So Move It - should we move?

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Ed Chaney

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Dec 19, 2020, 9:30:39 AM12/19/20
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Hi all,

TL;DR: I think we should move, mainly because the workshop is cramped, limiting usage and affecting safety. Larger premises will mean better use of the equipment we have and more scope to use the cool new equipment we're talking about. We can probably get a better deal and long term security, with a little more cost and risk. We appear to be in a good financial position to do so.

As some of you know we currently have a healthy bank balance and there are various discussions about what equipment we could buy or upgrade as well as improved dust extraction and other safety issues. One possible option I want to explore here is the idea of moving to a larger premises, why we might want to move and what the costs or risks of doing so are.

For some time the limitation on space has had an impact on the usage of the workshop and equipment, as well as health and safety issues. Some examples:
  • The wood lathe is obstructed by the bandsaw.
  • The welder and power sockets are obstructed by the bandsaw.
  • Attaching the chip extractor to the table saw blocks the route to the chop saw and use of chop saw bench - the chip extractor is most often not used and thus creates lots of dust.
  • There is not room to put an cantilever guard on the table saw - the depth of cut is limited and there is no dust extraction from the guard
  • Use of the table saw restricts use of the central benches (and vice versa)
  • Use of the metal lathe restricts use of the central bench and blocks the walkway.
  • The welding area curtain partially obstructs the fire escape and is too small an area to weld anything that doesn't fit on the bench
  • Hand tools and equipment are not visible and easy to find / keep track of.
Perhaps each of those on their own are resolvable and it's much better than it was thanks to the work put in by members. However there is a fundamental lack of space that will continue to limit what we do. There some benefits to having a larger workshop:
  • More space to work = safer and more pleasant for everyone
  • More space to train = better engagement with the equipment, better value for money for members and more attractive to new members
  • More people can work at the same time = more use of the space, more members
  • Dust extractors can be permanently attached = safer and cleaner for everyone
  • Tool and equipment storage that is more visible and accessible = easier to find / harder to lose = easier to make
I haven't really talked about the cleanroom but it should be understood that the aim would be to have at least the same, if not more space allocated to non-workshop areas. There are space-issues in the clean room that others may be better placed to talk about but generally when we are busy using the space involves a lot of squeezing past people, it's often not a comfortable welcoming environment and we have things like the soldering station squeezed in a corner, and benches where its not possible to sit at if someone is on the adjacent bench. Other benefits we could look for would be improved storage areas - accessible without ladders for example which would make the whole space safer and friendlier to use.

So, can we afford it?

We currently pay £1000 + VAT pcm base rent. (£12,000 PA)
Bills are extra: Electricity ~£100 + VAT (during winter), Waste; £25 + VAT
The total floor area is approx. 1100 sqft / 100 sqm

I had a brief look at the market to see how competitive this is and found these two properties (sadly now both let or under offer) provide reasonable comparison:

£960 + VAT PCM (£11,500 PA)
Ground floor : 1204 sqft / 112 sqm

£1125 + VAT PCM (£13,500 PA)
Ground floor: 1126 sqft / 105 sqm
First floor: 1016 sqft / 94 sqm
Total: 2142 sqft / 199 sqm

The second property has a mezzanine installed and is fitted out as office space upstairs and was an unusually good deal. The first unit does not have a mez, but does have the height available to do so. There would be a large upfront cost to installing a mez, but over the course of a 3-5 year lease it would roughly be a similar cost for each of the units.  Before anyone makes the excellent suggestion that we get a mez in our current unit, sadly we do not have the height required (5.5-6m is recommended, we are <4m), it would be a glorified shelf at best.

As most units available would be standard commercial lets, there are additional costs and risks we do not currently have:
  • Service charge - most industrial estates have a small charge to cover maintenance of the estate
  • Maintenance and repair of the building - most commercial lets are a "full repairing" lease, i.e. if the roof leaks after 3 years it's our problem.
  • Buildings insurance - linked to above, the tenant is responsible for the shell of the building and normally must insure it against damage
  • Services (electricity) - Currently we pay the landlord whereas in normal commercial lets you have your own contract and electricity meter, there may a slightly higher cost.
  • Stairs - the cheapest way of having more area is by having a mez or 2nd floor. This restricts access for some people.
  • Longer lease - typically 3-5 years commitment (although this can be a plus since we have security and know time and money invested into the unit will pay off)
  • Upfront costs - commercial leases typically require very large deposits, 6 months rent is not uncommon.
I don't yet have estimates of those costs, but it appears that for a similar price as we pay now we can have: 
  • A much bigger unit, or 
  • A similar unit with much bigger potential
We are currently operating at a slight loss, however over the past 4 years we have made an overall profit and we have recently received a Covid support grant. We currently have approximately £13k to our name.
The extra funds we have available at the moment should easily cover the upfront costs of moving and cover the additional expenses for quite a while, potentially several years. Depending on the nature of the available property and what upfront costs there are to making it fit for purpose we might still have large amounts of cash left over to buy large ticket items.

But wait - don't we need to spend all this money before the end of the tax year? - Yes and no. Without wanting to go into too much detail, SMI has been operating as a "dormant association" under the assumption that we would pay less than £100 a year of corporation tax. This sets a theoretical limit on our profit, less than £500 per year. However, I am investigating the accounts and finding some of the assumptions made about our tax status may not have been the best for us long term. For example, if we submit tax returns and pay corporation tax we are also allowed to use various tax allowances that would offset much of the tax and give us a lot of flexibility. For example we can carry profits or losses forward/backwards and claim tax back for good/bad years respectively. Also we can use capital allowances to offset any expense on equipment against our profits. In short, it's kind of easier if we spend all the money this year, but if not we will most likely claim most if not all the tax back the following year or in future years.

Next steps:
  • Complete the accounts (working on it) - this will give a clearer picture of our history and also elaborate on the accountancy / taxation issue described above
  • Discuss further the risks and rewards of moving
  • Discuss the logistics of moving - I've gracefully ignored this but it would require a huge amount of effort and commitment from members to make moving a reality
  • Discuss our needs and desires to better inform a property search
  • Submit a resolution to the AGM, essentially requesting that should an appropriate property be found, that the trustees undertake to secure that property for SMI's use.
For many years we have had an understanding (even voted on at a previous AGM I believe) that SMI is always on the opportunistic lookout for new premises. In reality, we've not been actively looking as evidenced by two potentially excellent properties slipping us by. So, if you're that way minded please keep an eye out, join the discussion and talk about the possibilities. There is already a slack channel #so-move-it from years back, google groups is an equally valid place to talk about this.

Kind Regards, 

Ed
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