Making the new VAT rules work for me

I’m a great believer in turning adversity into opportunity.  And the combination of the EU, HMRC and a massively complacent UK Business Secretary (yes, Vince Cable, that’s you I’m talking about) has certainly injected a bit of adversity into doing business online for UK businesses!

In case you haven’t been out of your cave for a few weeks, for purely digital products delivered automatically we all now have to charge VAT at the rate of the country our customers are in, and there’s no lower threshold – VAT is due on every sale, right from the first cent.  It means thousands of businesses selling the odd ebook or ecourse (like mine) now having to account for VAT for the first time.  That would be bad enough – but we also have to prove where our customers are, and keep the records for ten years.  That’s the bit that’s going to prove a serious problem for most such businesses – because it’s not remotely easy to comply with that part of the regs.  To see more – and sign the petition to get this ill-thought-out regulation amended – see http://euvataction.org/ or search on the hashtags #EUVAT or #VATMOSS

So we have two choices: (i) stop selling our entry-level products to EU customers or (ii) add a significant human intervention, making them no longer ‘digital’, at least for the purposes of these regs.  (i) is pretty impractical – it’s the internet after all!  And for many, (ii) is not very practical either – the whole point of offering digital products is that they don’t take any of our time to deliver so they can be inexpensive.

For a highly-automated, low-touch business that concentrates on info products, the new rules are a total nightmare.  But for me, and businesses like mine, where the low-price digital product is more a first engagement with the customer than a revenue stream, this could even turn out to be a great opportunity.  Let me explain:

Up to now, we deliver the ebook or ecourse digitally, give the customer a while to digest the material and realise how valuable our knowledge is, and then offer them a free strategy session to have a chat about it.  Of course, our objective is that a decent proportion of them will see the value in doing something more with us, and become premium or VIP clients.  But here’s the thing – I’ve found that the uptake on the free session offer has been dropping off.  People simply don’t value ‘free’ any more.

With the new rules, nothing about my digital products is going to change – except that they now *include* a strategy session, after the customer has gone through the ecourse or read the ebook.  In theory, that’s going to hammer my margins – adding in £100-worth of my time, without increasing the selling price.  Except that I’m already prepared to give a session to every one of my customers who responds to the offer after they purchase.  So nothing has changed, in terms of my costs.

What has changed is that now that strategy session is not a freebie after-thought, it’s something that is included in what the customer purchased.  And I’m betting (literally, as it turns out) that the uptake will be greater than with the free offer – that people will make more effort to use something they paid for than something that’s offered for free.

What that means for me is more serious conversations with people who get what I do, more people helped with a personalised solution – and very likely more people engaging with my individual programmes.  In short, a better sales funnel, with more income for me and more people getting greater transformations – a win all round.  And all without the VAT-man getting a single penny more!

What challenge or adversity are you facing, that a new way of looking at it could turn into an opportunity?

About Andrew Horder

Founder of the blog at TheBusyFool.com, Andrew has been working with business owners for many years, helping them find and maintain their unique Focus - those activities and opportunities that they love, and will produce their success, what Andrew calls your Joyful Genius! Andrew's first book, The Busy Fool's a to Z of Loving Work is available from Amazon http://andrewhorder.com/amazon-azlw
About The Author

Andrew Horder

Founder of the blog at TheBusyFool.com, Andrew has been working with business owners for many years, helping them find and maintain their unique Focus - those activities and opportunities that they love, and will produce their success, what Andrew calls your Joyful Genius! Andrew's first book, The Busy Fool's a to Z of Loving Work is available from Amazon http://andrewhorder.com/amazon-azlw