Five ways to battle inflation and rising costs in your small business
As the cost of living continues to rise, so too does the cost of running a business. Increased pressure on business owners’ finances by way of higher interest rates, skyrocketing electricity prices and increased costs for servicing loans, is making it even more challenging for SMBs who have just survived two years of a pandemic, writes Chris Dahl, director of sales and growth at Pin Payments.
Treasurer Jim Chalmers’ recent warning of ‘significantly higher’ inflation on the horizon has left many business leaders feeling uneasy about the economic outlook of Australia.
With the spike in inflation at its highest level in 20 years, many experts are calling on small and medium sized businesses to brace themselves for the period ahead.
So, how can you ride out (yet another) uncertain time in business? Here are five tips to help.
1. Stay connected with your customers
Unfortunately, the rising costs of living ultimately leads to a decrease in consumer spending, which could negatively impact your business.
However, on the flip side, Australian households and businesses saved more than $2 billion during the pandemic. Optimistically, this may mean your customers are not as impacted as expected, and may still have the funds to pay for business services or products.
The best way to understand your customers is to stay connected. During difficult periods, offering your customers support and transparency is more important than ever. If your customers don’t hear from you, it will be much easier for them to drop off your services.
2. Do a business expenditure audit
With the new financial year upon us, and increased financial uncertainty, now is the perfect time to do an audit of your business expenses and see where you can trim the fat.
Categorise your expenses into ‘must haves’ and ‘nice to haves’, then cut accordingly. Likewise, take a red pen to your banking transactions to see where you could cut fees from providers or get a better deal.
With costs predicted to keep rising, saving yourself a few pennies here and there could make a big difference in the long run.
3. Downsize your business needs
Many businesses now operate differently to pre-pandemic life but have not adjusted their business services, processes or office spaces accordingly. If you haven’t already, re-examine your office work spaces and understand what your ‘in-office’ capacity is each week.
For example, if your staff are only in the office 20 percent of the time, could you downsize or share the space with another business? Likewise, with occupancy in most capital cities down, you may be able to renegotiate your costs and stay where you are.
With increased flexibility surrounding how we now work, there are many ways to save money by operating in a more flexible or hybrid manner.
4. Budget for wage increases and discuss time-based incentives
Wages are set to rise by five per cent, so businesses should keep this in mind and budget accordingly. Likewise, if you’re considering offering your staff any bonuses or additional annual salary increases, you’ll need to consider this alongside the wage increases to understand what your business can afford.
If finances are looking tight, consider speaking openly with your employees about possible alternatives such as time-based incentives like regular days off or increased annual leave options. Consequently, you may find that time is more valuable to your employees than a wage increase, which could help you through this next uncertain financial period.
5. Plan for the unknown
Though it may seem like an oxymoron, being prepared for uncertain times is important for small businesses right now. Putting funds aside for unexpected costs or price increases will be useful if you’re hit financially down the track.
Likewise, building your mental resilience and preparing for challenging times is vital in this economic climate. Businesses that survived the pandemic did so due to their agility and tenaciousness to endure global and financial instability. However, during any period of difficulty, it’s important to try and remain positive and ready to adapt, for both your businesses survival and to maintain your mental health as a business owner.
If you’re in need of resources to help maintain your mental health as a business leader, Heads Up, developed by Beyond Blue, is a great resource for individuals and businesses to create mentally healthy workplaces. For tips on managing your mental health as a business owner during uncertain times visit: www.headsup.org.au/.
Source: Flying Solo July 2022
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