Ask the Collective

#cbils#insurance#finance#renewals

How should CBILS/BBL loans affect business insurance renewal terms, and what should you do if insurers penalize borrowers?

Members report mixed experiences with insurance renewals after taking CBILS or BBL loans. Some had no issues with their bar/hospitality insurance despite the borrowing, but others have encountered negative renewal quotes that appear to penalize them specifically for taking out CBILS. **The recommended approach is to push back on the quote**: members who were quoted higher premiums or worse terms explicitly challenged their insurers rather than accepting the penalty. There is no indication from the community that CBILS/BBL borrowing should legitimately affect standard business insurance, and several members successfully renewed without issue, suggesting this may be an error or overly cautious underwriting by some providers. If you receive a penalising quote, contact your broker or insurer to query the reasoning and request a revised quote. Members also note frustration that many insurers failed to honour business interruption insurance claims during the COVID period, so expect pushback on claims generally.

#founder-agreements#legal-structure#equity#funding-conditions

What should a founder service agreement include, and how should founders approach negotiating one?

A founder service agreement typically needs to cover equity, corporate governance, intellectual property (IP), restrictive covenants, and confidentiality clauses. Members report these agreements are often required by investors as part of funding conditions. Key considerations members raised: - **Scope**: The agreement should address equity earnings, governance rights, IP ownership, restrictive covenants (e.g., non-compete clauses preventing you from starting a rival company simultaneously), and confidentiality obligations. - **Caution on over-signing**: One experienced member advised "not to sign one at all, or have the most basic employment contract possible," suggesting founders should be cautious about overly restrictive terms. - **Timing**: Founders should prioritise tidying up these agreements before final funding tranches are released, as investors often make this a condition of payment. The community did not share a specific template in this discussion, though members indicated willingness to source one from their networks. No specific legal firms or template providers were named.

#accounting#cogs#labour costs#p&l

Should production and labour costs be classified as COGS or overheads in P&L statements?

The classification depends on whether costs are directly attributable to the production of individual units. **Direct, per-unit costs go into COGS; fixed and shared costs go into overheads.** **What belongs in COGS (pure unit economics):** - Filling/bottling fees (outsourced production services directly linked to product output) - Ingredients, glass, caps, and labels (per-unit variable costs) - Direct production labour *if* it can be attributed to conversion of raw materials into finished goods - Per-unit label costs (split tooling/origination fees into overheads, per-label fees into COGS) **What belongs in overheads:** - Production manager salaries and brewer/distilling staff wages (unless they perform *only* direct conversion work with no other business functions) - Storage and warehouse fees - Rent on production plant - Product receiving fees - Shared facility costs like electricity **Key principle:** Members recommend treating COGS as pure unit economics—only costs that scale directly with volume. If staff perform multiple functions or their labour cannot be directly attributed to converting raw goods into finished product, they belong in overheads. Some members argue for including labour in COGS if tracking cost-per-unit is important for their production model, but this requires clear delineation of when direct costs stop being attributable. **Standard reference:** IAS 2 governs the treatment of inventory costs and conversion costs. Members also noted that allocating labour and overhead to per-unit costs can be contentious with accountants—one member wished they'd "stood their ground" on this decision.

#credit-insurance#risk-management#wholesalers#cash-flow

What credit insurance providers and products should beverage businesses use, and what do they typically cost?

Credit insurance is viewed as essential protection against wholesaler failure in the drinks trade. Members have seen it pay out significantly: when Waverley went bust, one member recovered 90% of owed money through their policy (with a 10% excess); when MCW nearly collapsed due to unpaid HMRC duty, credit insurance gave peace of mind across the group. **Providers and brokers:** - Main players are **QBE**, **Atradius**, and **Euler**. Members recommend going through a broker rather than direct; one member mentioned a contact at **Carole Peachey** (via Rankin Cork, sales@rankincork.co.uk), though they note broker contact forms are sometimes the easiest route. - If you use **invoice discounting**, your bank may offer a credit insurance product that can be bolted on. **Costs:** - One member reported securing cover for approximately **0.2% of annual revenue** for the next 12 months, paying out **90% of invoice value** on debtor failure. - Rates are expected to be **higher at the moment** due to economic uncertainty and nervousness about the hospitality sector post-COVID. - Cover is "quite expensive depending on cover levels required." **Practical benefit:** - Having credit insurance also gives you leverage with slow-paying customers: you can tell them "the credit insurer won't give me more credit on your account" to encourage payment or justify withholding stock. **Pooling opportunity:** - Members have explored whether businesses can pool together to achieve better economies of scale on premiums, with at least one member running comparisons between single-business and pooled-risk options. Contact members directly if interested in joining a group quote process.

