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Our experience

Learn from this

Whether you are a business or an individual, then you will know that there are some basics. And here is the first one.

STOP!!!!

No, really, there are basics that you MUST NOT IGNORE and they are covered over our pages on corporate advice. Ignore them and increase dramatically the chances of being a failure.

1. This information is valid for both a business and an individual.
2. It does not from a book, but from our observations of successful and unsuccessful people.

Unsuccessful people – what not to do

Some years ago I was asked to advise a retired widow. She had originally owned the house she lived in with no mortgage worth about £450,000. She also had savings in the region of £60,000. She had an interest in property and during the boom (after the turn of the century) she had invested in buy-to-let property in a university city. By the time I met her she owned several property’s and was apparently receiving a good income stream. However, the reason for her contacting me was to ask me to examine her situation and see how she could realise more income.

I asked to see a business or financial plan – there was none. I asked to talk with her accountant – she did it herself. I could carry on but it took me 2 meetings to establish that she her won home, which was originally debt free, now had a substantial mortgage that had been used to purchase some buy-to lets. When going through her accounts I quickly established the rental income, after allowing for unexpected expenses, was actually barely covering all her outgoings.

In fact, she was relying solely on increasing house prices to make her money. She presented me with figures that indicated that she had made in the region of £250,000 over 7 years, and that she had a healthy equity in the properties.

When I did the calculation and I allowed for selling costs and tax, and added back in other costs (that had mysteriously been ignored) I worked out that she did indeed have around £430,000 equity in the buy-to-let properties subject to capital gains tax. However, to offset this, she now had a £300,000 mortgage on her own home; so she actually had not made much money at all, and was in fact at risk if house prices fell (as they subsequently have).

An asset is only an asset if it either has potential for appreciating in value or raises a regular yield (income) and her portfolio was in danger of doing neither. Like so many other property investors she had forgotten golden investment rules and one of them was spending the profits, re-mortgaging as she went along. She had produced very little real income from the properties and despite them increasing in value she had no plan and never taken any advice.

My advice to her in early 2007 was to sell, take what little money she had and protect it, or at least take less risk by investing in more than one asset class where there was more liquidity. She did not take my advice as she saw property as a low risk that would continue to appreciate.

The reality

Now, she has no method of repaying her debts without probably selling her main residence as well. Her home is at risk if she does not keep up repayments. She is retired. She has barely sufficient income and possibly inadequate assets to repay all her debts now that house prices have started to decline. Could it all come crashing down, and if it does, how sympathetic should we be to this retired widow?

The lesson

My advice cost a few hundred pounds and was worth a lot more than that – avoidance of sleepless nights, worry, perhaps even a broken life. Yes a bit melodramatic, but I have no doubt what happens to many people whose business fails. However, what do business and individuals expect if they listen to no-one other than themselves and their family? Some people are bright enough and stubborn enough and able enough to get by without advisers, but the vast majority are not.

The moral

Nothing can guarantee success. Take advice as it may be the difference between success or a serious financial burden and worry. Even if you do not agree with the advice you are given (and there is no such thing as perfect advice most of the time) then at least recognise the value of being able to give answers to difficult questions!

Successful people

Are what we are! We started with nothing but hard work, determination and a business plan. We invested our own money and never borrowed in the first 9 years of business, other than a small overdraft facility. We have taken advice, studied and learnt, diversified and run several trademarks / business both in the UK and mainland Europe and each one has a profit – and we do not take these profits, preferring to re-invest in another viable asset. You are reading one of them!