The Pain of Rising Costs and Staff Shortages

Supply chain issues and staffing challenges are still driving up prices, with inflation still stubbornly high. Running a business is more expensive and this is particularly the case for small businesses.

Over three quarters of small businesses say costs are rising (Source FSB), with payments for outgoings higher than they have been for almost ten years. Inevitably these rising costs will threaten some SME’s so we offer here a few ideas on how these cost increases and upwards price pressure can be mitigated.

You need to know exactly what you are spending and where it is being spent and for what reason. This is a very worthwhile exercise because you may find that certain expenditure is no longer fundamental to your business’s success. Look at each part of your outgoings and ask yourself if you really need it to be successful. Do the ends justify the means? What value does it add? This can help you to decide where cuts can be made.

When we talk about negotiating skills, we tend to think of them as exclusively for salespeople. This is far from the truth and completely underestimates the value of a team equipped with great negotiating skills responsible for purchasing.

When was the last time your benchmarked your key business suppliers? Are you REALLY getting the BEST deal from your suppliers. Skilful negotiating from your team can secure significant cost reductions and we see this in every business we work with when we look at this area.

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, no matter what they provide for you – but it takes skill to get that top deal.

‘We can’t raise prices in this market’ is another statement we hear often. The reality is you can – but again only if it is done skilfully. To sell a price increase requires credibility, authenticity and proof of why the increase is needed. When put together these make a powerful combination which and ensure that increased costs don’t necessarily decrease your margin.

We understand that 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. But the simple fact is that your business needs to make money on the goods and services you supply, or other things will suffer like quality, service levels etc. So, if the price of raw materials is increasing and your profit margins falling, even a small, temporary increase or an increase on just part of what you offer in products/ services can help to mitigate the impact of rising costs.

When faced with rising business costs, cash flow is often negatively affected. It can become stretched and difficult to manage.

While the above 3 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 in that your financial future is secure?