Back to Finance‚ Legal & Tech

Finance‚ Legal & Tech

Going VAT registered: Overcoming the fear of increasing your prices

with Vinegar & Brown Paper

 

Andy Poplar from Harrogate, Yorkshire has spent the last ten years growing his company, Vinegar & Brown Paper, a vintage inspired small business offering an eclectic mix of etched glassware combined with clever typography. What started as a hobby soon became his career and earlier this year he took the leap to get VAT registered, previously he had always believed in staying just below the VAT threshold – even lowering his prices by one or two pounds to stay under! 

Andy’s aim was to grow his business, but retain the soul of it. Like many small businesses he was worried that becoming VAT registered and having to increase his prices would lose his customers. So we asked him to share his journey from what was holding him back, to why he eventually took the leap and how he overcame his fear of price increases.

Andy stopped sole trading in January this year and he now pays himself a salary and is a Company Director of Mend Your Head, ‘I trade as Vinegar & Brown Paper. Which comes from the nursery rhyme, Jack and Jill, because they mend Jack’s head with vinegar and brown paper. I’ve certainly mended my own head by doing something I love.’ Andy said: ‘It never started as a business, it was just a way of creating things that I loved rather than thinking up ideas for other people.’

‘It seemed ridiculous to not work for the next four months just to stay under the VAT threshold.’ He realised that there was no other option than to go VAT registered, and he’s been pleasantly surprised, ‘I was panicking about it but it was a huge relief when it was no longer an option.’

Vinegar & Brown Paper was born when Andy quit his city job as a copywriter in advertising after finding himself crying in a stationery cupboard, burnt out. He learned to etch words on glass and now his words adorn apothecary bottles, wall mirrors and accessories. One of his designs – a lab bottle with the words ‘Creative Juices’ etched on – even went viral overnight.

Vinegar & Brown Paper has had its busiest twelve months ever during the COVID-19 pandemic, after his pieces really resonated with people. Although the brand was growing by the day, Andy wanted to stay small so he didn’t have the responsibility of VAT returns. He thought that going VAT registered would disrupt that.

After such a successful 2020, Andy found himself having to slow down his sales in order to stay below the £85K VAT threshold, ‘I was doing everything I could to avoid going VAT registered and staying below the threshold, even by two pounds if I had to.’

Andy was putting his work on Instagram which generated even more sales which was great financially, but last November meant he went over the threshold, ‘It seemed ridiculous to not work for the next four months just to stay under the VAT threshold.’ He realised that there was no other option than to go VAT registered, and he’s been pleasantly surprised, ‘I was panicking about it but it was a huge relief when it was no longer an option.’

The hardest part for Andy was putting his prices up by 20% in order to cover the VAT, ‘I didn’t want the pressure of putting my prices up to keep that 20%. Anything I sold for £25 had to go up to £30 and pieces going for £150 went up to £180, I felt bad doing that to my loyal customers.’

Andy was worried that his customers would complain about his items being too expensive, but they didn’t, ‘It’s weird pricing your own work anyway, I still wonder why anyone buys it, I almost gave my pieces away at the start!’ 

Andy had the clever idea of launching a new product at the same time as increasing his prices, ‘Whenever I launch something new, there is always a rush of people buying it so they didn’t bat an eyelid at the price increases. I didn’t even have a dip in sales.’

‘Whenever I launch something new, there is always a rush of people buying it so they didn’t bat an eyelid at the price increases. I didn’t even have a dip in sales.’

He also launched a series of online vintage events in order to give his customers something back and drive more excitement around his ‘collector pieces’, he said: ‘I’d put vintage pieces up online at 10am on a Sunday morning and everything had gone in the first four minutes. The price increases didn’t make a difference, and the buzz of the new pieces proved that if a customer wants something, they will buy it, whatever the cost.’

Andy’s story shows that you can grow your business whilst still retaining its spirit, soul and your customers.

Key takeaways:

1. Don’t be afraid: It’s easy to worry about making enough money to stay VAT registered, but you’re more likely to grow even more. You may also worry about staying under £85k threshold, but just leave the stress behind, grow at your own pace and go VAT registered, otherwise you’ll hold your business back.

2. Get an accountant: A key part of making the transition into being VAT registered for Andy was employing an accountant so now all his financial stress has gone. He doesn’t have to learn how to do VAT returns and if your turnover is £85,000, it’ll pay for itself anyway.

3. Engage with your followers: Before going VAT registered, Andy engaged with his followers, and other artists in a similar situation, and was reassured that it wouldn’t affect his sales giving him the confidence to go for it.

IGTV Pricing your product

Think about how you currently price your work. Do you charge for your time? Your expertise? Or decide a price that you yourself would be willing to pay? Which is what a lot of small businesses do. Ceramicist Charlotte Miller shares her journey and lessons of pricing her unique work.

Share this article

Back to Finance‚ Legal & Tech