What would you do in my situation?

Grammadeck

Looking for some advice here.

I've been running a business for over 5 years. It's doing okay, makes a steady turnover.

Due to changes in the structure of the company I've been able to make significant improvements to the set up, processes etc over the last year.

I believe that there's good potential for the company to continue to grow, however I find myself at a crossroads in terms of what I want to do over the next few years.

Option 1: Continue as I am and slowly build up the business
Option 2: Strip things back to achieve my main goal at the moment which is to buy a house.

To expand on Option 2, I am nearing 40 yrs old and I don't own my own house. I pay myself 50k, and this isn't enough to secure a property where I want/need to buy. Due to personal circumstances I am unable to save a significant amount and am very much in a rental trap.

I have one employee who earns around 35k. If I let this person go and reduced other costs, I could put myself on ~100k in a matter of months if I wanted to.

Of course, these changes would significantly impact the performance of the business and I would expect the business to be very inhibited in terms of its potential. I could manage a reduced workload by myself but I'd probably need to turn away new business and would also be unable to strive for where I think the business should go in the next few years, which if all went well I think it could be a multimillion euro business with potential for international expansion, etc.

If I was 10 years younger the answer would be obvious, but right now I feel there's little hope of me getting my own place, having that security, settling down and having a significantly better personal financial situation. I feel I'd be rolling the dice depending on the business growing significantly enough that I could get my salary to that level without making those cutbacks. Plus there's the option of ramping things back up once I get my own property, however a lot of the momentum would have been killed doing that.

Any advice would be much appreciated.

PhilOssophy

Interesting.
I'd always say look after #1 and unfortunately, if the employee has to go, so be it.
Nobody will thank you for not looking after yourself. I'd say make the decision with your own best interest and financial situation.
One consideration, is it possible the 35 year old could take your idea and go with it if you show him the door? If its a first to market idea, could he gazump you and completely screw you in the process?

Wabbit Ears

You want to grow the business by downsizing the workforce from 2 to 1 and putting all the responsibility on yourself solely for everything so you can buy a house.

Brings into a play a lot of Buisness ownership and Management ethics in general, but sure yea, look out for #1 and that goal of getting your house.

Grammadeck

PhilOssophy wrote: »

Interesting.
I'd always say look after #1 and unfortunately, if the employee has to go, so be it.
Nobody will thank you for not looking after yourself. I'd say make the decision with your own best interest and financial situation.
One consideration, is it possible the 35 year old could take your idea and go with it if you show him the door? If its a first to market idea, could he gazump you and completely screw you in the process?

Thanks for the reply! Yep bit of a tricky one alright.

Just to clarify the employee is on ~35k salary, rather than 35 yrs old

So that's actually the other side of it. The employee and I get on very well, and we have spoken about a form of partnered expansion. Covid threw a bit of a spanner in the works here, so now they're looking for a significant pay rise which I suppose is why I'm reassessing everything.

Just to note this person is a fantastic worker and they know the business inside out, and their absence will be very impactful. Plus, if I were to continue to grow the business (ie Option 1) it'd be significantly more difficult without them.

I don't think they would copy the concept if we were to go our separate ways, I suppose it's a possibility, but not one I would give much weight to when making my decision.

Grammadeck

Wabbit Ears wrote: »

You want to grow the business by downsizing the workforce from 2 to 1 and putting all the responsibility on yourself solely for everything so you can buy a house.

Brings into a play a lot of Buisness ownership and Management ethics in general, but sure yea, look out for #1 and that goal of getting your house.

Not sure if you're being sarcastic here - what ethical issues is this bringing? If it's the letting go of the employee, they'd get a new role very easily. They're headhunted regularly for higher salaried roles. They've stayed with me because they like working together and they see future potential in the business.

westgolf

Grammadeck wrote: »

Thanks for the reply! Yep bit of a tricky one alright.

Just to clarify the employee is on ~35k salary, rather than 35 yrs old

So that's actually the other side of it. The employee and I get on very well, and we have spoken about a form of partnered expansion. Covid threw a bit of a spanner in the works here, so now they're looking for a significant pay rise which I suppose is why I'm reassessing everything.

Just to note this person is a fantastic worker and they know the business inside out, and their absence will be very impactful. Plus, if I were to continue to grow the business (ie Option 1) it'd be significantly more difficult without them.

