MHV 2019-2020 Financial Discussion

Hi All,
Rather than a monthly financial report, I’ll throw one large financial report covering the 2018-2019 financial (& committee) year here, as well as projections for the 2019-2020 financial year and onwards.
I’ll also talk a bit about my budget proposals for the 2019-2020 financial year and we can discuss any improvements or outright alternate suggestions, so we have something reasonably solid to present at the AGM.
I’ll read through all the comments everyone’s made on my previous financial reports, and everyone’s free to add in any concerns you wish for me to address in this thread while I work on the reports.

Also, please, bring up any and all other issues, suggestions, changes, or anything else related to space finances here. If all interested parties have all relevant discussions here then we can avoid having them during the AGM around those who aren’t interested.

I’ll apologise in advance if this thread seems a little brutal, however, our finances aren’t exactly in good shape.

MHV Finances September 2017 - August 2019
If something’s worth doing, might as well spend the whole day on it.

Featuring everyone’s favourite moments from the monthly financial summaries, now over two years!

Let’s start by looking at our I/O (Unless otherwise specified, everything will have insurance averaged and power usage allocated to the month in which it was used, not when it was paid):

Money In:
Income%20and%20Donators
Expenses:
Expenses


Say what you will, in the last 12 months, however, we haven’t been doing so good.
12%20Month%20Income%20And%20Expenses
How bad?
Let’s look at our losses by month:
Losses
So that’s three months in the last two years, 3 out of 24, in which we got more from donations than we spent.

And just because people ask, our bank balance:
24%20Month%20Balance
I won’t bother to go into detail, but that drop in the last third was insurance. The peak after it was a refund received for a preorder we decided we didn’t want.
Remove that Deus Ex Machina from when the space was viable and we’d be even further down, and the trendline would look far worse.
Actually, let me make that clear, EXACTLY what we’d look like without the glowforge refund:
24%20Month%20Balance%20Without%20Deus%20Ex%20Machina
There. Much better.

WHY STOP NOW?
Let’s forward project the next two years by replaying this graph with our current balance as the start point, showing what the space would be like without the reduction in our rent:
Next%2024%20Month%20Balance%20Without%20Rent%20Subsidies
AWFULLY CLOSE TO ZERO THERE, ISN’T IT?
This is what happens if we do what we’ve been doing for the last two years without radical change.

WAIT NO
WE HAVE THE RENT REDUCTION!
WE’RE SAVED! WE NEVER HAVE TO CHANGE ANYTHING EVER!
FUTURE MHV MEMBERS CAN DEAL WITH IT SO WE DON’T HAVE TO!
LET’S TOTALLY IGNORE THIS BLESSING, THIS ONCE CHANCE TO USE OUR SPARE FUNDING TO REBUILD MHV INTO WHAT IT WAS, LET’S JUST KEEP GOING AS IS, IGNORING ONE LAS DEUS EX MACHINA UNTILL IT’S FAR TOO LATE TO BE USEFUL!

Or maybe we shouldn’t do that.
Maybe we should think long and hard about every cent we spend over the next two years ahead of time
So I have this crazy idea
This really tottaly insane idea
We make
Alright
Listen
Listen closely
What if
Come on, listen
What if we
What if
What if

Before the AGM
We make a budget?
And actually decide HOW we’re gonna spend the money
Rather than just buying stuff whenever we feel like it?

What if
What if we planned what we’re gonna spend AHEAD of time?
So we know how much we can actually afford to spend?
I mean, there’s a “Budget” folder in the shared Committee drive, but it’s just got some auto-generated spreadsheets in it.
What if we MADE a BUDGET?
Alright well I think it’s a good idea so that’s what Imma do. See you all in five hours when it’s done.

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THE BUDGET!
So, I ran the math, and it turns out we’re still stuffed.
BUT NOT AS BADLY!
Using our nominal operating costs, I’ve come up with a new absolute minimum amount that MHV will need to pay to continue to exist:
Minimum%20Monthly%20Cost
That’s $522.58 a month just to exist.
And can you guess our average income per month this year?
That’s right! $531.30, leaving us with a MASSIVE $8.72 SURPLUS!
So Eight Whole Dollars to spend on actually making the space a better place each month! Fantastic!

