I'm having an argument with the boss...


D

Dave F.

Hi

Not a serious one, more of a discussion.

It's about a % profit the company made (just over 5%).

Personally I think this is OK. Not brilliant, but liveable.

He says it's not good enough because: "you could get that rate by just
sticking it in the Halifax".

Now, I think I've read previously that this is not a comparable
argument. Unfortunately I can't remember the reasons why.

Other than the company has to perform some work to get _any_ money to
invest. However are there any further reasons?

I'm keen to hear your opinion.

Cheers
Dave F.
 
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T

Toom Tabard

Dave said:
Hi

Not a serious one, more of a discussion.

It's about a % profit the company made (just over 5%).

Personally I think this is OK. Not brilliant, but liveable.

He says it's not good enough because: "you could get that rate by just
sticking it in the Halifax".

Now, I think I've read previously that this is not a comparable
argument. Unfortunately I can't remember the reasons why.

Other than the company has to perform some work to get _any_ money to
invest. However are there any further reasons?

I'm keen to hear your opinion.
Depends on many factors. But if you put capital assets into a business
and at the end of a year you have assets worth 5% more, then you could
have got at today's rates about 5%, less tax on interest (nett 4%),
from Halifax, and might be up by a whole actual 1% depending on your
measure of inflation. However, is the profit after owner has taken a
salary from the business, and would he have been happy to have no work
and take no salary, or happy to work for someone else and could get a
comparable salary from such work ?

Toom
 
M

Miss L. Toe

Dave F. said:
Hi

Not a serious one, more of a discussion.

It's about a % profit the company made (just over 5%).

Personally I think this is OK. Not brilliant, but liveable.

He says it's not good enough because: "you could get that rate by just
sticking it in the Halifax".

Now, I think I've read previously that this is not a comparable
argument. Unfortunately I can't remember the reasons why.

Other than the company has to perform some work to get _any_ money to
invest. However are there any further reasons?

I'm keen to hear your opinion.

Cheers
Dave F.
What about some compensation for the risk of losing the lot ?

Also when you say 5% profit - is that 5% of turnover or 5% of investment ?
 
C

Chris Blunt

Hi

Not a serious one, more of a discussion.

It's about a % profit the company made (just over 5%).

Personally I think this is OK. Not brilliant, but liveable.

He says it's not good enough because: "you could get that rate by just
sticking it in the Halifax".

Now, I think I've read previously that this is not a comparable
argument. Unfortunately I can't remember the reasons why.

Other than the company has to perform some work to get _any_ money to
invest. However are there any further reasons?
One flaw in his argument I can see is that the 5% profit is,
presumably, calculated after the boss has paid himself a salary and
allowances out of the company. If the capital invested in the company
were instead invested in the Halifax at 5% he would then have to draw
on that 5% to provide himself money to live off.

Chris
 
T

Tim

Dave F. said:
One flaw in his argument I can see is that the 5% profit is,
presumably, calculated after the boss has paid himself a salary
and allowances out of the company. If the capital invested in the
company were instead invested in the Halifax at 5% he would
then have to draw on that 5% to provide himself money to live off.
No he wouldn't - he'd be working elsewhere instead, and
be receiving salary from that. Alternatively, if you really do
want to compare the business against your "Halifax" scenario
(ie with him not doing any work), then you need to imagine
that he had got in a manager for the business instead of
running it himself, whom he would have had to pay a salary...

Or do you really think that he should work for *nothing* ?!
 
V

Virgils Ghost

Tim said:
No he wouldn't - he'd be working elsewhere instead, and
be receiving salary from that. Alternatively, if you really do
want to compare the business against your "Halifax" scenario
(ie with him not doing any work), then you need to imagine
that he had got in a manager for the business instead of
running it himself, whom he would have had to pay a salary...
It rather depends on the nature of the business and the amount they've spent
on capital equipment or sunk costs. If we were talking about an old
fashioned metal bashing business and filling a factory full of expensive kit
for a mere 5% margin then clearly a return below the cost of capital is not
worth making (assuming future projections are equally dim). However, if the
business was running on what is a essentially a few grands worth of IT
equipment (which is virtually worthless on the secondary market) and based
on previous labour then the return isn't so bad if no new investment is
needed in the future and the outlook is quite rosy.

