It’s a tough time for small businesses as operating costs increase sharply. After a difficult couple of years, it’s once again a case of survival for many business owners. So what can you do to lessen the pain of rising costs?
Here are a few things that may help:
Make sure you have a firm grasp on your costs
First things first. You need to have a clear understanding of what these rising operating costs are, and how they’re impacting your business. Once you know the full situation, you can plan to address the operational areas that need to be reviewed, updated, scaled back, put on hold or removed completely.
Working with a Licensed accountant is worth strong consideration, as they can give you tailored advice, ranging from sources of funding, to setting your prices and reviewing your budgets. Cloud accounting is also beneficial, as you can access up-to-date reports, helping you make informed decisions quickly.
Review your pricing
Adding your fixed costs (such as rent, insurance, salary, equipment) to your variable costs (such as raw materials, electricity, packaging, etc) will give you your breakeven figure when setting your prices at the very beginning.
Increasing the price your customers pay for your products/services is always risky but, as we’ve seen, unprecedented events can cause variable costs to soar and this is when it’s worth re-assessing your pricing as part of your business’s response.
Don’t be too afraid to increase your prices if you need to – most customers expect that the cost of their products won’t remain stagnant forever.
You might experience some customer churn if your competitors don’t follow suit, but if you handle the communication of it quickly and authentically with your customers, you might be surprised at how many are willing to stick by you when they understand the situation.
Ways you can encourage a smooth implementation is to contact them directly, let them know in advance, explain the reasoning and make yourself available for any questions. It’s risky, but sometimes necessary to avoid operating at a loss. (For more information, see our guide on setting your prices.)
Analyse your business cost effectiveness
There’s only a limited amount of money you have to spend on your business, so it’s important you make your money work harder, especially during uncertain times. Making your business cost-effective is ensuring you are getting the maximum out of your available funds. It’s ensuring that you’re spending your budget on the right things with the aim to get the best value for money that you can. Regularly reviewing and analysing your costs as objectively as possible is good business practice. A great way to regularly monitor cost-effectiveness, is to download a budget tracker app. Again, this is something an accountant can assist you with if it isn’t your area of expertise.
Get rid of any unused services
Are you paying monthly annually for software services that you’re not really using? Consider downgrading to the free version or cancel altogether if you don’t see the value. Keep a log of your subscriptions and review it regularly. If you discover a service you like, but don’t require all the features, shop around, as there are a lot of affordable options out there. Set diary reminders to review your list of services – it’s a great way to run a lean ship.
Operate more efficiently with automation technology
Automation technology is transforming how businesses operate, as it allows you to do more with less, helping you scale in ways that were never before possible. The right software will speed up and streamline operational elements of your business, releasing time for you to re-channel into profit-focused activities such as new business development. Accounting, project management, email marketing, social media posting, appointment booking, payment processing, database management – there is no shortage of cloud-based solutions and apps out there that can help. Most solutions offer free trials, which are worth taking advantage of to ensure they’re the right fit for you.
If you’re not particularly tech-savvy, is there an employee who could step up into a more operational role, who’s particularly good with technology and can conduct research and trials for you, and be responsible for implementing it into the business?
Outsource for extra efficiency
Delegating specific tasks to subject matter experts outside of your business can be an effective long term investment, particularly until you’re in a position to consider hiring in-house expertise. As a small business owner, you’re understandably spinning a number of plates － why not outsource your marketing activity for a period of time, and review the results from an ROI perspective?