VAT registered businesses are always open to receive a visit from one of the HMRC’s compliance officers. During the 22 years we have run our shop we have had 3 inspection visits and the last one was more than 10 years ago. It came as no real surprise that we recently had a phone call from the HMRC asking to arrange an appointment for one of their compliance officer to visit us.

We took the first date given to get the inspection dealt with quickly. The confirmation letter that was emailed to me advised us that we would need to have our business paperwork for the last 4 years available. As we had already delivered most of the 2010/2011 paperwork to our accountant we had to get it back and check that we had all the evidence for the VAT claim and anything else we thought that the officer may want to see. The compliance officer arrived and with his paperwork & notebook out on our kitchen table he started to ask about our business sale and VAT refund claim. He wanted to know who were the directors of our former business and what we were planning to do. He asked who we had sold the business to, their contact details and what the shop’s address is. He also asked us to describe what the business did and how many staff were employed.

All these details noted he wanted to understand why we were claiming a refund of VAT. We have used Total Accounting Service of Bognor Regis to undertake our VAT accounting for 20 years and they provide us with a record booklet every quarter, the officer wanted to see the latest one. After I had explained the records he went through the booklet asking to see the higher value invoices with the larger VAT amounts. Our key supplier that all these invoices were from was Capper & Co, our Spar wholesaler. He also inspected the invoices from our business transfer agent and solicitor for their work that lead to our shop sale.
Having been through all the evidence the compliance officer was satisfied that our claim was legitimate and he passed the refund for payment.

Another job done!

Our first task was to tell our staff that we were selling our business and the their jobs were safe as they were covered by TUPE . As I posted here that we also sent a message to our customers .

To enable the transfer to happen ‘comfortably’ we decided that we would close our shop at 1pm on the 21st. This was to allow for the removal of our rented SparPos epos system and the installation of the buyer’s Nisa tills ready for the next morning. We had prearranged with our stocktaker to undertake the valuation on 21st September and I contacted them to confirm the date. I also contact Post Office Ltd and Camelot to confirm the transfer.

I had been keeping our Spar wholesaler, Capper fully informed throughout our sales process and I spoke to their rep to discuss our final week of being one of their customers. We discussed removal of their equipment including the epos system. We also talked about when our last order would be placed.

Next on the list was a letter to each of our suppliers to tell them that we were selling our business and where needed to pay any outstanding accounts we sent a cheque. We also advised our local council of the impending change as well as the utility companies. And then came the HMRC in all it’s guises.

Throughout our last week we had many conversations with our customers, sharing memories and accepting their thanks for the service that we had provided them and the community. It was an outflow of sadness that we were leaving mixed with warm wishes for a happy retirement. It was delightful to hear from so many customers about how they saw us. We also received dozens of cards and letters.

To enable our buyer to get his EPOS system up and running by 22nd September we allowed him to have his back office computer installed on the previous Friday. As the Spar and NISA EPOS systems are very similar we were able to arrange for our stock file to be made available which saved a great deal of effort. His team did check that all our stock lines were on their system and then needed to add newspapers and magazines.

As the buyer and his store management team were in the shop for some of the days in the run up to completion we were able to introduce them to our staff and to start to introduce them to our customers. On hearing that one of our staff was concerned about his future with the business I arranged for him to have a interview with future owner. This dealt with the worry that all the staff were going to have to reapply for their jobs, this concern apparently came about due to a misunderstanding about the need for the new owner to provide a replacement contract of employment.

When our last day arrived it was business as usual, well nearly, all the deliveries arrived including a dry goods only one from Capper. This stock was set aside and its value was taken off the delivery note. Of course more customers wished to bid their own farewells to us, quite emotional really, but there was much to do.

At 1 pm we closed our shop for the very last time, I have to say it was quite a relief. The tasks for the afternoon and evening still had to be achieved. There was the stock valuation, removal of the SparPos system and Post Office balance that I needed to complete. Two stocktakers had already arrived and we set them to work. The Spar till engineer arrived and removed the tills, but before we allowed him to close down the back office computer we backed up and printed out data that we thought that we may need in the future such as the ‘electronic till rolls’.