Funding & Finance7 discussions

What legal documentation and compliance process should we follow for seed funding, including SEIS/EIS approval?

Members strongly recommend using **Seed Legal** for the documentation side—multiple members cited it as saving "so much fucking time, hassle and money." If you're in a co-founder situation, it's worth having someone review the model articles to protect both founders. For the investment process itself, members have taken two main approaches: - **DIY with professional support**: Handle the investment process in-house (issuing share application forms, applying for SEIS/EIS approval with HMRC), then engage your local accountant for the company secretarial work. You'll need a business plan, UTR, and financials to submit to HMRC. Your accountant can then issue shares, prepare board minutes, file with Companies House, and complete the follow-up SEIS/EIS paperwork with HMRC. Members report this is "quite a cheap approach." - **Startup lawyer route**: Some members use a dedicated startup lawyer for templates and guidance, though this is typically more expensive than the accountant-led approach. **Key requirements for SEIS/EIS approval**: Business plan, UTR (Unique Taxpayer Reference), and financial projections. The HMRC follow-up paperwork is noted as tedious—delegating this to your accountant is strongly recommended. Consider having legal eyes on co-founder protections via articles of association, even if using Seed Legal for the main documentation.

#seed-funding#legal-documentation#seis-eis#investor-relations

Funding & Finance7 discussions

How should I value a drinks business ahead of a first funding round, particularly for SEIS investment?

Valuing an early-stage drinks business is described by members as "a black art" with many possible approaches. There is no single formula, and valuations vary widely in rigour—members have seen some that read like "outstanding work of fiction." Here's what the community recommends: **Approach:** - Valuation is ultimately determined by what an investor will pay, not by formulae alone. Use comparable brand valuations as a benchmark, but don't over-index on them. - **Pitch high initially**: Members advise erring on the side of over-valuation in your first round, because equity dilution at this stage is greatest. You'll likely negotiate down anyway ("you'll end up taking a hair cut on your valuation anyway, so over egg it"), so starting high protects your stake. - Several members reported having direct experience with raising at ~£300k SEIS rounds and offered calls to discuss specific numbers and methodologies in detail. **Caveats:** - Macroeconomic climate affects investor appetite and valuation expectations. Conservative valuations are increasingly common. - Get advice from experienced founders in the space before finalizing your figure—this is sufficiently subjective that peer input is valuable.

#valuation#funding#seis#early-stage

Funding & Finance7 discussions

What invoice financing or discounting services do members recommend for drinks businesses?

Several invoice financing providers are actively used and recommended by members in the drinks industry. - **Close Brothers** — Known for strong industry expertise in drinks. Rigorous due diligence process, but highly regarded. Offers bad debt cover. Members have made introductions available. - **HYDR** — Charges 5% and pays same day the invoice is raised. Integrates with Xero and banking systems. Proactive in chasing buyer approval and follow-up. Members report no issues and recommend. - **Novuna** — Used by members; recommended for invoice financing. - **Growth Lending** — Mentioned as an option for invoice financing in the drinks space. - **Time Finance** — Recommended by members who can provide introductions. Members specifically noted they wanted providers that **understand the drinks industry** rather than generic lenders. Close Brothers' strong bad debt cover was highlighted as valuable. HYDR's same-day payment and proactive buyer-chasing were cited as practical advantages.

#invoice financing#cash flow#suppliers

#accounting#expense-management#software-tools#xero

What expense management and accounting software systems work well together for drinks businesses?

Members use a combination of expense tracking apps and accounting software linked together for seamless integration. The most commonly recommended setup integrates with **Xero**, which appears to be the standard accounting platform in the community. Expense management and payment tools members recommend: - **Soldo** — used alongside approval workflows and payment runs that feed into Xero - **Approval Max** — payment approval layer that integrates with Xero - **Telleroo** — payment run tool that feeds into Xero - **Dext** — links directly with Xero and QuickBooks; described as "super simple" - **Expensify** — recommended for handling mileage, receipt uploads, and meeting expenses - **Pleo** — praised as "very easy" with Xero integration **Xero** itself is consistently cited as the accounting foundation, with members noting it is "very easy" to use. The common pattern is: expense app (Soldo, Pleo, Expensify, or Dext) → approval layer (Approval Max) → payment processing (Telleroo) → Xero. Members emphasise the value of direct integrations to reduce manual data entry and cut down on administrative friction.

#fundraising#legal-services#funding-rounds

Is Seedlegals suitable for fundraising rounds, and when should you hire a traditional lawyer instead?