I don't think they would copy the concept if we were to go our separate ways, I suppose it's a possibility, but not one I would give much weight to when making my decision.

Possibly say no to the pay rise for now but instead incentivize the employee with either a commission based structure or a small shareholding ?

JMR

This is really a question that you can only answer yourself as the solution is rooted in your personal priorities rather than the business priorities.

Writing out your post, will have helped in some small way, I imagine.

One thing I would add, is whether you are fully confident that, the business could maintain your increased salary of €100k, should you reduce the workforce to 1?
Surely, letting the employee go, will impact turnover and therefore your ability to pay your salary - otherwise why do you need them??

BingCrosbee

My daughter had the same situation as yourself, nearing 40, no house, great business, one employee on 35000. The employee went travelling and she is 35,000 better off, works 6 days a week but will have her own house in 12 months.

BingCrosbee

My daughter had the same situation as yourself, nearing 40, no house, great business, one employee on 35000. The employee went travelling and she is 35,000 better off, works 6 days a week but will have her own house in 12 months.

PhilOssophy

JMR wrote: »

One thing I would add, is whether you are fully confident that, the business could maintain your increased salary of €100k, should you reduce the workforce to 1?
Surely, letting the employee go, will impact turnover and therefore your ability to pay your salary - otherwise why do you need them??

I meant to add that point too, yes you'll be 35k better off but only if you can retain what you already have in terms of customers, etc - if it means working 50% harder to do so, have you that much spare capacity in your life to do so?

Mrs OBumble

Under option 1, what would happen if you got sick or injured? If business is 1 person it would grind to a halt.

Are there any more options, eg some part time employee(s)?

Grammadeck

westgolf wrote: »

Possibly say no to the pay rise for now but instead incentivize the employee with either a commission based structure or a small shareholding ?

Thanks, I had considered this also but I'd rather retain 100% of the business at the moment as it'll make future management a lot more straightforward. If we're partnering in the future it'll be under a new entity as well.

JMR wrote: »

One thing I would add, is whether you are fully confident that, the business could maintain your increased salary of €100k, should you reduce the workforce to 1?
Surely, letting the employee go, will impact turnover and therefore your ability to pay your salary - otherwise why do you need them??

Yeah, the employee generates revenue that pays off in the long term, and their short term work covers their wages basically. I'm fairly confident the business could maintain a single salary of 100k at least for a couple of years. Without that growth aspect though that could dwindle over the following years. So it could well be the peak and thus the bigger picture potential could be wasted.

BingCrosbee wrote: »

My daughter had the same situation as yourself, nearing 40, no house, great business, one employee on 35000. The employee went travelling and she is 35,000 better off, works 6 days a week but will have her own house in 12 months.

Wow, very similar situation. Glad it's working out well for her and gives me some confidence if I go that route, thanks!

PhilOssophy wrote: »

I meant to add that point too, yes you'll be 35k better off but only if you can retain what you already have in terms of customers, etc - if it means working 50% harder to do so, have you that much spare capacity in your life to do so?

I'll have to restructure things for sure. There are other costs I could save on without this employee as well though, mainly office and associated costs. So the extra 35k becomes an extra 50k quite easily.

Mrs OBumble wrote: »

Under option 1, what would happen if you got sick or injured? If business is 1 person it would grind to a halt.

Are there any more options, eg some part time employee(s)?

Part of the improvements I've been making over the last year is building better processes for outsourced work. That's coming together nicely at the moment so it's giving me more confidence that I could manage okay by myself.

That being said, the current format the business is in is the only format that fulfils its full potential in terms of growth, due to the unique way we're approaching the market. Without it we lose that competitive edge and the growth will be much more limited and possibly reversed as a result.

tacofries

Small businesses are scared to up their prices. Perhaps before you let the employee go, try increasing yours. High prices can transform an okay business into an absolutely brilliant one overnight.

FionMc

I was in the same situation and earling same money as you. So I decided to switch focus to buying property. Heres what i did:

compromised on the property. bought an apartment instead of a house. Now I have an asset. I rent one room in the apartment sothat pays half the mortgage. Now focusing on my business. I plan to leave the apartment and live in cheaper country eventually and rent the other room (where I sleep) out and the property will pay for itself and become my pension effectively

Grammadeck

Thanks everyone for your input, plenty of food for thought. I still haven't made my mind up on this but hope to soon. Thanks again