I’m going to tell you about the business journey of Jack and Diane.
“A little ditty about Jack and Diane
Two Irish kids growing up in this heartland”
While this is a business journey it’s also a love story. Given the day that’s in it, love and business collide and thrive. Let’s delve deeper into
- Background
- New business
- Moving to CF
- Company
- Lessons
Background
Jack is from Kerry and Diane is a Limerick lady. Their paths first crossed in the Stables in UL. Jack picked up the courage to say hello to Diane when she was with her friends. A fact that didn’t go unnoticed by her. Brave and cute, she was smitten with Jack, and they would meet again soon. After the first date, they became inseparable. Two peas in a pod, doing the same course in PE and spending lots of time together. Having fun and hatching plans.
After finishing college and various part-time jobs they moved to this neck of the woods. Both worked in some local gyms for a bit but with one goal in mind. To open their own place. This they did in 2019. They secured a lease and ploughed whatever funds they saved into setting things up.
New Business
But the new business had to have a name. Jack liked Bench Press and Diane loved Smith Machine with her surname being Smith. Not being able to agree they settled on Increase your Strength. Their business couldn’t compete with the €40 a month gym nor did they want to. The main idea was to give clients a more personal service. Not only to increase the strength and fitness of the client but help in other areas too. Like diet and other habits such as drinking and smoking.
Not having a clue about the accountancy side of the business they went to a friend of a friend to help them out. They set up as a partnership. Effectively, both are sole traders working together in a partnership. Bank accounts were set up and registrations with Revenue completed. At the start, they didn’t have employees, so VAT and Income Tax were the taxes of concern. Jack is a man who likes having separate bank accounts. He wants money squirreled away to pay the VAT man and funds available to pay other tax liabilities.
After a few months, business was improving. Membership was growing so they needed to invest more. Bank funding was sorted to get new equipment. Both were working hard. Jack took on extra work like strength and conditioning coaching for teams. Getting the name out there and improving his knowledge too. Early starts and late finishes, they were a motivated couple.
Moving to Comerford Foley
What was their motivation for moving to CF? Their first accountant did a good job getting them set up. They did accounts and filed tax returns on time and didn’t owe Revenue anything. But they had a feeling that things could be better. There was no real understanding of the numbers. They were unsure if they claimed everything they could claim. In short, they wanted more security on the business side of things. However, they had one huge motivating factor that was driving them on. Buying their first home together.
During year 1 of Covid, the business struggled a bit and picked up again when things opened up. People loved the gym, the classes, and also that extra personal help which was very motivating. Membership continued to grow as a result of their hard work and dedication. They had been renting for 5 years in the locality and were fed up with moving and paying rent. Dead money as they saw it.
Help with a mortgage
Getting our help with a mortgage application was vital for them. The main thing is that they had a growing business with profits increasing. That shows repayment capacity to the bank. But, the bank also looks for
- Tax clearance
- Filed Tax returns
- Savings
- Accounts for 3 years
- Outstanding debts
We could see that running the business through a company would be better than a partnership. But we advised against that initially. By moving to a company, we felt it would complicate the mortgage application process. The key for them was having all the information that the bank wanted. Plus, that information would work to secure a mortgage.
The team here got cracking to finalise the accounts early. Rather than waiting until October, we filed the tax returns once the accounts were done. Plus, Jack and Diane had saved enough money to clear the tax liabilities in full. The business had no tax debt. They, as business owners, had no tax debt. Tax clearance was in place, and they had savings. Plus, up-to-date accounts showing increasing profits over the last two years. A dream client for any bank. Much to the delight of everyone the bank approved the mortgage shortly after.
New Company
The next stop on the business journey was a new company. Increase Your Strength Ltd was set up shortly after the mortgage success. But why would they set up a company when everything was going well in the partnership? Many reasons to include
- Gives them limited liability so greater protection in the event of a claim
- More efficient structure. They take a set salary and pay tax on that, and the company pays tax on the profits after salaries.
- More tax efficient. Pay less tax so that leaves you with more money to invest and grow the business
- More money in the company makes it easier to secure finance for growth.
- Company can pay pensions and other benefits for them
Moving from a sole trader to a limited company isn’t straightforward. Dee set the company up for them and we advised them on shareholding, company directors, etc. We set up new tax registrations with Revenue. They sorted out a new company bank account. There’s quite a bit of admin involved as they have to move all their clients from one bank account to another. From the tax side, you want to time it as best you can to avoid
- Splitting a VAT period
- Extra Income Tax liabilities
- Balancing charges on plant and machinery
Up and running
The new company is up and running now and working well for them. Brenda, their manager, is doing a super job looking after their accounts, and Tax returns. She is using Xero & Dext for their bookkeeping, so their numbers are up to date. Both are happy knowing they have a strong business. It gives them security about the present and confidence to invest in the future. Revenue are paid and everything is up to date.
Lessons
One of the main lessons for us was knowing that Jack and Diane were a good fit for us. Why was that? In the first meeting, Ger and Brenda got on very well with them. They were friendly, wanted to do everything right, and hardworking. But they were ambitious too. They had an infectious enthusiasm. You couldn’t but like them and want to work with them. There was an inbuilt desire to improve and grow their business. Plus, they were willing to take advice and invest in their bookkeeping and finance function.
They achieved their initial goal of securing a mortgage and buying a new home. Their hard work paid off for them and it was a pleasure for us to have helped them with that. For us, the excitement is being part of their business journey. They do the heavy lifting, and we are there, like business partners, to help and guide them along the way. Both continue to raise the bar every day and it’s a privilege for us to help.
“A little ditty ’bout Jack and Diane
Two Irish kids doin’ the best they can”
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