This post is an overview of our financial standing at the end of 2018 and an opportunity to reflect on where we stand and how to prosper in 2019. This may seem an unusual topic for a blog post, but we aim to be as transparent and open as possible with our customers and readers in all aspects of running our business.
As you may know, we're a community interest company. This is a category of business in England that requires us to say how we will use the money we have left over from operations (profits) to meet the objectives outlined in our governing documents.
We're passionate about supporting people to learn new things, make new friends and use their imaginations to create something new through fibre crafts. We believe these are important tools for building a quality life no matter how old you are or what obstacles you may have to overcome. So our 'profits' go into supporting our drop-in groups, low-cost workshops, The Knit-Stop programme, and activities that support Knit for Peace.
However, as we approach our 3rd birthday at Wool on the Exe, we find ourselves in a quandary. The first 2 years allowed us to find our feet and learn lots about what our customers want in a local yarn shop. And we were thrilled that we were able to support our social aims through the 'profits' of the shop.
But now, due to our growth, we've surpassed the HMRC VAT threshold and are required to pay HMRC 20% of our total sales. It's becoming increasingly clear that this is going to have a negative impact on our ability to stay true to our mission.
Why am I telling you this? Well, our accountant told us in March 2018 that we had a few choices. We could:
- Raise our prices
- Reduce our turnover (sell less stuff) to get back below the threshold
Neither of these scenarios sounded good to me, so we've soldiered on and are now starting to feel the pinch.
We want to provide you with a quality shop where you can find fairly priced yarn and accessories that have been carefully selected for their quality and provide good value for money. We want to provide learning opportunities that are diverse and financially accessible and taught by lovely, local talented people. And we want to give you an opportunity to join in groups, knit-a-longs, and community initiatives as they come up.
To do this, we need to stay solvent and we thought that by sharing the following pie charts this would give you an idea of how difficult this will be in 2019. Our next payment is due in a few weeks and it's over £2500. That's a lot of yarn :-(
We had income of £110,346 and expenses of £105,066 in 2018. The following charts illustrate where the money came from and where it went. As you can see, there is little room for paying a VAT bill of between £8K and £10K annually.
This post isn't meant to be a discourse on the struggles of small business. I believe it's the job of business to figure out how to meet the needs of their customers while staying financially sound. And if it's not possible, then there is no need for the business. This is why I'm sharing this information today.
If you need and value Wool on the Exe in your community, then please support us. Our yarn may cost a bit more than Wool Warehouse, but it will come with a smile, gentle encouragement and an open door if you have a need for support. Our workshops will cost more than a YouTube video, but they come with individual care and attention and a true desire to meet you where you are in your learning.
What do we hope you'll do with this information? Some ideas are.....
- Reflect on the importance of small businesses in your community and Wool on the Exe specifically. Do they matter to you? If so, how can you support us?
- Tell us what you need, want, and hope for - that's fibre related of course :-)
- Have a better understanding of why our prices may increase for workshops and memberships - 2 areas that are especially hard hit by our VAT obligation.
- Consider becoming a member of our Board of Directors. If you have experience in financial matters, we would welcome your participation.
As always, we're here to talk about any aspect of our business with you. Please don't hesitate to stop by or write to us at firstname.lastname@example.org