Seedlegals is a smart legal document platform rather than a traditional law firm—it gives you access to templated documents to tailor yourself, but does not provide strategic advice, negotiation support, or term sheets guidance from experienced lawyers. Members' experience depends heavily on the complexity of your round. **When Seedlegals works:** - **Seedlegals** — good for straightforward rounds (e.g. bringing on a couple of new investors) or if you've raised before and know what you're doing. The platform is user-friendly. **When to hire a traditional lawyer instead:** - **Legaledge** — recommended by members for more complex fundraising. One founder noted their experienced strategic general counsel was invaluable for pushing back on terms, working to tight deadlines, and ensuring the deal structure was robust. - **Getting a good solicitor through recommendation** — Several members found that hiring a lawyer with investor and SME experience, negotiating a flat fee upfront, was not significantly more expensive than Seedlegals (which takes a commission on revenue raised) and provided much greater protection. Members who went this route were happy to work with the same team across multiple rounds. **Key caveats:** - Seedlegals takes a commission on funds raised, which can add up to more than a flat-fee lawyer would cost. - If anything goes wrong in the future, a document you've self-tailored on Seedlegals may not protect you adequately. Members stressed the importance of having someone who can "push back" on terms and advise what's "normal" vs. "abnormal". - For anything more complex than a simple add-on round, get professional legal advice.

#margins#pricing#duty#finance

Should alcohol duty be included in or excluded from margin calculations?

Whether to include duty depends on your purpose, but there are two distinct approaches: **For internal analysis and strategy:** Exclude duty from margin calculations. This approach is cleaner and more useful because: - It allows meaningful comparison across different channels (duty-free/export vs. UK domestic sales) - It keeps margins consistent when duty rates change—important because you typically can't pass duty rate increases directly to customers without them accepting the cost increase separately - It gives you a true picture of what's fundamentally changing in your business **For retail/wholesale customer discussions:** Include duty so your customer's margin calculations reflect their actual landed costs. **Key principle:** Members note that duty is not reclaimable like VAT, so it cannot be treated the same way. The standard approach among strategic-minded producers is to exclude duty when benchmarking gross margins, especially since duty rates vary hugely internationally. This avoids the problem where a duty rate change on 1 February (for example) would artificially depress your reported margin percentage despite nothing fundamentally changing in your operation. One member flagged that duty-suspended calculations are more complex and less commonly used.

#eis#tax-relief#capital-gains#investor-incentives

How does EIS capital gains tax deferral relief work, and how do investors claim it?

EIS capital gains deferral relief allows investors to defer capital gains tax on gains used to fund an EIS investment. The mechanism works differently depending on timing: **Key points:** - Capital gains that you *use to invest* in an EIS can be deferred. If you've already paid CGT on a gain before investing, reclaiming it requires accountant advice on the best approach. - Gains *made on the EIS investment itself* are CGT-free—there's nothing to offset against other gains or losses elsewhere. - Income tax relief (a separate benefit) is claimed in the year of investment or the year before, through the EIS3 certificate form and your tax return. - Capital gains deferral relief is claimed in the same way as income tax relief: via the **EIS3 form** on your tax return. **Recommendations:** - Use a tax agent rather than applying yourself; it's too easy to get wrong. **Seed Legal** was mentioned as a recommended provider. - This is ultimately an accountant question—the specifics of reclaiming already-paid CGT depend on individual circumstances, so confirm with your tax adviser. **Caveat:** Members emphasised this is not DIY territory and stressed the importance of professional support to avoid errors.

#bootstrapping#external investment#seis#funding definitions

What is the difference between bootstrapping and external investment in the drinks industry?

Bootstrapping and external investment are distinct funding approaches in the drinks industry. **Bootstrapping** is defined as fully self-funding your business using your own capital and taking no outside investment. This means relying entirely on personal funds to launch and grow the brand. **External investment** includes any funding raised from outside sources. Members note that: - **SEIS (Seed Enterprise Investment Scheme) rounds** count as external investment and therefore do not qualify as bootstrapping, even though they are smaller rounds - External investment can disappear quickly if not managed carefully — one member noted they received external funding two years ago but the cash "disappeared way too quickly" and they've since operated on "cash zero for twelve months" Members emphasize the distinction is clear-cut: if you've raised capital from external sources (whether SEIS, angel investment, or larger rounds), you are no longer bootstrapping.

#expense-tracking#accounting-software#financial-tools#xero

What employee expense tracking and financial management tools do members use, and which integrate well with Xero?

