Start-up Finance

[ASP 1]

Evening Chaps,

Since going full time in March of this year, things have been going well (Selling bread and butter small hatchbacks and first time cars from home). However, I am struggling with cash flow and finance as a whole. Currently, I have three cars (10k invested) advertised and until one of them sells, I simply do not have the money to buy any additional stock (frustrating, seen as I have plenty of space for upto 10 at home). 

Essentially at the moment, I don't really have a business. As people have said before, it needs to be a production line, selling and buying X amount per week, not as and when I have the money because I've sold a car.

Just curious really as to how people started, perhaps similarly from home, and how you funded your initial investment. I know 10k is nothing in this game, but that's what I had at the time and I wanted to give it a proper go full time after years of dabbling part time (Before you ask, doing everything by the book!)

Two options really, look into getting some sort of finance (business loan) or go back to work for a year or two to raise what I would otherwise have borrowed.

Thanks in advance guys, Alex

[trade vet 703]

9 minutes ago, ASP said:

Evening Chaps,

Since going full time in March of this year, things have been going well (Selling bread and butter small hatchbacks and first time cars from home). However, I am struggling with cash flow and finance as a whole. Currently, I have three cars (10k invested) advertised and until one of them sells, I simply do not have the money to buy any additional stock (frustrating, seen as I have plenty of space for upto 10 at home). 

Essentially at the moment, I don't really have a business. As people have said before, it needs to be a production line, selling and buying X amount per week, not as and when I have the money because I've sold a car.

Just curious really as to how people started, perhaps similarly from home, and how you funded your initial investment. I know 10k is nothing in this game, but that's what I had at the time and I wanted to give it a proper go full time after years of dabbling part time (Before you ask, doing everything by the book!)

Two options really, look into getting some sort of finance (business loan) or go back to work for a year or two to raise what I would otherwise have borrowed.

Thanks in advance guys, Alex

 

10 minutes ago, ASP said:

Evening Chaps,

Since going full time in March of this year, things have been going well (Selling bread and butter small hatchbacks and first time cars from home). However, I am struggling with cash flow and finance as a whole. Currently, I have three cars (10k invested) advertised and until one of them sells, I simply do not have the money to buy any additional stock (frustrating, seen as I have plenty of space for upto 10 at home). 

Essentially at the moment, I don't really have a business. As people have said before, it needs to be a production line, selling and buying X amount per week, not as and when I have the money because I've sold a car.

Just curious really as to how people started, perhaps similarly from home, and how you funded your initial investment. I know 10k is nothing in this game, but that's what I had at the time and I wanted to give it a proper go full time after years of dabbling part time (Before you ask, doing everything by the book!)

Two options really, look into getting some sort of finance (business loan) or go back to work for a year or two to raise what I would otherwise have borrowed.

Thanks in advance guys, Alex

As you are going well,May I enquire how much on average you are making each week.Are you VAT registered ,It may be better to just stick with what you are doing.

[Mojo121 229]

Hey Alex, started with the same sort of money as you but the simple answer is I bought cheaper cars, worked on small margins and ran around like a blue arse fly to auctions, collecting cars and selling them quickly to build up.

It really difficult to buy cheap cars now though and we were always aware that a few mistakes would evaporate out money

[It's me 615]

6 minutes ago, Mojo121 said:

Hey Alex, started with the same sort of money as you but the simple answer is I bought cheaper cars, worked on small margins and ran around like a blue arse fly to auctions, collecting cars and selling them quickly to build up.

It really difficult to buy cheap cars now though and we were always aware that a few mistakes would evaporate out money

this

i started by buying cars out of an add i ran in the papers 'cars wanted'

i bought them gave them a quick wash and brush up and blocked them the same day

even then cash flow was always a problem where you bought a real nice sweety but had to let another trader buy it

personally having all your eggs in 3 cars to me is madness i would rather have 6 at least seeing as you have the room

cant give you an answer other than walk before you jump get rid of these cars you have to get cashflow back sit down rewrite your business plan and start again

you know you can do it youve proved it carry on seriously

[ASP 1]

Cheers for the response...Trade Vet - I'm on the cusp of VAT registration currently - 3/4 cars and I'll be over 85k. Currently, it's almost impossible to give a weekly figure. I've been netting a minimum of £600 per vehicle, £100 of which goes into my self funded warranty pot. I'm only selling between 4/6 a month, which doesn't leave much of a wage once expenses have been taken out!

