Post Office Dilemma

I’m not sure whether writing this down will help, but I won’t know unless I try.

We visited the Post Office last week and were getting excited about it. Whilst I was away, I also discovered that a guitar-playing friend of mine happens to be a chartered accountant and he very kindly offered to cast his accountant’s eye over the numbers for the business. I spoke to him at length last night and he believes that the business is overvalued quite considerably and that we should be offering about £50k rather than the asking price of £90k.

I clicked a link he sent which showed various Post Offices for sale, and, judging by that, it doesn’t look like ours is expensive. But, looking at our numbers again, it seems that the net profit as it stands today would not sustain a family of four whilst paying back a considerable loan and it’s breaking my heart. The reason for moving is not primarily to make money; it’s a means of getting to the place where we have dreamed of living for a long time now. But having said that, I do not want to spend the next 10 years being miserable because we have no money. That would be worse than the position we’re in now. I know that money doesn’t bring happiness, but the lack of it can sure bring misery (and I know from experience that that is how I would feel).

My accountant friend has asked that we get the full accounts, rather than the extracts that we were provided with, so that he can look more closely. I pointed out the potential for increasing the net profit, to which his response was that we should not be valuing and paying for potential, but only paying for what the business is worth as it stands today.

The latest year’s figures should be available any day now, so I guess the thing to do would be to request the full set of accounts for the latest year and for the previous two years and then take it from there. The problem is the worry that somebody else will get in first and we’ll lose our dream, but I suppose we really ought to be looking at everything as closely as we possibly can before putting in an offer. Alternatively, we could offer considerably less than the asking price and see what happens, but I’m a bit nervous about doing that and either losing out to someone else or offending the vendor.

We don’t actually know how the vendor came up with the figure that she did, so it might very well be the case that she’s chancing her arm to see if there is any interest at that price, in which case if we offer less than the asking price but it turns out to be the only offer, it could work.

I feel that, based on the current net profit of the business, if we were to borrow what we have applied for and pay the asking price, we would be stretching ourselves too thinly for the next 10 years (which is the term of the loan). We would have very little room for manoeuvre and have next to nothing with which to improve the business. My fear is that the asking price is too high, but there’s just no real way of knowing. Up until now, we have been concentrating on how we would improve the business and looking for ways to increase the net profit; but, as my accountant friend points out, that is mere potential and we shouldn’t be paying for that.

I suppose that last night’s discussion with the accountant has knocked the rose-tinted specs right off my nose and I’m only now seeing the raw data, as it were, without taking into account the emotional attachment. And as the accountant told me, that is how accountants tend to see the world, at least in the business sense.

So what, dear friends, are we to do? It’s a dilemma to be sure.

 I guess the next steps should be these:

1. Request the full accounts for three years (including last year’s figures which are hot off the press and we don’t yet have);

2. Make a spreadsheet of other leasehold Post Offices for sale around the country, entering their data for the sake of comparison and get a feel for how these things are valued.

3. Try to stop worrying quite so much about it.

There, did that help? D’you know what? I think it did.


  1. Hi, Cams – was hoping you would surface soon … a question for you about this … what are the chances that you can see of improving the profits, either by cutting costs or offering different products/services ? Or does the place seem well-managed to you as it is now? When I look at a business opportunity, I try to cess out what *could* be – what value I bring to it – treating the current accounts as just a snapshot of where the business is now. Businesses are always in motion, either going up or down … can you visualize/dream about how to make this one go up? 🙂

  2. Hi Venus, nice to hear that you were hoping I’d be back 🙂 I was away for 10 days and left he online stuff alone for a while – it was quite refreshing actually but I wouldn’t fancy staying offline for much longer. 

    There certainly is a lot of room for improvements. Firstly, the shop could do with refitting and I have a couple of friends who have already offered to help with that – one’s a professional shop fitter and the other is in the building trade. That in itself is another of the things that seems to have just fallen into place. So we’d be looking at freshening the place up by installing a suspended ceiling, redoing the floor and renewing the lighting. We’d also be looking at installing automatic doors and a permanent ramp for wheelchair access. I believe the Post Office would provide a grant to cover at least some of those costs.

    Besides improvements to the shop, we plan to change a lot of the stock. At the moment it’s mainly stationary (which we would keep) and bric-a-brac (or “cheap tat” as we prefer to call it). We have many ideas, a strong desire to be there, and the advantage of still being relatively young and tech-oriented.

    In short, the whole thing seems like a Good Idea. We just don’t want to overpay and leave ourselves stretched for the length of the loan (10 years). We’d have little chance of budgeting for the improvements we want during that period, and then we’re in our mid 40s and have teenage kids. I predict that life will be rather different by then!

    Any words of encouragement would be most gratefully received!