Members recommend two main platforms for employee expense and petty cash management: - **Pleo** — praised as simple and bookkeeper-friendly, with no complaints reported. Members note it also offers overdraft facilities (though these aren't widely advertised). The platform supports approval processes, team limits, and auto-top-ups, though some members recommend properly configuring these features rather than relying on defaults. - **Soldo** — frequently mentioned alongside **Approval Max** as a paired solution for expense tracking. Both integrate with Xero for sales order tracking and accounting sync. Members emphasise that these tools work best when you actively configure their built-in functions (approval workflows, spending limits, team permissions) rather than using them at default settings.

#pitch deck#fundraising#design#investor relations

Should pitch decks be created in-house or with external design help?

Most members take a hybrid approach depending on the deck's purpose and how frequently it needs updating. **In-house creation** works well for sales decks that change often, giving you full control and flexibility. **External design support** is worth considering for investment pitches (SEIS/EIS), where visual polish matters to investors. Members recommend: - **Beautiful AI** — praised for making decks look polished - **Canva** — members noted it's a great option for creating professional-looking slides - **Freelance designers** — several members worked with external designers to handle the visual design while keeping core content control **Albatrans** was mentioned as helpful for template work. The consensus: write the core content yourself (you understand the narrative best), but consider bringing in a designer for investor-facing decks where presentation quality directly affects credibility.

#cogs#accounting#logistics#export

Should storage and logistics costs be included in COGS or separated when calculating gross profit, especially for export customers on ex-works terms?

Members consistently include storage and logistics costs in COGS rather than treating them as separate line items on the P&L. The reasoning is straightforward: these costs are inherent to getting product to customers and should therefore be factored into gross margin calculations. **Key recommendations:** - **Include in COGS** — Members treat storage and logistics as part of COGS across the board, as the product cannot reach customers without these costs being incurred. - **Use nominal codes or profit centres for visibility** — If you want to see profit differential between channels (e.g. export vs. domestic), set up separate nominal codes or profit centres within your accounting system for import and export stock. This lets you report separately while still including these costs in COGS. - **Handle ex-works carefully** — For export customers on ex-works terms, the same principle applies: calculate and include the logistics cost in your COGS to understand true product profitability, even though the customer will bear the final shipping cost. **Note:** This approach ensures your gross profit reflects the true economic cost of goods sold, regardless of whether customers are domestic or international.

#equity-structure#fundraising#shareholder-rights#cap-table

Should we use non-voting share classes, and how does this affect fundraising and investor relations?

Non-voting share structures are generally not recommended for fundraising. Most sophisticated investors will not accept non-voting (B class) shares, as investors typically expect proportional shareholder voting rights tied to their equity stake. However, in practical terms, this concern is often overstated: since most early-stage investors hold under 1% of the company, their individual voting power is minimal and won't significantly inhibit founder control anyway. The community consensus favours simplicity: - **Single share class structure** — recommended as the cleanest approach. Keeps cap table uncomplicated, gives all investors a voice, and avoids the friction of explaining voting restrictions to prospective investors. Members note this is often easier to manage as you scale. - **Realistic investor impact** — even with full voting rights, small investors (under 1%) have negligible practical influence, so the theoretical concern is often not the bottleneck it first appears. Caveats: There is no single "correct" way; different structures have trade-offs. But if you're seeking outside investment, expect pushback on non-voting shares from institutional or experienced investors, making a single share class the pragmatic choice for fundraising ease.

#mortgages#finance#business-ownership

What are the mortgage requirements and best approach for UK drinks business owners and company directors?

Getting a mortgage as a business owner is challenging but possible with the right broker and lender. Most mainstream lenders require 2 years of filed accounts, though this can sometimes be negotiated down to 1 year with specialist brokers and a larger deposit. **Key requirements:** - 2 years of filed accounts is the standard benchmark - Directors are typically counted as self-employed if they hold above a certain ownership threshold - Lenders can factor in company profits, though some require personal salary history from employment in the same industry - A higher deposit may be needed if you have fewer than 2 years' accounts **Recommended brokers and lenders:** - **Halifax** — noted as one of the most lenient high-street lenders for business owners - **Jennifer Ward** (cmme.co.uk, jennifer.ward@cmme.co.uk) — specialises in mortgages for directors - **Rosehill Financial Services** (sam@rosehillfs.com) — specialises in mortgages for directors - **Independent brokers** — members reported success using independent brokers who could negotiate terms; one member completed on a first-time buyer mortgage with only 1 year accounts via Halifax with broker support **Tactics:** - Use a specialist broker who understands director mortgages — they can often negotiate better terms than approaching lenders directly - If you have recent employment history in your industry, brokers can sometimes use previous years' salary alongside company accounts - Be prepared for higher deposit requirements if you don't meet the 2-year accounts threshold **Caveats:** Big institutional lenders often struggle with business owner applications and may require full company accounts. The process is more complex than standard employee mortgages and typically takes longer to arrange.