And every new cent of donation will add directly to that number!
Meaning, that in two years when the rent goes back to what it was, provided we spend absolutely nothing, we’ll have $209.28 TO SPEND!
That’s not even a single months worth of our current discount on rent!
And I ran the calculations backwards, with our new minimum monthly costs, if we received the same donations that we did for the past 24 months we’d even have $691.24 spare!
That’s ignoring the countless thousands of dollars we’ve spent on other things, of course.

Still, $691.24 discretionary over 24 months is like, $28.80 a month to spend on the space!
And if that sounds good, it should, because right now, with $209.28 split over 24 months, we’ll only have $8 a month to spend. $8.
A MONTH

So cry to the heavens, we’re saved!

We can either continue as is and say we’re happy to either spend $8 a month, or slowly increase our bank balance at a rate of 1% per year, or make some radical changes (which, spoiler alert, I’m about to propose in the next post) in the hopes that it’ll drive up membership to the point where we have, ya know, more than eight dollars a month.
And remember, from just keeping on keeping on for the last 24 months, we’ve gone from a $28.80 surplus (averaging the last 24 months) to an $8 surplus (averaging since January).

We’re slowly, surely, gliding calmly directly into the ground, and I’d honestly rather not stick around if everyone’s happy to let it crash gently for fear of what might happen if someone tries to take control.

Ryry’s super awesome budget plan for 2020-2021 coming up next:

Ryan’s Super Awesome Happy Funtime Budget Plan fowhy are you screaming?
There is no need to be afraid, everything will be fine!

Idea 1: An actual budget.
So forget stressing about money and not spending anything on space betterment because “We don’t have any to spare!”
We do, we have eight thousand dollars in the bank, and rather than curling up into a ball in the corner thinking the space is gonna fix itself before that money runs out we should spend what we have on actually improving the space.
Waiting for three committee members to agree on something before buying something the space needs just isn’t working. It means money is only being spent on larger items in the hundred-to-thousand dollar range.
What I propose is to set aside $250 every month to a space improvement fund, along with $100 to “save” up for larger purchases. Don’t argue the exact figures, they’re not important.
Once a month the committee could vote on a preprepared list of potential purchases for the space, a simple yes/no, to use the allocated funds.
It’d take over 17 months for us to spend everything above our reserves at this rate. It’d mean that every month there would be a visible value-add to the space.
It would also mean that we could tell members, rather than “Your donation will mean we’ll drain slightly less from our bank account this month”, that “Every cent you donate will go directly to space betterment within the next month or so”

With a running cost of ~$500/month, I propose that the first half of the $500 be paid directly from reserves, the remaining $250 be paid by member donations, and all surplus after that be reserved for space betterment.
An example:
$500 a month to keep the space alive, $700 of member donations
$250 comes from the bank account, $250 from the member donations, leaving $450 for space betterment.
I believe this should motivate people to donate and contribute more actively, as well as allow members the freedom to spend what they want on maintaining and upgrading the space without the current hassle of individually authorising every single purchase.
Even in months with lower donations, never allow the money for space betterment to go below a certain threshold.
So many times I see things go unrepaired for months because people place a higher value on a small amount of money than not only the human labour cost, but also the time that a piece of space infrastructure will be offline and unavailable.
If we treat the space with the sort of respect we expect prospective members to give it, rather than this “Good enough I guess” mentality that’s meant nearly all of our hand power-tools have remained broken for the entire time I’ve been a member here, how could we possibly expect people to even consider donating when all their donation will provide is prolonging the existence of a downtrodden shed of broken tools, rather than the advancement of a well-kept facility?

