Financial Transparency — The first 7 months at Flux from a 💰 perspective
Sharing our ups and downs, where we’ve been, where we are now, and where we’re going
Why are we sharing our finances?
We’ve recently announced a shift in focus at Flux, moving away from helping corporates in their pursuit of growth at the cost of human happiness; towards helping awesome leaders, founders, and entrepreneurs who want to build strong, small companies that will last a lifetime.
We want that for our company too! We’re building Flux at the same time, and we need to set an example. Transparency is an important asset for modern businesses. Financial transparency even more so. Like many companies, we used to be scared of sharing our figures:
What if our clients see how small we actually are?
What if our competitors steal our ideas?
What if we lose work by sharing this stuff?
I now think they are bullshit reasons. We work with people not clients. We focus on ourselves instead of ‘competitors’. And if someone doesn’t want to work with us because they’ve seen our finances, then they’re not the kind of person who we want to work with anyway.
So I’ve been through our finances for the first 7 months of Flux (we call that Flux v1.0) and I’ll share the numbers with some context around them.
I’d love to hear some reactions in the comments. Is this interesting? Useful? Are we doing well? Poorly? How does this compare to your finances? What else would make this kind of information more useful?
I think we can all be better by learning from each other, and active transparency (sharing like this) is one of the easiest ways to do that.
Pre-Start (bootstrapping > investment)
Flux was originally conceived as a spinoff venture. We were going to pitch it to a board, get investment which would pay us decent salaries, and build an awesome new company nestled in the comfortable bosom of an existing one.
But that wasn’t for us. We wouldn’t have been free. The highs wouldn’t have been as high, and internal politics would have been unavoidable.
So we had to bootstrap this thing, and on October 24th 2016 Flux was born. We kicked off the company with a 3-week trip to America & Mexico. To meet awesome people, enjoy awesome nature, and write an awesome book.
I had £3,400 in my account. Jon had £11,000.
I had spoken to a couple of people who were interested in working with us, and Jon had some old clients who wanted to to explore different kinds of partnerships. We knew we needed to start bringing in some money to sustain ourselves until we could figure out what this company was and where it was going.
Profit / Loss (what came in and went out)
~ between Oct 24th 2016 and May 24th 2017 ~
So we made a decent chunk of money: £79,328.30. Most of it through the consulting work we did with 10 clients on 14 different projects. Some of it through book sales.
We didn’t spend too much. Most of our direct costs went on paying our pals to come and help us do the work, and on flights, accommodation, & food. Most of our overheads went on setup costs, laptops, the US trip, online SaaS products, and founders meet-ups.
We didn’t pay ourselves much either. Around £800 each per month on average. Which works out at about £5/hr. Not great! But enough to keep us going before the big invoices started coming in.
Big Lesson
Having a decent network and potential clients was essential. We weren’t starting from scratch at all. That meant we could focus on doing great work with people that needed our help, instead of spending lots of time on ‘new biz’.
Balance Sheet (what we’ve got right now)
~ on May 24th 2017 ~
Right now we’re in a pretty good spot. We’re waiting on £21,000 of invoices to come in, we don’t owe too much to contractors, and we’re about to pay ourselves properly (finally!).
We want to earn £40,ooo/year. So our plan is to take salaries just below the tax threshold, £958.50 each per m0nth. Then to supplement that with directors dividends of £2,375 each per month.
This is pretty standard practice. And for us I think it makes sense for now. There’s always a dance to be done between salary and dividends, and the tax boundaries are constantly shifting. But this way we’ll end up paying less National Insurance, and about the same amount of tax (through Corporation Tax). We’re also implementing our own internal taxes, giving 1% of income to support grassroots workers rights movements in developing countries, and 2% of travel costs to offset carbon and campaign against deforestation.
In this respect, for me and Jon as individuals, owning a company makes way more sense than just being employees. We end up making around £7,000 more each per year (my annual rent in Berlin!)
Big Lesson
It’s good to just stop and look at the balance sheet every now and then. Running a small business can feel like riding a financial rollercoaster at times. But I think this is the first time that our finances have felt really nice and stable. It’s the first time I’ve not been worried about money. And it’s the first time in a long time that I’ll be able to fully pay off my credit card debt.
Cashflow Forecast (what the next 4 months look like)
~ from June to September 2017 ~
The immediate future is looking sunny. Beyond this forecast we reckon we’ve got enough money coming in to last us both until December. And there are a couple of projects at the proposal stage that we’re quite confident about.
I think cashflow is the most crucial thing to keep an eye on in a small company. Or in any company. It’s like a heartbeat. Like the organisational lungs. Sometimes you’re short of breath, and other times you’re sucking in fresh mountain air from a seemingly endless sky.
We’ve been pretty unlucky with a couple of clients not paying invoices on time. But I hear that this is happening quite a lot this year, more so than usual. And actually it’s a blessing in disguise. Because we’ve had to manage without very much for the last 7 months, we’ve got used to not spending money, and now that money is coming in, it means we can focus on developing new, better products and services to build Flux 2.0 strong.
Big Lesson
No matter who you work with, you’ll always have to chase invoices, and that means you’ll always be worrying about cashflow. This is one of the big reasons why we want to move towards more stable ways to bring in money with Flux 2.0.
Flux v1.0 to v2.0 financial plan
So, our plan is to gradually phase out consulting work with clients (the bulk of the work we’ve done to date), and bring in revenue from the new learning experience products that we’re developing. We think that there will be a couple more projects / clients that come in organically over the next few months. This revenue will be essential to maintain a decent buffer that we’ll need to test and grow Flux v2.0.
Every £7,000 we make (gross profit) will buy us an extra month of development time.
This is our new pitch:
We’ve got a whole suite of new products / courses / experiences that we’re developing. We’re hoping to bring in around £120,000 revenue from these in the first 12 months.
Let us know which ones you think might be most useful for you and your company:
- The No Bullshit ‘MBA’ > Make your company stronger. New ways of thinking and doing based on in-depth knowledge without the buzzwords.
- CEO Sparring > We help leaders think differently about themselves and their orgs. With sparring sessions, some in-person, most online.
- Dream Hackers > Launch your business on the right track without all of the complicated nonsense. Fast, intense, and effective.
- Founders Retreat > Get your mojo back by getting out of the office and talking about the stuff that matters. Clarity, vision, and creativity.
- Design Doing (& Thinking) > Learn how to design things for your customers based on real needs. Then adapt the process to make it your own.
- Smart Growth > Learn how to build a business that is strong not fat. Get stuck in with clever, simple marketing tools that our Mums could use.
- Product Sprint > Make an idea real in a few days. Research, prototype and test new ideas for your company to find out if they are any good.
Like I said at the top. I’d be really curious to hear your thoughts on this article. Coming soon, our manifesto on ‘Running Flux Responsibly’.
~ check out Jon’s recent Creative Mornings talk ~
