Biggins

I currently own & run a small manufacturing based business, 10 employees.
The Company was incorporated back in the 70's when the UK was still very much a hotbed for industry producing quality & competitive manufactured articles. Sadly, successive government actions have eaten away at most of the advantages UK manufacturing once had leaving us an overpriced, under skilled, red taped, litigious nation. It is my intention to continue to operate my current business until such time that it becomes grossly uneconomic to do so. By this, I do not mean until the Company does not make huge profits, as at present we are loss making but getting nearer to profit. Obviously, I am continually looking at areas for improvement within the Company to increase profitability, but as with most UK manufacturing, it is the labour costs & issues that are the biggest headaches. Thanks to Tony & the rest of the out of touch morons, our labour situation is set to worsen in October when the minimum wage is once again raised!!

OK, RANT OVER!!

With this in mind, I want to start a 2nd business venture in a totally unrelated field to manufacturing, thus hopefully providing a little future security. I have obviously already got ideas as to which areas I feel could be winners (property, fashionable coffee shop, designer menswear, womenswear retail) but thought it might be interesting to get Scoobynetters opinions on areas to consider. Start-up capital should be no more than £250k.

This should be interesting.

Big C

Any Franchising agent will gladly spend your £250k.
How about doing your civic duty and opening a 24hr McDonalds somewhere near to a thriving town centre bustiling with drunken late night revellers?
Or a BK, a KFC or whatever?

C

RussBoy

When I started on my own 3 or 4 years ago my accountant said "you can never go wrong when you buy and sell tangible items" and in theory she is right - you buy at x%, add your margin and sell at y%.

However, the Internet generation is the 'now' generation and hence want their products within a day or two and not 2 or 3 weeks as was in my generation (I'm not that old though ). This obviously means keeping larger stocks, which means not only warehousing and insurance costs etc. but also lot's of capital tied up in stock, which can suddenly become 'unfashionable' and hence worthless overnight.

I'd therefore suggest either a tertiary business (i.e the sale of services and not tangible items) or a tangible business (like a trendy coffee shop) where you don't need much cash wrapped up in products on the shelf.

Also, I'd suggest always trying to build a project which makes it 'resaleable' and not easily copied....

Big C was correct in saying any franchise would snap your hand off for that kind of cash...

Must admit, if I had that sort of money and the opportunity I'd look at a trendy 'ecletic' bar/restaurant somewhere posh. I'd also think about 'buy to let' properties - without going into too much detail, I'm led to believe (by my wife who works for a buy to let broker) that each buy to let mortgage can be financed, in part, against the rentable value of the property. This would basically mean that if you used the 250k cleverly for deposits you could probably own a number of mortgaged 'buy to let' properties, each giving you a modest monthly return....with house prices still steep it's impossible for some to start on the property ladder and hence they'll always be queues of people wanting to rent...

Good luck what ever you do!


Russ

Luan Pra bang

Thats only a good idea if you really really know what you are doing . A good properly set up kitchen can cost 80k on its own before you even go near the restaurant which has to be spot on to convince people to spend money there. Good trade can also take years to build up and will only happen if you have the quality to match the prices.
Mcdonalds as a franchise involves going to Mcdonalds school which sounds like a lot of hassle. Dyno rods make a fortune but you would have to buy a franchise outright from an existing trader. I would suggest you look at Dominoes the start up capital is only 60 k and they help you to finance the rest which means for the rest of the cash you could buy the free hold of the property and rent it to yourslef. The profit in selling a pizza that costs 1.50 to make 1.00 to deliver for 13.00 speaks for itself.

Nicci

The coffee shop is a saturated market, unless you happen to have no others in the area where you live (I work for a coffee supplier).

I agree with Big C, get a fast food franchise.

BMWhere?

Agree with the buy to let idea. As property prices increase then so will the number of people looking to rent! This is my long term plan for retirement cash!

As for retail, the more upmarket/trendy/exclusive your coffeeshop or whatever is, then the more you can rip people off although the flip side is the more you charge and the classier you are, the greater the risk of failure once the initial trendyness has worn off!

Service industry is the best way to go if you want a business IMHO. Minimum overheads no stock to worry about and usually quite high rates relative to the amount of grafting you need to do!

GaryK

Biggins,

You have a PM

cheers

Gary

TopBanana

The buy-to-let idea: What if the property market falls 25% when you've borrowed so heavily.. you're screwed!

As above, I know of a couple of people who've opened coffee shops along the lines of Costa etc and are doing very well indeed. The key is picking a good location.

