Alice Benham, a marketing consultant, realized she needed to take an unconventional measure to rake in higher profits: reduce her revenue.
Earlier in the pandemic, Benham said she invested “every hour” into her marketing-and-strategy business, which she started in 2016 at just 17 years old.
Benham told Insider she launched her first online course in September 2020 and made £15,000, or about $18,400, on the first day, which was double her average monthly income at the time.
More revenue doesn’t guarantee more profit
Despite growing revenue, Benham was taking home less each month because of increased costs. In May 2021, she had to become “VAT-registered.”
In the UK, VAT, or valued-added tax, is a levy on many nonessential goods and services, charged as a percentage of the sale price and then paid to the government. The percentage is defined by the government and varies depending on what is being sold.
Businesses generating more than £85,000 in annual revenue must become VAT-registered.
VAT can be costly. If a business charges its customers more VAT than it pays to other VAT-registered businesses, it pays the government the difference. If it’s the other way around, the government pays the difference.
The tax is an added 20% of the sales price for most items. But when Benham became VAT-registered in May 2021, she chose to increase her prices by only 10% so her customers weren’t hit by a large price hike.
