VAT and Shop

Busy week responding to the demand for part seasoned firewood ahead of going VAT registered. My attempt at direct marketing worked for me with an approximate 25% take up rate, with one person ordering and paying for next years demand, part of which will be delivered now with the remaining loads being delivered as required as the winter progresses.

It has been a week of development and change, the results of many months of dreaming and planning; having seen the bigger picture, I am beginning to colour it in. When I started TVF, I hoped to sell thirty grands worth a year, work four days a week and spend the rest of my time with the family on our smallholding. The dream was real, but the reality somewhat different.

The first big change this week is that we have gone VAT registered. Although we are not yet at the turnover that requires you to register, we may hit that at our busiest time next winter. So, after months of planning and talking, we are now VAT registered. Whichever way that you look at it, the move represents an increase in the cost of Tanat Valley Firewood to the domestic user, although there is no additional income derived from that increase for me. Having started the process of completing my end of year accounts, I note that I still hover somewhere between the minimum wage and the living wage, depending on the time of the year, sometimes I imagine it is like having a zero hours contract.

The other significant development this week is the new website shop, which is currently being developed by the Web Master (love that title, rather like describing yourself as a Jedi). We were putting barrow bags, kindling and firelighters into the basket, paying through PayPal and eagerly waiting delivery within five working days. It leads to all sorts of questions about cost, minimum order quantities, delivery zones and end user experience. Once the customer as clicked and paid, it needs to be delivered within the agreed time frame. What happens if it goes cold and 100 people order six bags of firewood? Can we cope? What are our stocks and reserves? Can I live up to my reputation as a competent logistician and deliver the right product to the right person at the right time? ‘Course I can, but you have to plan for it.

What happened at the end of this winter were two bouts of late snow, enough to cause a run of demand for firewood, so as many others locally ran out, demand for my dry stuff went up and up. It focuses me on how much firewood do you want to supply, at what price and how much stock do you need to hold? Like you, I know how expensive it is to buy firewood; I bought over £30,000 worth last year, which is a lot of cash flowing out of your account, particularly at times when there is less money coming in. Looking back a year, I wish I had had more stock, so if we learn from our experience I need to invest in further stock and my ability to get that stock out to the customer. Having said that, there is little point in having the stock available if you cannot get it out to the customer. When this becomes the pinch point we then need to add another delivery vehicle to the fleet with the associated costs that comes with it.

So where does the money come from? Is it worth going further into debt to fund an investment? Do I mortgage the house, take out a loan or an overdraft, seek outside investment, are there peer to peer opportunities in the form of Business Angels or crowd funding? Could customers become shareholders? So many ways to feel the growing pains and the cash flow problems associated with growing small businesses. What do you do?