We also needed to have our newspaper delivery customer debt figure to ‘sell’ to our buyer. As we had been computerise throughout our ownership that was just a matter of running a report. We had brought the value down significantly during the previous few days by sending out statements at the start of the week. A remarkable coincidence was the figure was with a few £1s of our 1989 transfer amount.

The buyer’s challenge was to get his scanning system installed and operational. This was followed by his team undertaking a full stocktaking using several hand held terminals and up loading the captured data on to the system. No small task.

During the afternoon our solicitor visited us so that he could be present at our last board meeting where we signed a series of documents that included us resigning as directors of our company. We also handed over to him the company record books for him to send on to the buyer’s solicitor. He told us that the purchase money for the business and stock had already been forwarded to him so completion would go head as arranged.

With the Post Office fully counted and the shop stocked on their system there was just the question of was everything in place for the following morning? As it was past midnight by this time I offered to provide floats for their tills and we locked up and looked forward to another busy day to come.

The new owner and his team were back by 5.30am and they checked the news delivery in and put the rounds together. At 7am I showed them how the automatic front door operated and they were off and trading. The Post Office trainer arrived before 8.30am and by 9am The new sub Postmaster, the trainer and myself had locked ourselves in the PO strongroom and the transfer stock count had begun. It was midday by the time everything had been checked and the paperwork completed. I was no longer a Sub Postmaster.

As we lived over the shop the 22nd of September was also our moving day, but that’s another story. Needless to say it was all a bit manic, but we had achieved our goal and after 22 year 6 months and 9 days of ownership of the newsagents on Haglands Lane in West Chiltington we had past the baton to a new owner.

I will look at the period from transferring the business to the new owner up to agreeing our completion accounts in a few months time.

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We were selling a limited company and this meant that the transaction would be dealt with by a Share Purchase Agreement to be drawn up by the buyer’s solicitor. We were offering a new lease for the premises and our solicitor would draw up this agreement. The next three months were very much filled with bringing these two parts of the deal together.

For us there was the regular request for information from the buyer and his solicitor. This stretched from staff details to flooding risks (the shop is on top of a hill so that risk is pretty close to zero).  During these three months we past over dozens of documents through our solicitor.  Thank goodness for having a good scanner!

One of the great benefits that our buyer and I had in bringing the deal to a positive conclusion was that we quickly developed a good relationship and were able to talk to each other about any questions that came up. I of course regularly talked to our agent and solicitor to either get their guidance or to bring them up to date.

As we were to become landlords we needed to get the electricity and gas safety checks done. The electricity check showed that we needed to have some improvements made to bring the installation up to date. This done our safety certificate was issued. The buyer’s surveyor discovered that there was evidence of woodworm in the roof and elsewhere. We called in a specialist firm to deal with this. After they had undertaken the work they provided us with a guarantee certificate for this. All these we passed on to our solicitor and he sent them on to his counterpart.

As the deal was by way of a share sale our solicitor advised us that we would need to provide a declaration letter for the buyer. We needed to let our solicitor know about all the issues that may come back to ‘haunt’ the company later like our dismissal of a weekend employee  http://www.betterretailing.com/2011/06/staff/a-thief-in-our-shop-police/ and a past dispute with a supplier who threatens court action. We also needed to put in the letter that we offered a ‘box office’ facility for many of our community groups. This list took several weeks to compose as many items that we eventually included were not immediately apparent.

We had to provide a register of assets, fixture & fittings, equipment, etc. In fact everything that our company owned and used on loan like the cigarette gantry and Post Office equipment. The list went through several drafts as we thought of more and more items that needed adding to it.

The next list was of our suppliers, everyone from Smiths News and Capper & Co our biggest suppliers to our smallest ones like a cash and carry that we rarely used. We included as much detail as was easily available account numbers and contact information.

We of course also had to agree a completion date that Post Office Ltd could accept, they needed to provide an Auditor/Trainer to oversee the transfer and deal with any training/compliance issues.

In the final part we look at the completion and transferring of the business.

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The reason we decided to use Transagents was the professional way that they acted when we bought our business through them in 1989. We had occasionally spoken to them during the 20 years between buying and hitting the sell button. This helped us believe that they would market the business well and we would have a good relationship while it was happening.

