How can businesses tackle the cost of living?
With the cost of living continuing to skyrocket, putting a strain on consumer spending, and energy charges on the rise, small businesses are feeling the pinch and searching for ways to reduce costs and become more efficient.
With around two thirds of individuals being employed by smaller businesses, the knock on effects can impact employees and place businesses at risk of failure.
However, there is plenty of actions smaller business can take to reduce the risks posed by the rising cost of living.
What is driving the rising cost of living?
Smaller businesses are seeing rapid inflation in the cost of materials and business services. With inflation also affecting consumers, businesses are faced with pressures on wages as employees seek higher salaries to meet the increased cost of living.
Fuel prices have decreased from their highs in July 2022, they are still higher than before the cost of living crisis. The cost of transport and shipping (importing and exporting) have increased across the board.
According to the Government’s Quarterly Energy Price data, non-domestic electricity costs are now much higher than they were several years ago. This will be impacting higher energy businesses such as manufacturing, warehousing, hospitality and refrigeration businesses.
How to tackle the cost of living crisis?
Businesses will be looking at different ways that they will be able to tackle the cost of living and there are a few factors that may ease cashflow pressures and the effects of the cost of living crisis.
Review and assess your existing costs and identify areas that be cut, alternatives that can be sourced and if is there anything that be reduced. This ranges from materials used in manufacturing and inventory to office supplies and operational costs.
Source within the UK
If you’re importing from outside the UK, could you review your materials, supplies, ingredients and/or goods and see if you could get them within the UK at a cheaper price? This helps you avoid expensive shipping and importing costs.
Assess Your Energy Use
As we approach winter, your energy usage will increase to battle the colder weather and the darker days. It could be a good time to evaluate energy suppliers, consider renegotiating supply contracts or switching to a different supplier.
You can also encourage your employees to cut down on their energy costs by turning off their equipment when they’re not using it whilst you look to switch to more energy-efficient lighting and add smart meters.
If your business’ energy usage is high, a renewable energy asset could be the answer to reducing your energy usage further. Installing solar panels or biomass boilers for example will mean your business will produce their own power and reduce your monthly costs. Renewable energy assets can be purchased with a finance facility, either with asset finance or a business loan.
As well as your business, your employees will be feeling the impact of the rising cost of living.
Increasing their wages may be something that your business can accommodate however, consider other ways to support your employees:
- Introduce more work from home days to cut back on their fuel/commuting expenses
- Is there any corporate staff discount scheme that you could join where employees can receive money off their weekly food shops or meals out.
Focus on Your Customers
Your customers will also be affected by the cost of living crisis and will be cutting back on their spending. This can have a negative on your business as the decrease in spending will equal less revenue for your business.
It might be a good idea to think about how you can support and maintain your customers during a more difficult time:
- Offer cashback rewards
- Introduce loyalty scheme
- Offer a finance option to allow the costs to be spread out
- Offer lower prices if it’s possible (e.g. you were able to cut costs in a different area so you can offer a lower overall price)
Another option for your business is using a finance facility. If your business is eligible, a finance facility can support your business’ growth plans and ease any cashflow pressures.
The injection of working capital can help meet overheads, pay suppliers & employees and the survival of your business during a tricky couple of months. A business finance facility can also fund investment plans or upgrade machinery to improve productivity.
Get in touch with our team today!
If you’re looking for a Commercial Finance facility, get in touch with our team to discuss your requirements. Call us on 01270 443510 or complete our enquiry form and we’ll be in touch as soon as possible.
As a commercial finance broker, we can arrange cashflow and asset finance to property finance and a spectrum of funding to meet your franchise finance needs. Whatever your requirements may be, feel free to get in touch to discuss your plans and see if it’s something that we will be able to assist with.