No-one likes agreeing to spend money, THAT’S WHAT A BUDGET IS FOR.
Make the decisions on paper, because we’ve been given a golden opportunity to use our surplus funds to rebuild the space into something fantastic, I’ll be damned if I’m going to sit idly by as we save said funds for a rainy day, a rainy day that we will only guarantee the coming of if we don’t take action to better the space now.
Either we do nothing and membership continues to decline as it has been for the last 12 months, or we actively spend money on bettering the space.
I propose $250 to be spent every month no matter what. Others have said this does not allow for long-term savings for bigger projects. I propose that any donations we receive in excess of $500 go either to long-term savings for projects, or are split between immediately spent money and savings for bigger purchases.
Guaranteeing to all member that we will spend $250 a month every month on improving the space is something I believe we owe to all members regardless.
I firmly stand against any suggestion to allow anything left of that $250 to be saved for future use, as it would encourage people to vote against immediate spending to solve immediate problems for the sake of long-term goals.
Thus, I propose any of the $250 not spent each month is either burned, donated to a rival community group, or simply “returned” to our main savings account, not able to be spent for any other purposes for the time being.
We cannot afford not to spend money to rapidly better the space while we have the golden opportunity to do so.
This is my proposal, and if anyone can thing of a better thing to do with eight thousand dollars sitting dormant in a bank account that we will not otherwise draw on for the next two years, I’m all ears.
Because right now it’s being wasted.

There’s a whole bunch of other stuff about restructuring the member system however it’s been an incredibly long time since I’ve spoken about such an idea and may need a refresher next Tuesday.
But I think I made my point clear here, and this will be the hill I’m going to die on if I need to.
We’ve got two years of sitting with our current bank balance and, should we not spend it, it will do precisely nothing, other than grow by around $200 should we not increase our member numbers.
Then, we’ll be hit with our unsubsidised rent, and we’ll go back to only having 12 months to survive.
I have no desire to simply prolong the space as long as possible regardless of its condition.

If it does not provide value to the community then it does not deserve to exist.
We’ve been refusing to spend money on its improvement because maintaining its existence was more important.
We no longer have to worry about such things. We’ve got two years, and if we don’t change it into something that people view as being worth paying membership for, it will simply fail in good time.
We have the time to experiment here. If we spend six months on space betterment, costing a whopping (gasp) 1/5th of our reserves, and membership still doesn’t pick up, then we’ll still have 4/5ths left to experiment with. We’ll still have a safety margin remaining.
However, if we only wait till we have months left to live before ever making radical decisions, then we will never have the needed safety window to make those decisions.

Desperation is the worst time to take risks, because you have nothing left if you fail.
While we still have our current safety nets, we need to elevate the space into something greater.

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Smaller thoughts:

Setting up a few accounts for managing our finances.
So one for all donations each month, one to hold all savings (for automatic payments), and another for the monthly “budget” (should we decide on such a system as proposed above).
This’d just make monthly financial analysis a little easier. Automatic payments from one account, donations into another, and choice spending from a third.

Contactless payment terminal for one-off donations
I believe Ben suggested the idea of a payment terminal at the front door for collecting donations, so that members could, if they so decide, tap their card on it to make a one-off $10 donation to the space.
Other charities and not-for-profits use such a system, and I have been looking around for providers in Australia who offer such services.

Ratify a $2k Reserve
Something else which I believe is a de-facto space policy by now, is that if our bank balance runs under $2,000, that we should perform a safe, managed shutdown of the space, allowing time to move all items of interest out of the space, and either donate them to other local interest group, sell them then donate the profits to such groups, pay for a skip and dispose of what’s left, and then leave gracefully.
It’d be good to have this as official space policy.

Another point is just bringing up that if anyone has any evidence that we, at any point, ever tried to contact the ISP internode to cancel or modify our line to Belconnen in any way whatsoever, then please let me know. All we need is an email or the record that you so much as made a phonecall to them after or during the move from Belco and we could get around $1k or so back from them.

I think that’s it for now, but again, feel free to add any suggestions

I’ll just edit this post so I don’t bump the thread above Free Pizza™, Next Tuesday™, Don’t miss it!

I’ll go into detail a little on member fee restructuring.
With the rent reduction and our death clock getting two years of borrowed time added to it, neither of these may be important anymore however I will list them regardless.