Once we had agreed that Transagents would sell our shop there was some significant information gathering for them. The most significant being what it was we were offering to sell. In our case it was our limited company and the freehold property were it traded as well as living accommodation. We also supplied the most recent three years accounts, the current business rate statement and Council Tax statement. Then we had the energy rating of the building surveyed and an asbestos report drawn up. Our agent put together an information pack for prospective buyers and after some small amendments we agreed their content. We also needed guidance as to how we should present what we were selling when people came to view.

When the agent phoned to say that they had several people that wished to view we knew that this was real. The visits were all interesting and we received several offers, none of which were near enough to the figure we were looking for. To begin with we only offered the business and freehold for sale, but the economic conditions since 2008 eventually persuaded us to offer a leasehold sale. We did this in spring 2010 and again had a new flush of viewers followed by a steady stream of offers.

It was last December that we agreed to one of these offers but unfortunately the potential buyer withdrew in March. We again had viewings from more people interested in the business and one of these made us a good offer. My next post will be about what happened next.

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Chris Salmon, the Bank of England's chief cashier, holding the new £50 note

Today the Bank of England released the first new re-design of the £50 note in 17 years.  On the back are portraits of the 19th century industrialists Matthew Boulton and James Watt, the first time a dual portrait has ever been used on a Bank of England note. It also has several new security features including a “Motion Thread” which shows an image of the £ symbol and the number 50 switching up and down when the note is tilted.

The old design featuring Sir John Houblon, the first governor of the Bank of England, will remain legal tender for the next few months but will eventually be recalled.  Its not exactly clear when they’ll be recalled but the Bank of England will give at least 3 months notice before doing so.

Chief cashier Chris Salmon encouraged retailers to spend time getting familiar with the new notes and their security features in order to help combat fraud.  He warned though that  ‘unfortunately no matter how well we design our notes, whatever their quality, and however well educated the public are about authentication, there will be some level of counterfeiting,’

What do you think of the new design? Do you find £50 notes useful or a hindrance?
Make sure you know how to spot a fake note by taking the test provided by the Bank of England.

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After undergoing a minor refit to make space for a single position counter and strong room we opened at the end of February 2004. Our community was delighted to get their Post Office back.

The key reason for the delay was down to us needing to obtain planning permission for our extension. Once we had opened up our Post Office and become comfortable with its management it was down to organising the development. There was the finance to raise, the builder to select and a new shop floor layout to design.

We started the build at the beginning of January 2004. The builders were with us until the end of April and the build went almost without a hitch. The only challenge our builder had to over come was to provide an open space without columns. This was overcome with the help of a neighbour who worked for the timber frame company our builder was using on our project. Amazing!

Once we had settled on a sales floor layout with a significant input from our Londis business development manager & his colleagues, we then agreed the schedule with their store development partner. We had to organise Post Office Ltd’s part of the development as we went to a two-position retail, two-position PO combi-counter in the new layout.

With everything organised the fit out of the new space happened over three days in mid March. It was very intense with many different tradesmen on site during these days, which was a real health and safety challenge.

Even though from the outside our shop was still a building site we had achieved a completely new look inside. The reaction from one of our first customers said it all, Wow.

Throughout the development our customers came into our shop by way of a temporary door to the side our premises. When the builders completed their work at end of April customers were able to use the new front entrance for the first time. We had been trading for six weeks and our customers liked it.

In the next part we move onto putting the business up for sale.

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The key reason we thought that a Post Office could work in our shop was the launch of the ‘combi-counter’.  This is a screen-less PO that would be part of the main shop. I was privileged to see a presentation about this ‘new’ development more than 12 years ago and immediately thought that it could work in our type of shop.

I had a meeting with Post Office Ltd’s Rural Transfer Advisor a couple of years later. Our neighbouring Post Office was not for sale at that time as the owner had only bought it a year or so before.  However we still talked through the process of buying a Post Office and of how a modernisation might work which proved to be both interesting and useful.

The next expert was our local district councillor who also happened to be a regular patron of the shop.  He was the chairman of the council planning committee so I regularly talked to him about our plans and opportunities. When I mentioned that we were considering an extension to the shop he arranged for a planning officer to visit us. The visit certainly smoothed the way forward as I was able to get a positive response to our idea of building on to the front of the shop. The only real concern was that we should ensure that the extension was built in similar materials to the rest of the premises.

