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Arran Post Office update

12 April 2007 by

I met a chartered accountant at a guitar thing I was and he kindly agreed to look over the figures for me. This he did and was surprised to discover that all we had were extracts of the accounts. So we requested the full accounts, including for the last financial year which we did not previously have. We just heard from our bank manager that he has received those accounts and has forwarded them on to us and a copy to my accountant friend. Unfortunately my accountant friend (to whom I shall henceforth refer to as Charles, since that is his name) is leaving for Spain tomorrow and there’s no way he’ll get the docs before he leaves.

The bank manager also got a copy of the lease which he has forwarded on to our solicitor. The solicitor has to confirm that the lease is being transferred into your name, that there is sufficient
time to repay your 10-year obligation and that there are no restrictive or onerous clauses. The solicitor also to confirm the purchase price of £x.

We did get an encouraging e-mail from the bank manager today, in which he said that the seller seems keen to sell to us. Encouraging news indeed.

We were asked by the bank to put together an income and expenditure forecast based on what we will be earning and spending once we get to Arran. This put me into full procrastination mode as it seemed such an impossible task, but thankfully Lorraine is a bit more together than I and she put together the document very well. I did the whole business plan and current income and expenditure form, but then ran out of momentum. It seems we make a good team when all is said and done!

So, what’s up now? The bank manager has authorised a commercial survey, now that he has the full set of accounts for the last three years, and we should hopefully get an estimated valuation of the business. Hopefully Charles will get a chance to look over them soon, and we’ll get a second valuation that way.

Charles also mentioned that it would be worthwhile forming a limited company rather than buying the business as a sole trader, which was what I was initially planning to do. That kicked off a weekend of research and much head-scratching. Seemingly it’s not quite so clear cut as that, but there do seem to be many advantages to proceeding this way. I got in touch with someone from the National Federation of Sub Postmasters to find out whether the PO is okay with appointing the subpostmaster position to an individual who was an employee of a limited company and this seems to be okay. So more head-scratching to come about that.

We’ll wait until we get the full accounts before we submit our income and expenditure forecast as the most recent year’s figures are apparently better than we had hoped and it could put us in a stronger position regarding the bank loan application. It’s doubtful that they will arrive before the weekend, which is a shame, so it will be the middle or end of next week before we get the next task completed.

So, all in all, we are making progress. It’s a long and difficult process and sometimes the whole thing just starts to seem impossible and a bad idea, but it’s my nature to think that way, particularly when I’m feeling overwhelmed and am facing seemingly impossible tasks. If I were on my own, I’d have stumbled and fallen long ago. Thankfully, the teamwork seems to be pulling us along. We really do want this to happen, so we’ve just got to keep plodding along and dealing with each piece of the puzzle in rightful order.

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Post Office Dilemma

2 April 2007 by

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.

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