RussBoy

If the property market falls as much as 25% then we're all screwed if we provide goods or services as one can assume the economy isn't doing well and hence the last place people will spend money is on luxuries like Mochas and Latte's...

Plus, a property investment (particulary Buy to Lets) is long term so again if the market does plummet you'll still probably ok unless you were aiming to sell at that time (i.e, one would expect the market to pick up again over the course of time). Arguably you'd be better off as you could find even more properties to invest in whilst they are cheap and as those with negative equity (as a result of the value drop) seek to rent for the short to medium term....

Finally, 'what if' scenarios apply to any industry - what if monsoons in South America force up coffee prices, what if we have a boiling hot summer and everyone buys cold drinks etc. (ok, I know that's unlikely...) Over the course of time, property has always proven to be a good long term investment as it's a necessity for all of us....

I agree with location issues with the coffee shop though (as with any business which relys on passing trade)


Russ

TopBanana

Taking the long-term view is great, so long as you don't run out of money! If your coffee shop stops making money, then you close it down... you're not bankrupt. It's a lot less risky and he's looking for a cash cow for a few years, not necessarily a long-term investment.

RussBoy

I still wouldn't agree there's less risk associated. If a coffee shop runs out of business then yes you could close it down but then that's it, game over.

Unless you are looking to sell every single one of your properties (to make this work you'd need a small portfolio IMO) at the same time and during a slump (and that's assuming the value hadn't risen before they fell) then what's the problem? Ok, so a portfolio worth say £500k this week is worth say £380k a few months later but who cares (so long as the market picks up for when you want to redeem the venture which is another benefit of property as you get the time for recovery).

Rents are charged to tenants on a fixed monthly figure, so unless the mortgage lending rate ratio to revenue doesn't become unworkable (in which case you hoik up the rents anyway at the next review) then there's no problem. Lenders aren't so stupid nowadays that they'll let you over expose yourself massively this way anyhow and they always have one eye on the ball (re long term actuary forecasting etc.)

I concede that the risk is greater in terms of exposure but the risk is spread (unlike in a coffee shop project) plus property does have a proven track record historically, and a chance to recover (assuming you aren't in it for a 'quick win'). There's also a big difference in property for development and property to let as property for development does indeed depend on a stable market to recoup your costs plus any profit within a particular timeframe, buy-to-lets don't (well, only over years anyway).

At the end of the day I think it depends on a/ how long a person wants to invest and b/ an exit route (as selling say 6 properties will be trickier than selling a coffee shop, granted).

All business ideas carry a risk of some sort and if they didn't then we'd all be buying up properties or running coffee bars - it's just the element of risk and the way it is perceived by the risk taker aka 'the risk/reward ratio'....

I've got an idea though jlanng, - how about I buy a shop and lease it to you for use as a coffee shop then we'll both be rich

TopBanana

Dream Weaver

It all depends where you are as well - we are crying out for a relaxing coffee shop here, but there isn't one. However, shop/premises rental is stupid.

Biggins

Thanks guys for all the input, especially to those who have PM'd me their ideas, it all makes for very interesting reading.

I think that having weighed up the pros and cons of each idea, it is "buy to let" residential property which seems favourite. Fortunately I am situated in a University town (who isn't these day's ) so might look at picking up several student style houses and renting them out. I have heard the horror stories of people who have gone down this route and had their fingers burnt, smashed up properties etc., but believe the key to it all is carefull tennant selection.

I may also start a Cafe Bar outlet in my village which my wife could run. The village is very upmarket with a small trendy shopping street containing the usual Home Interiors, Designer Dress Shop, Trendy Hairdresser, Estate Agent, Delicatessen etc. It is a hub for bored housewives in their X5's, Cayenne's, Boxsters etc. to meet up and I feel a good Coffee place would do well. How does £3.50 for a coffee and £4.00 for a slice of quiche sound? any takers??? Also, my other half has a Jewellery background so we could have a few quality pieces on display for them to browse whilst sipping their Nescafe.

I'm sure my brain is going to explode with all these ideas running through it. Time to start clearing the fog and deciding on a course of action.

RussBoy

That'll be £500 (including SN discount) consultancy please...

Spoon

The answer is in the clue!! Male massage parlour or Ann Summers type affair.

Scooby96

I once considered renting a very very small 'shop' at Tunbridge Wells train station to sell coffee when I say small I'm talking more like a kiosk. Footfall was very good however they wanted £15k a year - hence its still empty although a larger coffee shop has now opened up, I dread to think how much rent they pay!

Its costs appox 3p to make a decent brew / coffee - sell that for 90p-£1.50 and you're laughing!!