By the time we needed to move towards a planning application the third expert, our architect, had retired, but he put us in touch with another who took our design scheme drawing through the planning application to permission.

All the way through the process from coming up with the idea to develop our shop to its completion and beyond we regularly talked another expert, our bank manager. We were most fortunate to have the same man in this role from 1996 through to 2007. It meant that he knew our business very well so when we wanted to apply for a loan he was incredibly supportive.

Next came selecting a good builder. Here our customers were very helpful in coming up with some names of who to invite to quote for the work. We had five on our list, but only three quoted as the others could not do the work within our time frame. Each builder we spoke to added to the knowledge we had about the process.

We also talked to a local estate agent and a commercial surveyor, both of whom were customers of our shop. Talking to them acted as a check on whether it made sense to invest in an extension to our shop.

In part 3 I take a look at the development we undertook.

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Steve's shop as it looked back in 1989

From the moment you open up a shop there will be a day in the future where you no longer have ownership of it. You may pass it on to a family member or sell the business or perhaps simply close it.

When my wife and I bought our newsagents shop in West Chiltington in March 1989 we didn’t have any thought of selling.  That thought came about ten years ago when my wife and I decided that we needed to understand how we could move on from our business once the time was right. None our children were interested in working with us in the business so we knew that we needed to prepare it for sale.

With a shop floor of 600 square feet we felt that the business would be seen as just another corner newsagents. Although we had added an off license and a reasonable convenience range we knew that we had work to do to improve its potential.

Looking around for possibilities we saw several opportunities, the nearby Sub Post Office was failing having changed hands several times in a relatively short period. We had not been interested in taking on a Post Office, but in a couple of periods when the branch had been closed we noticed a fall off in our trade. So we decided that we would look seriously at it if it came up for sale again.

With this thought we looked at how we could comfortably house a Post Office in our shop or alternatively could we move our business into the premises where the PO branch traded. We asked a local architect about extending our shop and he came up with a design scheme drawing for us to consider that would allow us to double the shop floor area. The extra space could be used to extend our convenience and local produce offering.

This of course would have needed a significant investment, but more on that in part two of this series.

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Mrs Butt described this as “grossly unfair”, and explained that the cost builds up quickly when you are a small business.

“I don’t see why small retailers such as myself should have to bear the brunt for offering Payzone’s services in-store, particularly when similar services can provide free ticket roll,” he said.

It’s an interesting problem, and one that has received an incredible reaction. I spoke with Retail Express editor Stefan Appleby who said that this letter had received one of the largest responses from other retailers he had seen in his time in charge of the title, so there is clearly a great strength of feeling on the issue.

Indeed, in our recent article on the launch of the Health Lottery we had a comment from Rohit Patel asking, “How can you give a lottery ticket that is nearly 10inches long? Who will compensate the number of rolls that this will take as Camelot give the ticket rolls free of charge?”

Payzone responded to Mrs Butt’s criticism explaining that their “policy on till rolls has been in place since 2009, with very little criticism from retailers. We believe this is because our customers are happy with our service and value the added earning potential a Payzone terminal provides.”

What do you think? Are companies such as Payzone being unfair by charging for ticket rolls, or is the earning potential they provide adequate compensation for this cost?

We’d love to know your thoughts.

The announcement of a fall in like-for-like sales of 0.5% is the first of its kind made by the retailer since the early 1990s, and shows that no shop is immune from the effects of the falling spending power of consumers that we reported last week.

The supermarket has still reported an increase in profits of 12.1% however on the back of “strong growth” in both Europe and Asia. They cited “subdued demand” in the UK as the cause for the fall in like-for-like sales.

Supermarkets are traditionally the very last of the retailers to see a fall in sales, so independents are right to heed this as a warning that tough times remain ahead.

Sainsbury’s results relatively strong

0.5% – fall in like for like sales at Tesco

However, it’s not all bad news as many analysts see the trend towards smaller c-stores as one of the contributing factors eating into supermarket margins.

Independent retailers are uniquely placed to adapt to a tough market, whereas the multiples’ smaller format stores are bound by their bigger brothers.

