Adventures with lyrical - buying a business

I"m surprised to see how easy you can get some free advertising from the truck alone.

Nice thread lyrical alot of good info here, not to derail but i jus wanna pick your brain.

My gfs mother is opening up a small country style deli and bakery, specializing in gourmet homeade cupcakes, and other country style foods.

For advertisement its a small town so we figure going to some little league games, and doing some taste testing with cupcakes, and some of the more simple food, but other than that, and local papers, aside from all the ways you used to branch out your specific business, anything specific you would do for a restaurant, mainly for a grand opening?

I had the idea to hand out little, tokens or coins at a few conventions coming up, that offered either 1-2$ off your purchase, or something like a free icecream/cupcake with your purchase on opening day/weekend.

What Cad said.

I"m not sure why you are in a rush to pay off your debt. That will only increase your overall tax liability. Again, I"m not sure your your specifics Lyrical, so maybe talk to you accountant about it. I know mine personally always wants me to carry debt. As an example, the cars I purchase through the business, even though I can purchase them outright with no problem....we always lease or take loans out on. Same with equipment (I know Cad just mentioned he doesn"t finance depreciating assets, but as a business you can write off a portion of the depreciation, and you can stretch it out over a few years). It sounds like you are doing well so you need every write-off you can get. Every quarter my accountant will let me know I should spend "X" dollars on capital expenditures....if you aren"t using it on the business, it"s gonna go to Uncle Sam! You"re kinda screwed either way, but I"d rather see it go to my business, employees, etc, than the government.

Izuldan said:

What Cad said.

I"m not sure why you are in a rush to pay off your debt. That will only increase your overall tax liability. Again, I"m not sure your your specifics Lyrical, so maybe talk to you accountant about it. I know mine personally always wants me to carry debt. As an example, the cars I purchase through the business, even though I can purchase them outright with no problem....we always lease or take loans out on. Same with equipment (I know Cad just mentioned he doesn"t finance depreciating assets, but as a business you can write off a portion of the depreciation, and you can stretch it out over a few years). It sounds like you are doing well so you need every write-off you can get. Every quarter my accountant will let me know I should spend "X" dollars on capital expenditures....if you aren"t using it on the business, it"s gonna go to Uncle Sam! You"re kinda screwed either way, but I"d rather see it go to my business, employees, etc, than the government.

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Can"t say I really ever understood this line of thinking. I have clients that go hog wild buying shit for their company (as well as shit "for their company", but that"s different) that they don"t really need and in the end they have less take home cash. The way I look at it is this: estimate your tax rate and determine if you"d like to buy the assets with that % discount, and if that sounds like a good deal, do it, otherwise don"t waste your money.

IE if you end up paying $5k in financing and assorted costs to purchase an additional work vehicle with debt, but it only saves you an additional $1k of taxes... Why did you just do that?

Lyrical said:

Wow, I just looked at a year-to-year comparison, and we are up 12% in sales and profits are up 25%. I believe the extra advertising is helping. We may break 600k in sales this year, which would put us at pre-recession numbers. There may be less customers, but my ad budget is huge, so we are exposed to more of them.

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This year is likely to be one of our worst years in the past couple decades, if not ever (I only really know the past 10 years). However the last few months might be quite good, but even then we"re likely to barely break even for the year. As of our July statement, we were down 375k for the year, on paper anyways.

On top of that, one development went sideways and to get 400k of holdback we were owed out of the project, we had to buy 4 condos worth about 250k each and they gave us 100k credit on each. So we had to put another 600k or so back in, and are now in the real estate business. There"s a rental pool that we"ll put them in, so at worst we"ll break even on the carrying costs, and hopefully sell them at some point in the next year or two for close to what we bought them for. At least that way we have free and clear title on the places, as opposed to an IOU from the developer that they might have been unable to pay for years, if ever. Wee.

Oh, and then another project that we were halfway through last February got shut down due to a permitting issues with the city and community (it"s a recovery/treatment centre for addicts, neighborhood doesn"t want it, city does, it was zoned residential only and the city issued a permit, community successfully challenged the permit in court, got it thrown out and left the project in limbo). The arms-length government agency that is the owner stopped paying their bills two months before the project got shut down, so we"re owed about 300k in progress invoices on top of the 100k or so of holdback they have, so we"re out about 400k in total (although about a third of that is actually owed to subtrades so not really out of pocket for us).

So yeah, been an ugly, ugly year. The timing was good in terms of cashflow though, because while all that shit was going on we finished up a few other projects and actually got all of our holdback out. Otherwise I don"t even know what we would have done, bro and I would have had to kick in hundreds of thousands (that I don"t have) to keep the company afloat while these fucking scofflaws made us wait.

