How to scale and handle going VAT registered
If you’re scaling your subscription box and heading towards VAT registration, how do you handle that financially / raise prices, and not lose customers?
This week’s Subscription Box Q&A question is from Olivia - and it’s a great one for those who are growing their subscription box business but worry about the VAT threshold:
I'm currently keeping my numbers below the VAT threshold as I only just raised my box price earlier this year, and can only realistically increase it again next year to include the VAT, as my profit margin is too small to cover it right now.
How do you effectively scale to include VAT in your prices and not have huge churn due to subscribers not being prepared to pay the higher price?
Quick note: In the UK, VAT is 'Value Added Tax' of (currently) 20%, and paid to the government when a business or service reaches £85,000 turnover (approx US $117,000).
So... Learning how to handle adding VAT costs and retaining subscribers is something that comes up for many subscription box businesses as they scale.
There's a few factors to consider when tackling this business hurdle, so let’s split them into two sections:
- Managing VAT costs (this looks more scary than it is!)
- Looking at increasing the price of your subscription box
Let’s go through each of these to find the best way for you to welcome that VAT increase (It's a sign of growth! You're paying for more nurses!) whilst maintaining a healthy profit margin for your subscription box.
Watch this week’s quick 7 minute video (click on the image above) to learn more.
All my best,
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