How to reduce the impact of rising business costs
Rising business costs continue to restrict small business growth and put pressure on cash flow.
Global supply chain problems, staff shortages and the soaring cost of energy and fuel are driving up prices, with inflation at the highest level seen in more than 10 years. The end of the COVID support schemes and Brexit, together with and a number of regulatory changes in recent years, have all made running a business more expensive, particularly for small businesses.
According to The Federation of Small Businesses (FSB), 78% of small businesses say costs are rising, with payments for outgoings such as fuel and utilities at their highest levels since 2014.
Many industry leaders are concerned that these spiralling costs are threatening the survival of many small businesses.
Fortunately, there are a number of steps SMEs can take to help mitigate the impact of increased prices.
Know exactly what you’re spending
First, to reduce the impact of rising business costs you need to know exactly how much you’re spending and where.
Whilst undertaking this exercise you may find that certain outgoings that are no longer fundamental to your business’s success.
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.
When was the last time your benchmarked your key business suppliers?
Regularly checking that you are getting the best deals for your business is a great way to save your business money and improve your bottom line, whether that’s your utilities supplier or marketing agency.
Our benchmarking series has lots of helpful tips for reviewing your suppliers and keeping costs down.
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, many businesses find the prospect of passing the rise on to their customers daunting, whether due to the level of competition, bad PR or the fear of losing business.
Ultimately, though, 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 rising costs.
Optimise your funding
When faced with rising business costs, you may find that your cash flow becomes stretched and difficult to manage.
While the above steps can help to reduce the impact, it can also be beneficial to review the level of funding support you have.
Look at your current funding facilities. Do they give you the flexibility you require to successfully manage your cash flow and keep paying staff and suppliers on time? Or could a new facility provide that and the peace of mind your financial future is secure?
If your company is struggling to keep up with rising business costs we could help. As an independent commercial finance broker we can help you find and secure the most suitable funding facility on the market for your business’s needs and goals. Call us today on 0800 9774833 or email firstname.lastname@example.org to speak to a member of our team.