Cheers Mojo, when I started out full time, I was only buying cars at £1000 or less including buyers fees, which allowed me to turn over more stock, but I was getting so many pricey problems I've now moved onto silver check assured, newer, lower mileage, FSH, pricier cars and fingers crossed, haven't had any major faults with cars bought

2 minutes ago, s and b said:

this

i started by buying cars out of an add i ran in the papers 'cars wanted'

i bought them gave them a quick wash and brush up and blocked them the same day

even then cash flow was always a problem where you bought a real nice sweety but had to let another trader buy it

personally having all your eggs in 3 cars to me is madness i would rather have 6 at least seeing as you have the room

cant give you an answer other than walk before you jump get rid of these cars you have to get cashflow back sit down rewrite your business plan and start again

you know you can do it youve proved it carry on seriously

Completely agree, feeling very uneasy with everything in these three cars. When you say blocked them, do you mean you put them through auction  S&B?

[andymc1973 199]

silver assured worthless

[DBDlloyds 18]

Hi Alex,

I started trading full time from home in May, my problem is buying stock to be honest. I certainly haven't got a bottomless pit of money but its getting the cars I am struggling with. I went to the auction today, bid on 5 cars and didn't win 1.

I have started looking at buying privately finding poorly advertised cars and going to look at them. At least you can drive the cars and I feel a little bit more confident in paying a little bit more for a car I have driven.

As you are more than aware borrowing money is cheap at the moment but for me I would rather take things a little slower and build my funds gradually. This business is hard enough as a new trader let alone worrying about loan repayments.

Regards Dean. 

 

[trade vet 703]

Hi ASP

I think you are are doing OK for newcomer.I would not register for VAT just yet.You will be able to get away with a lot in your first 18 months.Try and buy some stock privately as once you open an auction account and become a regular you will be on the HMRC radar.I would say stick with what you are doing and by next summer,you will have learned a lot more and you will probably be doing better.There are a lot of traders who would like to be in your situation ( no debt ).

[Arfur Dealy 823]

1 hour ago, trade vet said:

Hi ASP

I think you are are doing OK for newcomer.I would not register for VAT just yet.You will be able to get away with a lot in your first 18 months.Try and buy some stock privately as once you open an auction account and become a regular you will be on the HMRC radar.I would say stick with what you are doing and by next summer,you will have learned a lot more and you will probably be doing better.There are a lot of traders who would like to be in your situation ( no debt ).

+1. Don't borrow money, you then become a bitch to the debt. Let your business and confidence grow. Don't rush....

[have a word with the wife 299]

ADD VALUE !

auction halls are full of everybody from "charlie" with the smart top price car sales pitch to jo soap whos working from home AND drawing a wage to mr private who when hes paid the fees might as well have gone to "charlie" in first place and got a warranty !

i fail to see how working from home and buying from auction to retail is a business model at all nowadays !

you need to source from elsewhere and ADD VALUE ! what are your skills ? can you do a bit of spannering, valeting ? nowadays more than any other in the past you have to work harder for the $ and only by adding value can i see you going forward, read dlloyds and s&b posts again, and dont borrow money, youll get there 

[MrC 142]

How about an interest free credit card or two? I know its not going to be a huge amount but some are offering long interest free periods on purchases and its extra funding you can lean on. Much better than signing you life away

[BHM 994]

My immediate thought was that from the door you should be selling cheaper stuff.

13 hours ago, andymc1973 said:

silver assured worthless

+1, have a read of what’s covered then you’ll soon realise you’ve been lucky not buying a knacker. Sooner or later you are going to get a right kick up the arse so get used to it. The old saying “You’re not a proper trader until you’ve had a proper loss” is very true.

11 hours ago, Arfur Dealy said:

+1. Don't borrow money, you then become a bitch to the debt. Let your business and confidence grow. Don't rush....

+1.

You state you’re netting a minimum of £600 per vehicle and are selling 4/6 per month. By my mathematics that is £2400-3600 per month part time. You then state that after expenses that “doesn’t leave much of a wage once expenses have been taken out!”.

This means you are grossing NOT netting £600 per vehicle. As someone dealing from the door with few overheads, no VAT, only a few quid on insurance and your main cost being advertising please I fail to understand how you haven’t got much of a wage left. 

Finally you say you stock 3 cars but turn over 4/6 per month which is a stock turnover of 133-200% per month! Come on, are you sure? If so you’re an industry leader. 

This is all meant constructively, because until you know your true figures you’ll never know where your business is at. As an example, you’re turning over so many vehicles at thousands each but you’re not yet VAT registered - that simply does not stack up.

[justina3 518]

I can see Deborah Meaden wincing her eyes at those sums.

