The right path

Following recent redundancy, Mr R is keen to fulfil his dream of running a pub with his wife, but the way forward is confusing.

How viable is the option of becoming a self-employed manager?

I am looking for some advice from the panel of experts. I have recently taken redundancy from my job as a mechanical engineer and want to take on a pub.

My wife and I don't have all that much money, despite

my redundancy pay-off, but taking over a pub is our dream.

I have gained some previous experience by working as an assistant manager at a local pub, but that was about 10 years ago. Now I work at the local British Legion at weekends.

One company is offering me training and placement at a pub for a bond of £3,000. This seems attractive to people in our position as it offers low-cost entry into the trade.

We would be managers at the pub and would be paid 16% of net takings, which would give us a real incentive to work hard.

My main concern is that the pub seems to have had several managers recently - three in as many years, as far as I can tell.

I would also have to pay staff bills from my 16% but would get all the income from food sales. But I doubt that I would need to employ many staff as the pub is quite small.

What's the general consensus about being a self-employed manager, as it's known in the trade?

I feel pretty uncertain at present. This seems a good starting point, but I'm just not sure. Can you help, please?

David Morgan Cookseys DMP

Low-cost entry into the industry is always sought-after as a way to "cut your teeth" and learn whether you are really suited to the trade. A number of long-established training companies advertise in the Morning Advertiser. My first inclination is to play very safe and go with a reputable company and/or embark on a BII course. That way you are certain of having a quality education rather than just being left to learn from your own experience as a self-employed manager.

The problem you illustrate is one of balancing risk with reality. You are being offered 16% of net takings, but

without any certainty about what "net" means. Are there any "company" deductions included? Can you negotiate on any costs? Who pays for building maintenance? The list is

endless - and open to manipulation and abuse. Paying staff out of your 16% is a no-hoper, as staff costs will be at least 12% of total sales, unless you want to work 90 hours a week. You have also paid £3,000 (refundable, I hope) for the

privilege of working for a maximum 4% of net profit.

Food-sales income may seem attractive, but who has to provide the working capital to establish and sustain the food business? Again, take risk into account. Basic gross profit (GP) on food may be 50%, but after you have purchased a few pieces of catering equipment, extra cutlery and

tablecloths, that gross profit margin can quickly disappear.

Why not become an employed management couple for a major pubco instead? Apart from an assured salary, you will receive excellent on-the-job training and a wide range of initial experience that is funded by your employer. A self

employed manager is a very risky proposition. There are many negatives attached to your running a pub for

someone else, with the possibility of earning very little

(if anything) for all your hard work.

Paul Davey Davey & Co

You have had a taste of the licensed trade, but have not

had any real hands-on experience in a managerial position within the industry for some years. It is great that you are attracted to the licensed trade with proprietorial ambitions following your recent redundancy, but I would advise real caution prior to committing to the potentially costly opportunity you describe.

It sounds as if you are in real danger of inviting a baptism of fire with the self-employed management of what you have already identified as a potentially problematic house that has seen a recent succession of presumably

similarly-placed managers. Attracting potentially

self-employed managers may be the only way to keep the outlet open, but that hardly bodes well for your venture.

Investigate the possibility of working, possibly as an assistant manager, in a unit of a similar size and style to that to which you envisage running as your own business. It is

vital that your introduction to self-employment in the licensed trade is positive and does not cost you dearly,

particularly if your cash resources are limited.

Contact training and placement providers to compare costs and the variety of units to which they have access. Your personal licence is only the starting point of many aspects of pub management and self-employment you will need to learn about prior to taking on your first unit.

Most major pubcos offer comprehensive training

programmes - consider these as well as the independent

agencies to ensure a good match for your requirements.

The market offers a huge choice of size, style, location, level and mix of trade. The last thing you need to embark on is a costly mistake that eats into your limited resources and put the goal of self-employment and business ownership beyond your reach.

Graham Allman GA Select

It's highly commendable that you have a dream or goal in your life. When that dream is a pub, you are looking at a new home and a business wrapped up in one. Many people go down this road and end up with a smashing home in a suitable location that provides them and their families with a substantial living and quality lifestyle. So far - so good.

But if it sounds to good to be true, it probably is. Without knowing how much your "crock of gold" amounts to, it is

difficult to advise you. But to become a self-employed

manager is to work yourself into the ground for little return.

Check out training opportunities and whether they are accredited by a trade body such as the BII. You also need to know what type of pub and possible location you will be offered and its history, such as sales, how long the present licensees have been there and why they are leaving. If the pub takes £2,500 net of VAT a week this will mean a

possible weekly wage of £400 between the two of you, minus staff wages. No one can or should work 24/7, but my guess is that you will be doing that for £125 per week each.

Find out the terms of the £3,000 bond and talk to others who have the same arrangements with this company.

My advice is to talk to a recognised finance broker such

as Paul Thompson at Acorn Commercial Finance, who will

advise you how far you can go with the monies or assets you have available. You can also contact one of the

breweries that still offer traditional tenancies and get

training from recognised companies such as Taylor Hall,

in Derby. Some leasing pubcos offer free ingoings on

difficult-to-let pubs - but make sure you ask why.

Take great care if you go ahead with your original idea. It could be more productive to work on PAYE as a properly engaged pub manager and save every penny to fulfil your dreams. Good luck on this journey - there are many winners.

Mr R responds

What a wise old panel this is! I'm so glad I took the time to check out this dilemma fully before diving in and becoming a self-employed manager.

I think I was caught up in the

romantic dream of running a pub and that almost cost me dear.

After giving this offer careful

consideration, my wife and I have decided against going ahead.

Three managers being unable to make it work in three years does

indicate that there could be a problem.

Also, the fact that the company was unwilling to provide me with accounts made me feel uncertain. I just have no way of predicting how much I would be able to earn.

If, as Graham Allman suggests, it would only amount to £125 a week, it would not be worthwhile.

Many other things are unclear - do I get holiday pay and other benefits?

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