  3. Some thoughts … when you look at improvements, you need to ask yourself if the improvements will actually add to your bottom line – will they make you money. I think getting HRH to pay for some of the improvements would be an excellent idea … but in combination with things that would make you money long term. The first three such things that I would consider would be:

    – offering a few computer terminals and internet access
    – selling really good coffee to go along w/ the internet access. Two of the highest profit margin things to sell in the world are jewelry and coffee. HUGE profit margin.
    – offering very high customer service with regard to small package shipments. Making it very easy for people in this remote place to use the Internet and then to exchange goods that way. I bet this area is profoundly underserved in this way.

    Therefore, you would be bringing people in from longer distances because of the ease of small package shipments, making them stay long enough to buy a cup of coffee and check their e-mail, and perhaps while there are there and feeling comfy in the new surroundings, they may buy some of the upgraded stock.

    As with web sites, you always need to be giving people a reason to be physically in your location (driving traffic), and then you want to make them stay there for a bit and spent a few bob.

    Just a few preliminary thoughts ! 🙂

  4. You’re thinking along the same lines Venus, well, at least with the Internet access anyway. We had planned on installing at least one iMac (nice looking machines and easy to use) for Internet access. Lorraine is a bit of a wizz with eBay and had planned on scheduling tutorials to each people how to buy and sell, with the obvious side benefit of having people start selling things and sending them out through the Post Office. I hadn’t thought of the coffee angle so many thanks for the suggestion. As it is, the interior is dull and shabby, so doing the refitting and redoing the lighting would make a nicer ambiance for browsing the web and drinking coffee. It’s just the cost thing.

    Tourism is an important factor on Arran, so, besides selling postcards, Lorraine had the idea of bringing together some of the small-ish arts and crafts that proliferate around the Island and creating a brand called From Arran with Love. People could create their own gift sets and send them out from the Post Office. This would work for locals and tourists alike.With my web skills I could also create a web site for the brand and see where it went.

    Many thanks for the ideas and taking the time to reply. I’m most grateful!  

  5. Great minds, eh? 🙂 I think you are on the right track and I’m betting that you could turn it into a money-maker with these relatively minor changes. I really like the branding idea, especially if you could make it easy for people to ship stuff out from your location.

    Bet you could find some amazing shortbread there to a) sell with cups of coffee b) package and sell as a local product.

  6. greywolf says:

    A few of thoughts from past experience.

    You must be emotionally attached to the business if you expect to put in the time and effort required to make it successful.  And it will take more time and effort than you expect it to.  It sounds like you and your wife are heading in that direction.

    The business will need money to function properly.  This is over and above the money that you will need to draw out of the business to live.  There will be days or weeks when your revenue is low for no particular reason and the business still needs to run ‘full steam ahead’ during that time.  The Cash Flow is just as important as the Income Statement and the Balance Sheet.

    I think Venus has the right idea about looking at the bottom line when thinking about renos and they will likely cost more than you expect once you tear into the building.  A new ceiling etc might be real nice but a good paint job and minor repairs might do the trick until the business is established, and the more you can do yourself the better.

    When comparing the relative price of the post office don’t forget to compare the value of other types of business also.  It may be a good price for a post office but their may be less costly businesses around that can fulfill your needs just as well.  That can be tough a one though, they are apples and oranges after all.

    Definitely take your time and look at all the angles and outcomes.  It’s easy to get caught up in the success scenarios but don’t forget to realistically look at the failure outcomes as well.  Try to keep the rose-tinted specs on the table for a little while just to make sure you don’t get drawn into a situation you and your family don’t need.

    To finish, it sounds like you and your wife are doing the right thing by talking to people who know more about business than you do.  Good luck moving forward and I’m sure it will all work itself out.

  7. Thanks greywolf. Helpful comments indeed. I’m quite overwhelmed by the response from my hoodies actually. I’m really glad I posted now.

    I understand your and Venus’s comments about the bottom line vs. the renovations. It is as you say; a lick of paint should be enough to begin with. Perhaps we should be looking at keeping afloat and improving the stock over the first few years and not contemplating any renovations until the loan is paid in ten years’ time. There are places we can cut costs, specifically by cutting down the hours of the current part-timers or even cutting it down to two from three. The idea of having to give someone their notice gives me the heebie-jeebies, but I suppose if I’m in business I’ll just have to get used to making tough decisions, specifically when it affects me and my family . Anyway, I’m getting ahead of myself now.

    We have requested the latest accounts from the vendor via our solicitors and are basically waiting for other people to respond now. I just need to try and keep a cool head and not get too distressed, for that is what was happening yesterday. I was beside myself with anxiety and it was rather worrying.

    I’ll keep you all posted via the blog.