OVER TO ELLIE

Right now, this industry needs to get to grips with what fast-rising costs and inflation are doing to our businesses. There are tough times ahead and the right approach is vital

It’s buying time again, which has us running to evaluate turnover and margins and no doubt ask ourselves how the heck do we manage our rising costs, supply chain problems, staff shortages and the soaring costs of energy. Oh and the end of COVID support schemes, and the realisation that Brexit has finally hit home with huge cost implications when importing fabrics from Europe. Sorry everyone, but this is a sobering factual article and my goal is to leave you thinking (hopefully, not depressed).

Running a small business is now more expensive than ever and according to the FSB (Federation of Small Businesses), 78% of small businesses say that their costs are the highest they have been since 2014.

Whether you read Drapers, B.O.F (The Business of Fashion) or general news, it is reported by many industry leaders that these spiraling costs are threatening the survival of many small businesses. Also reported is the year-on-year inflation measured by the Consumer Price index which rose to 9.6% in May (and is set to increase further), largely driven by food and energy price increases. This is the sharpest increase since August 1988, and a worrying statistic for sure.

Having projected sales along with administration costs for Ellie Sanderson for the next operating year, I literally felt sick at the costs. I thought It may be useful to share that they will be 19% higher than last year. Electricity / gas / water / business insurance / staff costs / petrol and travel / dress bags / dry cleaning / bank charges. Seriously, it’s going to be a very hard few years and whilst we are basking in the glow of post

covid backlog, this will seriously bite for general manufacturing shows manufacturers are finding it more us in the bum soon. some growth but orders are slowing challenging right now.

Suppliers are also increasing and exports almost at a standstill My biggest anxiety right now the cost of goods making their with investments nosediving as is that the UK manufactured products more expensive for the companies cut or postpone plans bridalwear margins will not be consumer and making it harder to maintain their cashflow. The sufficient to enable UK retailers for us to convert sales. They, to survive if they solely sell too, have cost increases to British dresses. I was once 100% manage, staff costs probably British but have had to mix up being the biggest issue for my labels to increase margins them with the mass exodus which will help manage the of the European labour force. soaring costs. I now buy from British manufacturers will be the USA, Australia, Ukraine and feeling this more than anyone Spain. I only sell one British else and whilst inflation across label now. I am also not sure the globe is through the roof, if we will ever see the costs the sad deterioration of our reverse where we can afford country’s ability to manufacture seriousness of the situation means to operate our shops on less than fabrics means we are already at a that industry cannot wait for the 2.5 markup which is the average of disadvantage buying them from promised help in the Autumn by the British Labels. Our product margin other countries and importing to Chancellor, Nadhim Zahawi, and that balance now needs to be carefully the UK at huge cost. Makeup.org urgent Government help is needed considered. – a manufacturing body with an now to address business costs. Back to my very sobering and online site has said that the outlook All sobering stuff and British worrying point. Costs.

“Look at each outgoing and ask yourself if you really need it, to be successful. Do the ends justify the means?”

KNOW EXACTLY WHAT YOU ARE SPENDING

Whilst undertaking this exercise you may find that certain outgoings that are no longer fundamental to your business’s success and you can chop them off. • Evaluate operating hours - are you open when you don’t need to be or can you consolidate hours. Even seven hours a week is £3k a year staff costs! • Staff productivity - do all your girls earn their keep? Do you need one instead of two girls in – have you flexible contracts that enable you to cut hours. • Energy, I switch lights, fans,

Irons literally everything off all the time. • Review business processes – can you automate anything (whilst keeping it personal).

Can you remove anything that you’ve always done but now don’t need to? • Can you cut back on things that don’t bring financial results?

Look at each outgoing and ask yourself if you really need it, to be successful. Do the ends justify the means? This can help you to decide where cuts can be made. You will find at least one thing.

BENCHMARK SUPPLIERS

When was the last time you benchmarked your key business suppliers? • Benchmark your dress suppliers and evaluate margins and hidden costs to make sure you are charging correctly and that you are making money. • Evaluate every single item on your shop floor to ensure your margins are correct. I discovered we were massively underselling a belt supplier as we hadn’t added in import duties. • Check all your utility suppliers to see if you can improve on deals. • Evaluate your accountancy firm and bookkeeper - there are often cost savings to be made here.

PASS INCREASES ON

Another potential way to mitigate the impact of rising business costs would be to raise prices to account for these costs.

Understandably, we all find the prospect of passing the increases on to our customers a daunting one, whether due to the level of competition, bad PR, or the fear of losing business. But sometimes this has to be done.

Your business needs to make money on the goods and services you supply. So if the price of raw materials are increasing and your profit margins falling, even a small or temporary increase can help to mitigate the impact of rising costs.

DON’T GO IT ALONE

I have regular meetings with my accountant (prices agreed in advance) to discuss my future costs. Their advice is always sobering and unemotional. Accountants focus on numbers and forget all the stuff we get engulfed in like areas of exclusivity, minimum buys etc. If a label is not performing for me and no matter how exclusive or gorgeous they are, my accountant and I will always agree on a way forward. I did that review In January and really mixed up my product to counterbalance some of the above issues. It’s not a speedy process though so it’s good to have a clear plan before you buy one dress at Harrogate! Good luck everyone x

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