Sainsbury’s showed strong adaptiveness in the market with an increase of 1.5% like-for-like sales, also indicating that the market may not be as tough as Tesco’s figures suggest. Sainsbury’s Chief Executive described the results as “a good sales performance in a tough consumer environment.”

Big Price Drop

Tesco have been fighting hard for shoppers in recent weeks with their high-profile Big Price Drop promising to reduce the prices of over 3,000 “everyday” products.

A Guardian journalist analysed his shopping from the 12th September and found that the big price drop meant an increase of £2.09 on his grocery bill – apparently Parma ham and Innocent smoothies aren’t everyday essentials!

While Co-op chief executive Peter Marks believes people are cutting back on food for the first time in his working life, Tesco’s poor results also highlight the fact that 20% of the chains UK sales come from “discretionary” items – or in other words, electricals, CDs/DVDs, clothes and books.

These non-essential items are one thing that shoppers are cutting back on in their droves, and this is therefore another solace for the independent c-store owner selling the top-up essentials that customers are very much still relying on.
_{Updated: 5th October, 13:43}

Mr Varma has built a public profile on the back of a successful track record as a supplier to the multiple supermarkets and more recently through developing his own Dine In range. Late last year he joined the chairman of Asda in signing a letter to the Daily Telegraph supporting the government’s cuts to public spending.

Interviewed by Jon Snow of Channel Four, he said his optimism in creating new jobs and investing in the Dine In range was fuelled by the downturn because people were going to be eating in more frequently.

Mr Snow challenged Mr Varma’s view that the private sector could kick start the economy, saying that most small businesses could not get the loans from banks. Mr Varma’s answer was that he ran a small business (£80 million turnover BUT competing with Mars) and he achieved the loans.

How to get loans? You have to tell the story right and you have to get the results right, he says. There are difficulties but they are not insurmountable.

Spotting an opportunity

What Mr Varma is good at is the hard work of spotting an opportunity. He built his business on a simple fact. He saw that import duties for milled rice into Europe were £400 a tonne and for unmilled rice they were £200 a tonne. He knew nothing about rice but knew this was a good margin. He worked out that he could borrow the money to build a factory in the UK and the business would pay if he could sell 1,100 tonnes a year. His challenge was to get the volume of sales. The answer was own label for Marks and Spencer initially and then the supermarkets.

When to say no

Another important lesson is that of when to say no. Technology developments in Japan meant you could put rice in a pouch and sell it to UK consumers who could not master the art of cooking rice. Uncle Ben’s was the first mover in the UK and supermarkets asked Veetee to do own-label pouches. Mr Varma refused: “The brand leader and first-mover advantage was taken by Uncle Ben’s so anybody else would only struggle along behind…And I was so used to being mucked about by private-label, where margins went wafer-thin at times, that I was not prepared to go into another product just chasing someone else.”

Instead, he went to Japan to see what he could develop and the result was the Dine In range, targeted at the convenience market in the UK.

“What motivates people like me is that there is a problem that you want to solve,” Mr Varma told the FT. Pick the right problems to solve and your business is likely to be successful.

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There are several issues. If you sell 399 chicken dinners and have one left over, the cost model is very different from a shop where you sell nine chicken dinners and have one left over. If your 60,000 square foot hypermarket is sited where land is cheap and rates low, the cost of storing those dinners will be cheaper than in a 3,000 square foot store in a city centre.

How do the grocers try to manage the costs?

1. By clustering c-stores close together so you only need one truck to do deliveries
2. By tailoring what the stores offer to local demand and getting the stock levels correct
3. By trying to persuade shoppers to buy premium products.

“If people are going to come in and buy steak and a bottle of wine, it completely changes the economics,” Miles Foster, who is heading Morrisons’ c-store trial, told the FT. However, it is clear that the supermarkets are struggling with finding a competitive advantage against the wholesaler/cash and carry to symbol group/independent supply chain for local stores.

Independent retailers cannot be complacent but they may be encouraged. The big box approach works for superstores in part because the cost of travelling to the stores is taken by the shopper – both in time and through the cost of fuel. Moving the shop closer to the shopper means the supermarkets are taking over a bigger share of this cost and so far they can’t make the sums add up.

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