THESE ARE JUST SUGGESTIONS THAT HAVE FLOATED AROUND AND DO NOT NECESSARILY WORK TOGETHER

The first
*Updated Baseline Membership Fee
One suggestion was to increase our baseline suggested membership fee to $50/month, as our costs have far more than doubled since we started at $30.
That said, with the rent decrease our costs have now dropped back to damn near nothing/month (well, 11 people donating $50/month or 18 people donating $30), so there’s no longer an upward force driven by an existential crisis.
Without this, I think it may be best to leave things as is, additionally the above suggested budget plan would itself encourage donations as every new or increased donation would go directly to space betterment.
That said, another suggestion was

Basic Membership
Something suggested to me was to revert to something closer to the membership system we had in the past, with some modifications.
As proposed, this would involve a $50 mandatory yearly membership fee to cover insurance, and either a $20/month ongoing fee for unlimited space use or a $10 one-off fee for a single use of the space (the $50 still needing to be paid beforehand).
Grace would be given to prospective members on their first visit, however all concurrent visits would require both the yearly insurance fee to be paid, and either a $20/month membership… lets say, “Subscription”, or a $10/visit payment at the door.

This plan was conceived when we were a lot more financially desperate, while I don’t like backing off and getting soft simply because we no longer need to make changes as a matter of urgency, the question is now “In two years when we have to pay full rent, what will be the preferable system?”
Consider that the new suggestion actually reduces the overall yearly cost of membership from 12*$30=$360 to $50+(12*$20)=$290.
Throw in a card reader at the door (with receipt printer) and you don’t need to worry about which “casual members” have paid their one-off entry fee.

Yada yada it goes without saying that concessions would be made to those under financial pressure, however consider that for them the situation would be the same as usual, our policy of understanding wouldn’t change there, however for all other members they’d actually get a cheaper deal than they’re currently paying (average donations amount currently being 27/month, that’s averaging for months not donated in as well).

Additionally, for those who’ve been consistently donating $30+ a month for the last year, the initial insurance payment could be waved. This includes those that only make a yearly donation of a years worth of fees.
As those of you who’ve read my monthly financial reports would know, I’ve been keeping track of all member donations since January, so it would be pretty easy to work out who’s donated what and when.
In summary, on average, members of MHV would pay less for the space, monthly membership would be reduced, perhaps making it easier for some members to set up a recurring monthly payment, and looking two years into the future this is the system I think would be best to offer for new members, so we might as well start it now.

Because I just love the sound of my own keyboard, here’s what our power usage has looked like (because yet again I’m avoiding doing the financial audit)
Monthly%20Electricity%20Bill
Something something looks like heater usage is way down.

Here’s the final financial report, audited, for the space:

An idea I had for the space was to lock away the vast amount of our unused savings in a term deposit, leaving $2-3k spare for any major charges.
Thanks to the inverted yield curve, it’s most profitable to only lock funds away for three months, so I see no possible situation in which having to wait three months for any payments would be a problem, I know we’ve gone that long without paying any of our bills spare rent, for example.
To make things nice and safe, as I’ve previously suggested, separated accounts, so one would have enough in it to cover any and all bills for the length of the term, another would have spending money for the length of the term, and the remainder would be placed in a term deposit. Even if the spending money account ran dry, we would still be able to avoid eviction or upsetting anyone too much.
At current rates it’d get us a whopping $75 spare a year, but as we’re currently breaking even that’s $75 a year more than we have now.
It’s free money. Why not?

If every dollar counts, then one way to cut costs slightly is to ask everyone to take their own rubbish home, instead of paying for the bins. Carry-in-carry-out like in a national park. I am guessing the same problem will arise as with parks - some people won’t carry out.
There may be other reasons against this proposal, like large waste items being generated (broken-down bench tool) that need large-scale disposal bins, not household ones.

I am pretty sure our lease requires us to have a bin. Plus I think it was less then $50 for the last twelve months.

Unfortunately bins are a requirement, and from memory the cost is closer to $200/year, but I’ll call and work out the actual cost.
I’d still be cautious as I believe providing less services to members in hopes of saving money may be the exact opposite of what we need to do. Instead, spending money in order to provide more services and utilities to members with the hopes that doing so adds more members, making up the cost, is how I would hope to move forward.
We’ve already cut internet and I would hope that in the next 12 months we’ll be in a place where we can afford that again. These days unlimited data mobile plans are only $45/month, so it’s not totally outside of our reach.
None the less, I feel as if conservatism and cutbacks have only hindered MHV, not grown it.
Every dollar counts, but we’re not stressed for cash, we’re stressed for income.

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