Long story short though, we"ve picked up somewhere around 10m worth of work in the past month or two. 170,000ft manufacturing facility, 100 suite hotel, 138 unit condo, 72ish unit University housing development, 65 suite condo, and a few smaller ones. All of it reasonably fast tracked, with completions expected by late next year. Along with other work we had on the go. Our margins are going to improve significantly, which is the biggest thing really. Our net margin the past few years has been 0-5% both due to not having much mark-up on the projects and not having much volume relative to our overhead expenses. Now all of the sudden our volume is going to spike at the same time our mark-up is going to go up fairly significantly as we finish up older projects that were tendered when things were ultra competitive and start the newer ones where we had a bit more padding.

The boom in Alberta is back. In the span of two months we went from wondering what we were going to do for work to, well, wondering what we are going to do with the work.

I felt bad the last boom from 2004-2008 how much money we were making in general, and specifically on certain projects where we knew we had no competition. After the past 3 years of shit, I won"t make that mistake again. I will be raping and pillaging.

TecKnoe said:

Nice thread lyrical alot of good info here, not to derail but i jus wanna pick your brain.

My gfs mother is opening up a small country style deli and bakery, specializing in gourmet homeade cupcakes, and other country style foods.

For advertisement its a small town so we figure going to some little league games, and doing some taste testing with cupcakes, and some of the more simple food, but other than that, and local papers, aside from all the ways you used to branch out your specific business, anything specific you would do for a restaurant, mainly for a grand opening?

I had the idea to hand out little, tokens or coins at a few conventions coming up, that offered either 1-2$ off your purchase, or something like a free icecream/cupcake with your purchase on opening day/weekend.

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Advertising for a restaurant is so market dependent it is really tough to tell you exactly what to do. But what you need to do is keep lots of information so you can figure out what does and does not work for you. If you do run a newspaper ad make sure you track each redemption (assuming it includes a coupon) so you can keep track of how much each redemption costs you. Eventually you will get the data that lets you know what does and does not work for you, not only across different advertising mediums, but which offers work the best as well.

Also it has already been mentioned, but you need an online presence. A website is great, but at the very least create a Facebook page. Any time a person engages your page there is a chance that action will show up on their feed meaning all of their friends will see your name. Content is key, keep it fresh and light. The posts on my page that get the most views are generally of a humorous nature.

Another thing you can do is reach out to local businesses. I"ve had success by just showing up to a local business with a bunch of free pizza for lunch. If you have a high-school near by you can do the same thing with the football team. If you are involved with a local church, often they have a bulletin board up where you can post a flyer. I"ve offered a Sunday lunch discount for church groups. There is nothing better than some word-of-mouth advertising and nothing generates trial like free food.

A few other ideas, some sort of customer loyalty program (can be as simple as a stamp card). Offer double stamps if they bring in a friend. You can use this to gather customer information so if you do something like a mailer you can target addresses that aren"t already in your database. Mailing a coupon to someone who already is a customer is just cannibalizing your own sales. If you do want to target people who already are your customers try to make the offer on something they don"t normally buy or some sort of add on item so they get a perceived increased value while you get an increase in ticket price.

For your grand opening, if your local paper has a business section reach out to them. At the very least they will probably do some "new deli opening" blurb and they might be willing to do a small piece on you which will give you a chance to tell your story and get you some free pub.

Hope some of that helps. Also for what it is worth I haven"t had much success with newspaper ads and haven"t done them for at least a decade (probably longer). Your market my vary.

Lyrical said:

I wouldn"t buy equipment I don"t need. But the more expensive pieces of equipment can kill you in repair costs as it gets older. I have a big rig that costs 50k to replace new and the frame has started to rip. I"ve spent 5k in the last year patching the frame, and it keeps ripping. It"s clear to me that we need to have some sort of equipment obsolescence plan in place. If we can get some sort of tax benefit, well that helps the incremental cost-benefit analysis of buying a new piece of equipment. But we aren"t going to go "hog wild" as you say.

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No, I was talking to Iz. Some tax people get in the rut of "must present client with lowest tax bill possible" to justify themselves/feel they are doing their job, while on the other hand the client"s biggest concern is they want to make money (that is after all why you are in business). It might feel counter-intuitive to say those two needs sometime oppose each other, but they in fact do. Often time paying a higher tax % is a GOOD thing - it means you are making bank.

I"m just pointing out that going for the lowest tax bill possible isn"t always the awesome thing some people think it is.