[Rory RSC 596]

Firstly I used to buy private. Spotted a niche in a particular model that was selling, learned it well found the common faults and bought models that needed these faults doing. EG we bought loads of Corsa C SRI with timing chain / headgasket problems then sold them as new chain or new headgasket which were the common issues people worried about.

. You get to drive the car  plus no nasty auction fee. You can't negotiate at auction. You can with private sellers when you wave money in front of them. I learned loads at this point and became very strong at negotiations which actually helped me with selling. 

Got a very cheap mechanic. Valeted them ourselves. Took out and maxed out a couple of credit cards to raise some money. 

Did not pay myself a wage as I had another healthy income fortunately at that point. I still pay myself hardly anything even now much prefer it building up into stock. I am all about the future of my business 

You need to be buying and selling fast. In and out and build momentum. Make it happen. Get a few cheaper cars. Spot something that has good margin and is popular and almost specialise to a degree with a particular model. You will land on it and know whats right for you. Keep an eye out on the market as at some point it will go off the boil. You need to be onto the next trend.

 

[sparky 274]

13 hours ago, Arfur Dealy said:

+1. Don't borrow money, you then become a bitch to the debt. Let your business and confidence grow. Don't rush....

Hmmmmm. A little bit of manageable debt (especially now with low interest rates) won't do any harm if used properly and the moment is right.  Luckily I have no debt (apart from the wife) but that's only because I took  on some debt on to start with.

I imagine Meadon, Jones and Co have all taken on plenty of debt in their lifetime.

[ASP 1]

Thanks for all your responses guys, it’s much appreciated. My figures might seem odd, so let me clarify a few things. I’ve only very recently starting investing in more expensive vehicles, I’ve spent most of the year buying sun £1000 vehicles, hence, I’m not yet at the VAT qualifying level. 

I was increasingly finding that, almost every car I was buying at this value needed serious, expensive work doing. I do everything myself, but clutches and gearbox on axle stands are not pleasent and very time consuming! 

I do everything myself, valeting, mechanical work etc.

Im going to get rid of the three I’ve got and go backo the drawing board, search the private classifieds etc. When I’ve looked before, it seems that private sellers want close to retail money on the cheaper cars, so I guess your profit has to come from the negotiation. Whatever you can negotiate, will be your margin. 

Spares and repairs is something else I’m going to pursue, I’m not scared to get stuck in and I like the idea from Rory about specialising in a couple of models and really getting to know common faults. Having been hit with a couple of Corsa D head gasket failures from auction, I know them fairly well! 

And sorry for the gross and net confusion-business is new to me, but I want to do it properly. My overheads, although low to many of you, are still significant. £245 monthly trade insurance, plates, website management/email account

13 minutes ago, sparky said:

Hmmmmm. A little bit of manageable debt (especially now with low interest rates) won't do any harm if used properly and the moment is right.  Luckily I have no debt (apart from the wife) but that's only because I took  on some debt on to start with.

I imagine Meadon, Jones and Co have all taken on plenty of debt in their lifetime.

I have a £3500 overdraft in the business account so this could be utilised. I think it’s only around £20 a month too

[trade vet 703]

24 minutes ago, ASP said:

Thanks for all your responses guys, it’s much appreciated. My figures might seem odd, so let me clarify a few things. I’ve only very recently starting investing in more expensive vehicles, I’ve spent most of the year buying sun £1000 vehicles, hence, I’m not yet at the VAT qualifying level. 

I was increasingly finding that, almost every car I was buying at this value needed serious, expensive work doing. I do everything myself, but clutches and gearbox on axle stands are not pleasent and very time consuming! 

I do everything myself, valeting, mechanical work etc.

Im going to get rid of the three I’ve got and go backo the drawing board, search the private classifieds etc. When I’ve looked before, it seems that private sellers want close to retail money on the cheaper cars, so I guess your profit has to come from the negotiation. Whatever you can negotiate, will be your margin. 

Spares and repairs is something else I’m going to pursue, I’m not scared to get stuck in and I like the idea from Rory about specialising in a couple of models and really getting to know common faults. Having been hit with a couple of Corsa D head gasket failures from auction, I know them fairly well! 

And sorry for the gross and net confusion-business is new to me, but I want to do it properly. My overheads, although low to many of you, are still significant. £245 monthly trade insurance, plates, website management/email account

I have a £3500 overdraft in the business account so this could be utilised. I think it’s only around £20 a month too

Be careful with business overdrafts,unless things have changed,they can be called in at any time,with little notice and for no reason.

[ASP 1]

You’re right Trade Vet, that clause is in the contract