How do I adapt my small business strategy in the midst of a cost of living crisis?
So, we’re officially in the thick of a cost of living crisis. This presents a challenge for entrepreneurs and is a nerve-wracking time for many small business owners.
If you’ve had sleepless nights worrying about how you’re going to pay your suppliers or support your staff, you’re not alone. It’s likely you’ve already looked at where you can cut costs, but it seems like an impossible task when suppliers are raising their own prices.
But, don’t despair just yet! There are strategies to stretch your dollar further, and they’re not always about trimming expenses.
Regularly review your costs
Knowing exactly where and when money is coming out of your business, is the first step to seeing where you can save costs. You could be paying for services you don’t even use, or simply aren’t worthwhile.
Check your statements with a fine-tooth comb
By going over your accounts in detail, you might find payments coming out that you had forgotten about, e.g. for subscription services you no longer use. Even if it only saves a tiny amount each month, these costs add up over time and the cash could be better spent elsewhere.
Take it one step further and ask yourself if the products or services you pay for add value for your business.
Be on the lookout for deals
Once you’ve got a clear idea of your costs, work out whether your money is going as far as it can for the services you need. When was the last time you reviewed your providers? Can you negotiate a better rate? Could you get a better deal by going elsewhere?
If you’re a single-person business, you also might be able to get better rates. Many software companies have much cheaper individual plans, so it’s worth double-checking you’re taking advantage of your one-man-band status.
Look at ways to bring more money into your business
We’ve explored the topic of outgoing expenses, but there’s another approach to enhancing your cash flow – bolstering your sales and generating more revenue, a strategy with a longer-term impact.
Amp up your marketing efforts
It might seem counterintuitive to spend more when you’re looking to save, but investing in marketing can yield profitable results in terms of increased sales. There will be short-term costs, but in the long run, effective marketing can substantially contribute to a positive cash flow.
Manage your receivables effectively
Nobody enjoys chasing after debts, yet doing so can significantly boost your business, especially in challenging times. Here are some ways to streamline the process:
- Adopt direct debit systems like GoGardless for invoice collection.
- Enable invoice reminders via your accounting software.
- Consider asking clients for an upfront deposit or partial payment.
Make any cut backs strategically
Resist the urge to indiscriminately slash expenses. Cutting back in the wrong areas might hinder your business’ growth. Make it a priority to retain your staff, exploring other areas to trim costs or increase revenue instead.
Reevaluate your pricing
If sales volume is a challenge, consider adjusting your pricing strategy. As inflation rises and suppliers hike prices, it’s crucial to respond accordingly or risk bearing the brunt of the impact.
Keep an eye on external influences
You can’t control everything about your business. Stay aware of external factors that might impact the way buyers behave..
Understand your customers
During uncertain times, empathy goes a long way. Understanding your customers’ fears and concerns can inform strategies to drive sales. Depending on their situation, you might be able to offer more services or adjust prices without adverse reactions.
Monitor your competitors
Do you know how competing businesses are coping with the cost of living crisis? Can you see what kind of strategy they’ve adopted? Understanding their strategies can provide insights about your place in the market and potential customer perceptions.
Use the situation to your advantage
There’s a silver lining in every cloud. Reduced sales? Use this time to review and streamline your business processes. Examine the reasons for changing sales patterns and adapt accordingly.
Rely on the data
Making decisions based on solid data is more important than ever. Use actual business data to create your strategies, not assumptions. Don’t create a strategy based on what you think is happening, but on what is actually happening.
As the saying goes, “the numbers don’t lie”. Before making decisions, know your numbers!
In an unstable economic and consumer landscape, your data remains a reliable constant. Accurate, in-depth financial data is crucial to making informed business decisions.
Working closely with your accountant is a game changer
A good accountant can provide the right solutions at the right time. Their expertise on your business can be instrumental in improving its financial health. They can help interpret the numbers, understand the situation, and guide your future steps.
For further support through the cost of living crisis and beyond, feel free to contact us. We’re here to assist!