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18 ADVERTORIAL TO ADVERTISE CALL 020 3906 8488 Rising costs of being in business
BY ZARA NEWMAN, LEAD FOR DEVELOPMENT AND STAKEHOLDER ENGAGEMENT, JCOMMERCE.
The non-stop talk on the street about ‘The Cost of living crisis’ is an important topic and something that needs addressing, with inflation running at record levels and heading fast for the 11% mark. But what of the impact this is having on the average small business?
Businesses are enduring the perfect storm, having been battered by Brexit, the Pandemic and now the war in Ukraine. According to the Federation of Small Business (FSB) 78% of their members report that costs are rising, with outgoings at their highest levels in almost 10 years, largely due to the eye-watering price rises of fuel and utilities. Since the former is the bread and butter of product- based businesses to distribute their goods and the latter impacts on manufacturing, the adverse affect of spiralling costs on businesses is almost unquantifiable.
Rather than acting like a deer in headlights with nowhere to turn, perhaps it makes sense for businesses to ‘batten down the hatches’ in order to weather the latest financial storm and survive.
The best place to start is to be on top of all your outgoings. Whilst this might seem like an obvious no-brainer, not only would you be surprised how many businesses don’t have an accurate handle of their expenses, even for those that do, carrying out regular audits of outgoings, is a good way to pinpoint expenses that are no longer fundamental to the business at any particular time, or can highlight where cuts can be made. Look for opportunities to save in all areas of the business and don’t underestimate how helpful even small savings can be. For instance, if you haven’t yet done so (to please the green brigade) go paperless, saving on both the cost of paper and printing, with the added bonus of making the office more streamlined and efficient. Another idea is to research and consider bundled services that include phone, internet and web hosting amongst others; similarly leasing equipment could help
manage cash flow better and save on large capital costs and maintenance.
Since the pandemic, most companies have realised that traditional employee expenses – such as business lunches and travel – are largely superfluous to the core functions of their work. See if any further savings can be made by setting guidelines and activating pre-set limits for employees. Make sure your employee expense policy is transparent – as a small businesses owner it is entirely up to you to decide what expenses make sense for the company’s ideals and goals. On the flip side of the coin, as the public sector is currently calling for inflation busting wage increases so as not to be worse off financially, your employees may want to follow suit. Whilst increased salaries would have to be decided on a case-by-case basis, a good idea would be to attach any wage rises to improved performance or increased responsibilities.
So what is left you may ask? Well here it is worth exploring the sacrosanct areas of asking suppliers to share the burden and/or passing on costs to customers. For the former, although they are in the same boat as you with squeezed margins and escalating costs, there is no harm in benchmarking your suppliers constantly to check on quality and where overheads can be cut, as well as persistently asking for discounts. An open and honest communication is required here and it is also worthwhile mentioning what is good for you (selling more to customers at competitive prices) is good for them (more wholesale business)
And what of passing on costs to customers - something all businesses intrinsically feel like slamming the emergency brakes on when contemplating such action? Clearly there comes a point when passing on increased costs to clients and customers can no longer be avoided and profit margins have to be reviewed. Resist the urge to be a martyr and do put in place processes to increase prices as needed to maintain adequate profit margins. You would be surprised at how resilient and tolerant to price increases customers can be; consistently under-pricing will mean you no longer have a viable business model and perhaps they would prefer that your product is available and support you through the tough times. Alternately, customers may be keen to start a project now or buy goods, in order to protect against any future upcoming price rises.
In short, everything is on the table. Perseverance and resilience are the order of the day and hopefully the economic turbulence of the last 3-5 years will soon be a distant memory.
Jcommerce is a charitable organisation set up to support businesses to economic self-sufficiency and address business challenges that arisen from COVID-19 and beyond. For more information about our business support services including, video soundbites from successful entrepreneurs, business advice and mentoring go to www.jcommerce.org
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