Standing outside a hotel, I’m waiting for a group to finish
their meal when the first passenger comes out and strikes up a conversation. We
talk about the economy, Brexit and how his business is doing. I drop in to the
conversation that DrivenByQ have just had twenty-four months of continuous
growth. He says that is impressive in the current climate.
Our figures for 2018 reflect a 30% growth in turnover. We
brought in new drivers, bought new vehicles and improved our processes. It all
sounds good - and it is! There is just one small thing to note though. Our
profitability remained the same. The reason? We had to change our accounting
method (a conundrum I previously wrote about).
As the turnover grew we were forced to abandon one VAT
scheme and adopt another. At the threshold of £230,000 we could no longer use
the flat rate scheme. Instead we had to use a traditional scheme. The
difference meant claiming back VAT on purchases rather than retaining a
generous portion of VAT on invoices as we previously did.
Purchasing vehicles and taking on an employee was the first
step toward making the new scheme work for us. The reality however is that we
are still in a transitional phase. I’m sure most companies go through stages
where their business model changes and sometimes, you don’t really know the effect
of that change until after the event.
So in order to generate more profit we have two options: The
first (and easiest) is to reduce our turnover and go back to the previous
scheme. The second is to grow our turnover, purchase more vehicles as a company
and take on more employees. I will let you decide which one you think we are actively
working toward.
