Understanding Rise at Seven’s Balance Sheet: An In-Depth Analysis

Today, let’s talk about a real-life company and see what we can learn from their balance sheet. Rise at Seven is an SEO agency led by the amazing Carrie Rose, who talks a lot on social media about their fast growth. So, I thought, why not take a closer look at their latest Accounts (for the year to June 2021), which are available to the public to download from Companies House.

Rise at Seven Equity Positions.

First things first, let’s look at the equity position. We can see that last year the company had retained profits of £307k, which has grown to a whopping £1,655k this year. This means that they made profits of at least £1,348k in the year. And, when we add the retained profits to the value of the share capital, which in this case is £101, we can see that the company has a positive equity position and is therefore solvent.

Now, if Rise didn’t have a positive equity position, it would be insolvent, and strategies to improve its profitability would need to be implemented urgently. Directors have to take special care if their company is insolvent, and we always advise speaking with your accountant or an insolvency practitioner if you’re in this situation.

Cash Reserves and Creditors

Next, let’s look at the cash section. Rise has a large cash balance of £1,037k (up from £247k last year). But wait, further down the page we can see that there are £613k of creditors. We’ll take a closer look at what they are later in case there is a pressing need for the cash to pay them.

Corporation Tax and Cash flow planning

Moving on to the next page we can see that corporation tax of £354k is due on the profits made in the year. This will have to be paid 9 months after the year-end so some of that £1m cash balance will need to be set aside to cover this. Pro tip: having a regular update on your estimated tax position through the year can help you plan your cash flow better.

Investing in the Future: Growth in Fixed Assets

It’s a good sign to see growth in fixed assets as it shows that Rise is investing in its business. £88k has been spent on IT equipment, presumably, a good chunk of this will be on laptops for the new joiners. Money has also been spent on leasehold improvements and fixtures and fittings (e.g. desks, chairs, sofas etc). This means Rise is not only growing but getting set up for the future.

Debtors and Creditors: Getting the balance right to maximise cash

Now, here’s where we get into the nitty-gritty. Trade debtors have grown three times since last year, and the balance is now £830k. This is cash that could be in Rise’s own bank account. If we knew the turnover, we’d be able to work out how long on average it takes their customers to pay. This is a really useful metric to monitor. On the other hand, the trade creditor balance is very low and similar to last year. This tells us a few things. One is that the company isn’t stretching out payment terms to hold onto cash. It could also indicate that they don’t use many subcontractors to do their work.

As well as corporation tax, the company has £160k of other taxes to pay. This will be payroll taxes and VAT. It’s good to factor both of these into your cash flow forecast as this will need to be set aside to be paid in the next 1 to 3 months.

And what does Carrie Rose say about the Rise at Seven’s numbers?

I shared my analysis of Rise at Seven’s balance sheet with Carrie Rose and she kindly shared how she uses the numbers to drive the business’s success. This is what she said:

“We’re entering our 4th year of trading, and I’m still in the growth mindset. Any money we make is invested back into the business to scale and back to the people. We prioritised 20% profit margins minimum (average across 4 years) to bank cash for a rainy day. This has allowed us to grow with confidence and invest wisely.

We focused on 20% revenue growth, 50% gross margin, 20% EBITDA. By having these numbers as our anchors, we found if growth had increased above the 20% mark we were also able to afford to hire and grow our headcount.

Getting the numbers right is imperative to business success. Surround yourself with the right accountants who know agency numbers”.

How healthy is your balance sheet?

Overall, the Rise at Seven balance sheet shows a positive picture. If you’re curious about your own balance sheet and want some feedback on how to make it stronger, just let us know, and we’ll be happy to help.