Our 2018 Financial Results & Taxes
Convivio aims for radical transparency, so each year we publish details of our finances, including the tax we paid
We’re a young small business, so not quite in the realms of our financial results making markets move, or even funding luxury lifestyles for shareholders.
But when we set up Convivio we set ourselves the purpose of “helping organisations to work better for people.”
Part of that, we believe, is being more transparent. So, even though your investment portfolio doesn’t depend on our financial results, you might be interested to see them — and maybe you could add your voice to our call for all businesses to be this transparent.
Financial results
The results for the year ending 30th Sept 2018 were:
- Turnover: £470,363
- Profit before tax: £114,187
You can also see my blog post about last year’s financial results.
How did this compare to our forecast?
Our financial forecasts are like weather forecasts — our best guess at real figures using the current data available, not tight cost-control budgets or crazy aspirational targets.
Back in September 2017, our forecast for the coming year was:
- Turnover: £405,523
- Profit before tax: £74,521
However, during the year we re-evaluated our business plan, as Brexit (and political uncertainty around ‘preparation’ for it) began to impact the UK economy.
We decided as a team that the priority was to build our cash reserves and take a very cautious outlook. So we focused on short term profitability rather than growth, and cut back on planned recruitment (we’d planned to create two new jobs originally), marketing and so on. We also all decided to take on a larger than normal amount of work, but with the existing team. That’s not sustainable long term, but we all wanted to do it for the short term. We also turned down some work in order not to have to grow in the short term, only to face 2019 with a higher headcount.
Our actual results above show we gradually improved on our forecast, and did succeed in growing profitability to boost our cash reserves in preparation for a turbulent 2019.
What happens to the profits?
- We did not pay any dividends to shareholders in this period.
- Some of the profits will go on tax (see below).
- We are keeping the remaining profits within the business as a cash reserve to (hopefully) enable us to handle turbulence in the UK economy, and particularly in our market of serving the government. If things turn out better than we expect (fear?), we’ll use them to invest in recruitment and marketing to grow the business.
Fair Tax
We are accredited for the Fair Tax Mark (the first digital agency to achieve that in the UK), which audits us for transparency around our ownership and finances, and for paying the correct amount of tax in the UK.
You can read our Fair Tax policy, and our year-by-year declarations of taxes paid here: https://cookbook.weareconvivio.com/business-operation-recipe/fair-tax-policy. You can also read why this is important to us.
In summary, Corporation Tax for this year was calculated (at a rate of 19%) to be £20,588. We were awarded a Research & Development Tax Credit of £13,134. After some minor adjustments upwards (detailed on our Fair Tax page), this meant our net payment of Corporation tax for the period was £9,230.
We used the R&D tax credit to fund some extra free work on a government project in our Friday time (we don’t do normal billable project work on Fridays, we reserve it for professional development, working on the business, and working on more experimental things that we can’t yet charge clients for)— so, what goes around, comes around.
With Corporation Tax, VAT we collected, and PAYE/NIC paid by the company and the team, our business activities generated £179,806.24 in taxes for the UK. We’re very proud of that.
Looking around, and looking ahead
We are concerned about the UK economy, and the public sector market, in 2019 — as you may have picked up already.
Most of our work comes through the government’s digital marketplace, and we’ve seen a drop (pause?) in the number of projects that we’d be a good match for, and that we think are good projects set up for a high potential of success.
There are a quite a few projects published that have high expectations but very low budgets and strikingly short (arbitrary) deadlines — and, at the other end of the scale, quite a few where the only ‘outcome’ expected is to provide a lots of people on-demand on-site for a large budget to work at whatever pops up, clearly aimed at the big consultancy firms that bodyshop contractors in.
We work in the mid-range, where clients have a budget that matches expectations for work towards a genuine outcome over a sensible timeframe, working to the digital service standard in a defined phase of Discovery/Alpha/Beta/Live — and want a digital agency with a full ready-made team with good shared processes and tools to support and guide the project. Our work focuses on transactional digital services rather than marketing or content websites.
We also have some ethical selection criteria, and that rules out a couple of departments under their present policies.
We’re fully ready to bear the cost of having ethics, and being selective about projects we take on.
In addition to the reduction in suitable opportunities on the digital marketplace, we’re also seeing a steep rise in the number of suppliers submitting responses for each opportunity, often with suppliers who are clearly new to public sector work (judging from submitted questions). This seems to be partly down to the reduced number of good opportunities suitable for SMEs, and also to a slowdown in the private sector commissioning of digital agencies that happened in 2018, leading more agencies looking to bid for public sector work.
Thankfully, our preparations last year, our relationships with existing clients, and our reputation should protect us from the worst of any bumps in the economy — but it’s important for us to be mindful of the climate when making our forecasts.
Forecast for year end 30th September 2019
At the moment we’re simply not able to make any sensible forecasts for the financial year, because March falls slap bang in the middle and could send things one way or another. At the moment, though, our best-guess weather forecast is:
- Turnover: £350,000
- Profit/Loss before tax: -£10,000
So we’re currently expecting a drop in turnover and a small loss. This is because we expect disruption in government to limit the flow of new projects that we’d want to bid for, and delay those already in progress. Meanwhile, our overheads (mostly salaries) are fixed.
It’s also because our values led us, at the start of the new financial year, to negotiate our release from a contract with a key client. We knew it would be financially harmful for us, but a change in culture was going in so much the wrong direction we didn’t feel we could do our best work in it, and I didn’t feel happy with staff having to spend time working in that culture. We talked as a team and decided we’d take the risk of losing that income, even though the economy looked rough. I think it was the right decision and I’m glad we were brave enough to take it.
But this forecast could change wildly, and I’ll be updating our forecasts when we eventually get more clarity. Hopefully I can revise them upwards. As the situation is so changeable, I’ll blog about our progress and forecasts throughout the year.
We’ve prepared for this, as I detailed above, so have good cash reserves — but it’s frustrating to be treading water rather than growing a business, creating jobs, and doing good work for clients.
Thanks
Thanks of course to the rest of the Convivio team — Alice, Lewis, Mike and Joe — for the incredible amount of hard work in 2018 that put us in a good place.
Thanks to all our families who understood why we were working so hard, and joined in with our celebrations too.
Thanks to all the clients who chose to bring us in to help with some really fascinating and worthwhile projects in 2018.
Thanks to the wonderful #OneTeamGov community who make great things happen, and make them fun too. It’s great to be able to participate from the supplier side, and be transparent and sharing too.
And thanks to all civil servants. We see what you’re going through, and how you keep working away to do as much of the right things in the right way as possible, through increasing levels of friction — and we really appreciate it. That’s why we’re proud to pay our taxes to benefit from the results of your work as citizens, and as a business.
And finally…
Thanks to you for following our progress, and being interested in how we’re getting along with our little business.
If you value this kind of transparency, especially in companies that work with the public sector, perhaps you’d consider expecting it of all businesses? In our view, government should require every supplier to be accredited for the Fair Tax Mark at the very least.
Last, but definitely not least, let’s hope that some sense and normality can return to the government, and therefore the economy, soon. Then we entrepreneurs can get on with creating great places to work that generate jobs and do good work for clients.
Convivio helps organisations to work better for people.
We do this mainly by helping them transform their services using digital tools, but also by spreading new ways of working.
Read our blog: blog.weareconvivio.com
Follow us on twitter: @weareconvivio
Get in touch: hello@weareconvivio.com
Visit our website at weareconvivio.com
