THE BUTTERFLY EFFECTED CIC

Executive Summary

THE BUTTERFLY EFFECTED CIC has started well with positive cash reserves and balanced operations typical for a new community interest company. While the break-even financial performance and zero net assets suggest limited financial cushion, the company’s health indicators show no immediate distress. Focus on improving profit margins, building reserves, and maintaining cash flow will be critical for long-term sustainability and impact.

THE BUTTERFLY EFFECTED CIC - Analysis Report

Company Number: 15024864

Analysis Date: 2025-07-29 13:04 UTC

Financial Health Assessment of THE BUTTERFLY EFFECTED CIC

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1. Financial Health Score: B-

Explanation:
For a Community Interest Company (CIC) in its first full year of operation, THE BUTTERFLY EFFECTED CIC demonstrates a solid start with positive working capital and balanced operations. While turnover and profitability are modest, the absence of debt and presence of cash reserves indicate a generally healthy financial posture. However, the break-even result and zero net assets underscore the need for cautious management and growth focus.

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2. Key Vital Signs

Metric	Value	Interpretation
Turnover	£52,298	Modest revenues for the first year; typical for a new CIC with community-focused activities.
Gross Profit	£15,217	Indicates ability to cover direct costs, showing some margin on projects delivered.
Operating Profit	£0	Break-even operating performance; costs fully absorb gross profit.
Net Assets	£0	No accumulated reserves; typical for a start-up CIC but means no buffer for losses.
Current Assets (Cash)	£12,731	Healthy cash position to meet short-term obligations; a vital “pulse” indicator of liquidity.
Net Current Assets	£12,731	Positive working capital (“healthy blood flow”) signaling ability to cover short-term debts.
Employees	2 (average)	Small team size consistent with micro/small scale operation.
Administrative Expenses	£15,217	All gross profit consumed by admin costs; tight cost control needed to improve margins.

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3. Diagnosis

Overall Business Health:
THE BUTTERFLY EFFECTED CIC is in the early stages of its life cycle, with typical "newborn" financial characteristics. The company has established a positive cash foundation and generated turnover, reflecting effective community projects and income streams. The break-even operating result suggests strong cost management but limited profitability, which is common in the initial phase as the business builds reputation and scale.

Symptoms of Financial Condition:

• Healthy Cash Flow: The presence of £12,731 in cash and no current liabilities reflects good liquidity, a key sign the company can meet immediate financial demands without distress.
• Absence of Debt: No reported borrowings or liabilities, reducing financial risk and interest burdens.
• Zero Net Assets: Indicates no retained earnings or reserves; the business is reliant on maintaining positive cash flow to sustain operations.
• Cost Pressure: Administrative expenses entirely offset gross profit, signaling limited financial buffer to absorb unexpected costs or invest in growth.

Operational Health:
The CIC operates in "Other human health activities" with a strong community engagement focus, delivering impact through art and workshops. The directors’ report and community interest statements reflect a clear social mission with stakeholder involvement, which supports future sustainability.

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4. Recommendations

To enhance financial wellness and ensure long-term viability, consider the following steps:

1. Improve Profit Margins:

   • Review cost structures, especially administrative expenses, to identify efficiencies.
   • Explore additional revenue streams or grant funding to increase turnover without proportional cost rises.

2. Build Reserves:

   • Aim to generate surplus profits to accumulate retained earnings, creating a financial buffer for future uncertainties or investment.

3. Cash Flow Monitoring:

   • Maintain rigorous cash flow forecasting to avoid liquidity "stress episodes" especially as projects scale.

4. Stakeholder Engagement & Funding:

   • Leverage community and stakeholder relationships to secure grants, donations, or sponsorships aligned with the CIC’s social objectives.
   • Explore partnerships that can provide both financial support and operational synergies.

5. Governance and Reporting:

   • Continue timely filing of accounts and returns to maintain compliance and build credibility with funders and partners.
   • Consider periodic financial reviews to detect early warning signs and adjust strategy accordingly.

6. Strategic Growth Planning:

   • Develop a medium-term plan that balances mission delivery with financial sustainability, including potential scaling of successful projects.

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Medical Analogy Summary

Your CIC currently exhibits a stable pulse with healthy liquidity ("blood flow") and no immediate signs of financial distress ("symptoms of illness"). However, the zero net asset "immune reserve" means vulnerability to shocks or unexpected costs. Like a patient in early recovery, the focus should be on strengthening reserves and improving operational efficiency to ensure sustained health and growth.

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