Small businesses across the UK are facing an uncertain future due to the ongoing economic challenges.
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High inflation, unprecedented energy prices, supply chain issues and fuel costs are all contributing to the pressure on SMEs and individuals.
The cost-of-living crisis is impacting businesses in every sector: there are increased fears of losing employees through redundancy and even business closure.
What is causing the cost-of-living crisis?
Higher inflation, combined with low wage growth, has left many people worse off than ever before in real terms, as their income isn’t keeping pace with rising costs.
Short term factors, including the conflict in Ukraine, have worsened the global economic crisis that is impacting Britain. This has led to long term trends, such as lower productivity growth.
The economy never really recovered from the Covid-19 lockdowns, when businesses laid off employees and reduced investment. The global supply chain issues began due to the continual lockdowns.
There was a rise in demand for certain products, due to more people being trapped at home. Continued lockdowns in China led to a severe shortage of containers and more supply chain problems.
The ensuing rise in demand in 2021 and 2022 saw continued supply shortages, causing prices to increase.
Why is it important to control costs in a business?
Today, the rising cost-of-living for businesspeople, combined with changing consumer spending habits, means nobody has as much disposable income as they did in pre-pandemic Britain. This has created the most challenging scenario yet for small businesses.
In the first quarter of 2023, more than 105,000 UK businesses closed, according to data from the Office for National Statistics. This compared with just 79,000 new businesses opening in the same period – the largest recorded net decrease since records began. The first quarters of 2022 and 2023 are the only times the number of business closures has surpassed 100,000 since the collection of data began in 2017.
Controlling business costs has never been more important because your future survival could depend on it.
How can your business survive?
Businesses can get back on track by adopting a number of measures to try and cut costs, without damaging the quality of products or services.
First, learn how to control costs. Ask yourself where you can cut back. One way is by looking for cheaper alternatives in your supply chain, which ranges from the materials used for manufacturing to the inventories for retail stores.
Study your operational costs as well. If you’ve adopted the same business practices for years, you may find expenses have accumulated over time. For example, are you paying for infrequently used services, or legacy platform costs, when they’re no longer necessary?
Consider ways to minimise all your outgoings. Some SMEs enlist the services of a professional accountant to help identify potential tax savings and study your bookkeeping in general.
Can you source your materials, supplies, goods or ingredients domestically to avoid costly shipping and import costs?
Using local suppliers means less expensive transportation, while you will also be reducing the volume of greenhouse gases, so it’s a win-win situation.
Can you make any changes to your energy use? Find out by evaluating energy suppliers and renegotiating contracts. While there hasn’t been much choice lately, the energy market is gradually starting to open up again to more competitive tariffs.
Encourage employees to reduce energy costs by turning off equipment that isn’t in use. Install energy-efficient lighting and add smart meters to monitor your consumption.
Support employees in every way you can to help them survive the economic crisis too. If a pay rise isn’t an option, consider other ways of reducing the burden. Perhaps you can allow them to work from home more often to help them reduce their transport costs?
Building customer relationships
Arguably the most important thing you can do to help your business survive is to build customer relationships.
While the focus should be on customers all the time, it’s more important now than ever before. Maintain a loyal relationship, without springing additional costs on them.
Consumers everywhere are cutting back on spending, so think about ways you can help your customers. This will help to ensure they continue to use your business.
Consider offering cashback rewards, introducing loyalty discount schemes, and permitting payment instalments to help them spread the cost of buying.
Explore your finances thoroughly to see how long you can hold your prices low. Shoppers who are sensitive towards price increases will be on the lookout for bargains when money is tight.
At the same time, carry out some competitor research to find out what your rivals are doing. Keeping an eye on the competition enables you to remain one step ahead.
How to increase brand awareness
When you’re doing your utmost to make life easier for customers, you need to shout it from the rooftops!
There are many benefits to harnessing social media marketing and search engine optimisation. It’s money well spent when you invest in a marketing strategy to create positive brand awareness and increase website traffic, leads and conversions.
SEO has come a long way since the launch of the first website in 1991. Today, it remains the most effective way of increasing your site’s presence. If you choose the right company, you won’t be locked into a contract: the campaign will run on a month to month basis.
Enlisting the services of SEO experts will ensure your business has access to a mixture of organic and paid advertising to attract and retain customers, even during these challenging economic times.
Although we all need to accept that things are not easy at the moment, it is important that we continue to make educated decisions and remain as positive as possible. You’ve got this!