It does makes you wonder where the remaining 95% disappears to, whom is he
working for again? :)
 
J

John Boyle

In message <dJ6dnVd7kKICawfYRVnyuAA@brightview.com>, Dave F.

How can you say this..............
Personally I think this is OK. Not brilliant, but liveable.
And then say this ..........
Unfortunately I can't remember the reasons why.
You havent given us anything like the right info.

The first obvious question is "5% of what?"
 
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A

Adam

Dave F. said:
Hi

Not a serious one, more of a discussion.

It's about a % profit the company made (just over 5%).

Personally I think this is OK. Not brilliant, but liveable.

He says it's not good enough because: "you could get that rate by just
sticking it in the Halifax".

Now, I think I've read previously that this is not a comparable argument.
Unfortunately I can't remember the reasons why.

Other than the company has to perform some work to get _any_ money to
invest. However are there any further reasons?

I'm keen to hear your opinion.

Cheers
Dave F.
That depends on whose point of view you're looking at it from. From the
point of view of an investor who has nothing to do with the business, it
doesn't sound like a great investment (assuming you mean 5% of investment,
rather than 5% of turnover). However, if it's a small business that the boss
owns himself, and the profit comes after he's paid his own salary, then
that's a completely different thing. If he's paying himself a generous
salary, then really he doesn't need to make any profit at all.

FWIW, I own and run a small business, and pay myself a tiny salary, so I am
entirely dependent on my profits if I want to pay the mortgage and eat. If
your boss is an a similar position, then it might be that he has just taken
a huge pay cut. It can easily happen in a small business. I had a bad year a
few years ago, and although we still made a profit, it was a tiny one and I
was by far the lowest paid employee that year.

Adam
 
R

Ronald Raygun

Adam said:
That depends on whose point of view you're looking at it from. From the
point of view of an investor who has nothing to do with the business, it
doesn't sound like a great investment (assuming you mean 5% of investment,
rather than 5% of turnover).
Indeed.

However, if it's a small business that the
boss owns himself, and the profit comes after he's paid his own salary,
then that's a completely different thing. If he's paying himself a
generous salary, then really he doesn't need to make any profit at all.
A business owner can't pay himself a salary (unless the business is a
limited company). He pays himself "drawings" which come out of profit
and are therefore included in the 5%.
FWIW, I own and run a small business, and pay myself a tiny salary, so I
am entirely dependent on my profits if I want to pay the mortgage and eat.
If your boss is an a similar position, then it might be that he has just
taken a huge pay cut. It can easily happen in a small business. I had a
bad year a few years ago, and although we still made a profit, it was a
tiny one and I was by far the lowest paid employee that year.
Consider taking yourself to an employment tribunal to sue yourself for
paying yourself less than the National Minimum Wage. :)
 
A

Adam

Ronald Raygun said:
Adam wrote:



Consider taking yourself to an employment tribunal to sue yourself for
paying yourself less than the National Minimum Wage. :)
Great idea! Would my employer's liability insurance cover me if I win? Come
to think of it, what if I stub my toe on a filing cabinet and sue myself for
the injury?
 
R

Ronald Raygun

Adam said:
Great idea! Would my employer's liability insurance cover me if I win?
No, only if you lose.
Come to think of it, what if I stub my toe on a filing cabinet and sue
myself for the injury?
You should deny liability and blame the manufacturer.
 
D

Dave F.

Thank you all for replying.

Sorry for not being clearer.
It's 5.5% of turnover.

The company setup it a bit different I think. not sure how common it is.

The company that the employees work for is a limited company.
The directors (there's more than one boss) have there own partnership, I
think. they own the building & rent it back to the ltd company. Not sure
at what stage they take their wages but I'm pretty sure it's not from
the profit.

Dave F.
 
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R

Ronald Raygun

Dave said:
Thank you all for replying.

Sorry for not being clearer.
It's 5.5% of turnover.
In that case it's meaningless to compare it with "sticking it
in the Halifax", because turnover isn't money you have, it's
just money passing through your hands.
 

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