In my previous article , I set out some of the reasons accountants shy away from taking on pubs as clients. While I can understand my fellow professionals’ reticence to a degree, I think pubs can get a bit of a rough deal and shouldn’t be segregated as a greater risk than any other business. I mean, let’s face it, any business can fail if not planned and operated efficiently.
Any accountant doing their job properly should not simply run the numbers, they should be integral to shaping a business plan that will work in commercial terms – and that should be true regardless of industry sector.
With any client, accountants should apply some sensible due diligence before taking on their custom and make sure their business is a viable proposition – or help them address areas that might pose a risk to financial success.
With the points in my previous article in mind, however, I’ve drawn up a list of questions I think accountants should be asking existing or potential pub owners or pub managers before embarking on a professional relationship.
Whether you’re looking at this as an accountant looking to work in this industry, or as an existing or potential pub owner, I hope the following are useful!
1 – Have you owned or managed a pub before?
It’s perfectly possible to start up or buy into a pub business without prior knowledge of the industry, but any and all experience will help! For those who have managed pubs, as opposed to owning their own, however – I would always point out that ownership comes with its own set of rules, especially where tax and accounting is concerned. Pubs are one of the types of business for which capital allowances claims can be very valuable, for example, for the extensive fixtures in the property. It’s worth pointing out the differences, good and bad, to make sure they still consider it a good investment.
If they haven’t experience of either, this may lead to a whole new conversation about expectations and business planning.
2 – Have you run any sort of business before and if so, how did it do?
Whilst there are distinct differences between running a pub to other businesses, knowing a proposed publican has some business acumen and at least a basic grasp of the elements involved in running a successful business (financial management being a big one!), is really important. Knowing that it’s a tough trade to excel in, I would suggest some foundation in business management is essential.
3 – How much spare capital will you have available after any proposed purchase and refurbishment costs?
It’s very rare to buy a pub that needs no initial capital spend to uplift it to a recommended standard. This is usually the reason it’s up for sale in the first place – because it’s tired or lacking something and the existing owner couldn’t afford the upgrade. As a result, it won’t be bringing in the necessary trade to make it a success. If this is going to completely clear out the coffers, however, it would raise a warning flag to me. Like any new business, it will take time to gather speed and start making a profit and there will invariably be other costs incurred to get it up and running. Will they be able to make ends meet until the pub profits meet their financial needs?
4 – Is it freehold or leasehold?
There are pros and cons to buying a pub outright or entering into a leasehold agreement. It’s important they understand the difference, know what they’re getting into and how each could impact them personally and the money they could make.
With leasehold, there will be a heavy legal document governing how they operate the business, for example. It’s essential they get a legal professional to go through this with them to make sure they understand, and are happy with, all of the terms. There may be hidden clauses in there that could counteract some of their exciting plans or make their business plan completely unworkable.
5 – What are the strengths and weaknesses of other local pubs and bars?
If they haven’t done their market research and scrutinised their competition, then they’re pretty much done for! What works in one area might not work in another. Make sure they’re completely au fait with the clientele of the region and know what the locals want from a local! If all the other bars are sports bars heaving with footy fans and there isn’t a trendy gastro-pub in the area, it’s no good thinking they can introduce something new and corner the market. First, they need to ask themselves why there’s that gap in the first place. Has it been tried before and failed? If all the punters want is a big screen and cheap beer, their business model will need to reflect that.
6 – Does this pub have a solid track record of success with no unwelcome interest from the police or local authority?
A pub can live or die on reputation. If it already has a bad one, it might be hard to change perceptions. Forewarned is forearmed, it’s worth doing some digging to find out some history.
7 – What is your planned strategy to outwit the local competition and gain market share?
Although there are less pubs around now, it’s still a very competitive market with the ones still around all vying for their community’s support and disposable income! Sales and marketing strategy form a cornerstone of any successful business. A pub needs to lure in customers and how they intend to do that should form a key area of their business plan. Addressing this at an early stage and feeling confident that the pub owner knows what they’re doing will give you more confidence in taking them on as a client.
If you own or are looking to buy a pub business and would like to work with a proactive accountant who can help build your business, please get in touch. I can help you work through these questions and ensure your pub business is on the right financial track.
At Get Smart Accountants we work with our clients to drive growth and help them achieve their dreams.
If you’d like some advice or support to get your business moving in the right direction, then we’d love to hear from you.
Call Emma or Paul on 01902 212937