a company and it is at crossroads, we are into our 3rd year of a big contract. The business has grown organically over this time and I have a put in a manager and it now runs under management with me not doing much. It is a very good business

    The profit now from the business is my wage with no retained earnings to re-invest or expand.

    I have been trying to get more contracts over the last 12 months and haven't been successful mainly due to the small market and our size. It would be easy for us to diversify but would mean I have to let my very good manager go and go back into the business

    I don't want to take on debt but I could work back in the business and use 100k a year to re-invest that I would save on wages.

    I feel like that this is the only option now but im just checking my thinking is in check, is there another way I should be looking at it?

    is there anyone here that made the transition from working director to sales at a particular financial point at the business growth?
     
  2. Morgs

    Morgs Well-Known Member Business Member

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    7th Dec, 2017
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    Location:
    Sydney NSW
    If you've got a great business that is running steady and delivering great numbers under management what additional value will you deliver to it by stepping back in to manage it yourself?

    It is particularly difficult to find good people, so if you've got one running the show for you I'd be trying to hold onto them and finding a way to deliver more value. Starting with questions like:
    - Exactly why you have not been able to deliver more contracts? Does something need to change or the offer need to evolve to appeal to a broader market?
    - What ideas did you have around diversification and why has nothing not progressed?
     
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  3. Vertigo

    Vertigo Well-Known Member

    Joined:
    7th Jul, 2015
    Posts:
    114
    Location:
    Nsw
    Hi Richard

    There won't be any value added to it by my participation in the daily process, just the saving of a manager wage (around 90k ) that I can save and then reinvest.

    Yes, it's difficult to see whether it's worth it or not letting the manager go. We could get another contract in the next few months then the hunt is on again for another manager

    We are up against global companies, so the preference for the client is for the bigger player, in terms of risk even though our product and service delivery is better.

    We thought that adding a bolt-on business and refining it to our own business model would demonstrate growth, innovation and add more value to our offering, which could entice clients to sign with us. Thus this requires capital or time in the business saving on wages to produce retained earnings for reinvestment.
     
  4. Morgs

    Morgs Well-Known Member Business Member

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    Location:
    Sydney NSW
    It sounds like it might well be the way forward, however I'm not so sure that you need to go backwards to go forwards. What happens once you have that (let's call it $90K) in savings from removing the manager? You can then invest into the expansion but that'll require the $90K and your time which means you need a new manager. If your current one is a good fit, and does a good job then if I were in your position I'd be wanting to retain them.

    If you could raise the capital now (or via debt) then that'll allow you to maintain continuity on your base business and accelerate the expansion but effectively a year. I don't know what that is worth to you and if the numbers make sense but I know in business, time is money!

    PS: This is not financial advice :)
     
  5. sharon

    sharon Well-Known Member

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    6th Jul, 2016
    Posts:
    410
    Location:
    Brisbane
    Did you say the business pays you a wage too? Even though you are not doing much in the business? If the business is taking care of itself and you are not doing much - why not get another job and invest your wage from the business back into the business - hence the business doesn't pay you anymore but you do get to keep your manager?
     

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