How are small businesses working to offset the cost of living crisis?

Journalist: Helena Young, Startups.co.uk

ended 28. April 2022

ONS updates show that input price inflation for businesses has surpassed 19% to its highest point on record and the consumer prices index has hit 7%. Startups.co.uk wants to know how small business owners are feeling about the rise in inflation and the cost of living crisis, as well as examples of what SMEs are doing to offset higher supply chain costs. For example, are you raising prices? Investing in electric vehicles? Stopping client visits? Let us know.
 

10 responses from the Newspage community

Star Quote
"As a small manufacturing and ecommerce jewellery business, rising inflation and the cost of living crisis is of great concern. My business is very much in the luxury spend category. With rising energy, food and fuel prices, this has inevitably put a great deal of pressure on most people. Purse strings are tightened and understandably luxury spend is put on the back burner. Like so many other small businesses, we have had to make changes within our company to try and offset the negative economic inflation and cost of living crisis as much as possible. This has resulted in us being forced to put our prices up. Precious metals, like gold and silver, have yet again gone up and our silver chains that come from China have also increased in price dramatically. We have also seen a huge rise in our electricity bill to run the machines we use. This has forced us have to reconfigure our workshop so we can turn some off our less busy machines, lights and drills until they are absolutely needed. The knock-on effect goes even further as most our trade comes via our website. We have a large annual advertising budget that is used to get us customers via Google and social media adverts. If the customers can't afford to buy our jewellery, the return on our advertising spend becomes too high and we are then forced to pull back on ad spend. This in turn, if we are not careful, creates a deficit of customer visibility that then results in far fewer sales. I think that this year is going to be very difficult for all SMEs and hard decisions will inevitably have to be made by business owners across the country to protect themselves."
Star Quote
"Right now, small businesses are being squeezed more than a tangerine on a juicer. The result is a mixture of questions and scenarios. For example, do you put prices up, but what happens if your customers then go elsewhere? Also, what happens if they don't pay on time, or worse still, at all? Sometimes you wonder whether it's all worth it, but it is, of course. So off we all go, back on the merry go round again, where the Government expects us to pull a rabbit out of the hat and create economic wealth and jobs amid an unprecedented cost of living crisis. For my own bid-writing business, the use of zoom (and other similar tools) has been revolutionary for me as a home-based consultant. Time is my most precious commodity and the only place I can make savings that positively affect my business almost immediately is controlling it. Zoom and Teams help massively on that front. Not having to travel too much also helps with the cost of fuel going through the roof. Remote working helps to alleviate the financial burden of rising costs."
"We are not only putting our prices up but we are also investing heavily in turning our business model into a subscription-based one to be able to get an ongoing revenue stream while also upping the value of our company in the event of an exit. With the cost of living as it is, we feel forced to increase our prices but we also use part of the revenue to invest in offsetting our carbon footprint and doing more things for the environment like planting trees. So help save money, we've also adopted a remote work policy and currently 100% of our team is on a WFH or work-from-anywhere basis to avoid having to assume all the expenses that come with commuting like petrol and vehicle maintenance and the like. It's definitely scary because as a remote business we've also suffered a lot with the increase in the cost of living such as electricity and other high bills."
"The whole cost of living crisis is a very unfunny joke, to be honest. I've just had our electric bill come through and it's pretty shocking to see our monthly expenditure shoot up by several hundred pounds. Everyone is feeling the pain and other European governments seem to have worked a lot harder to shield consumers and businesses from price shocks. That windfall tax on energy company profits looks more appealing by the day."
"The rise in the cost of living at home is negatively affecting our boot-strapped business finances. As a self-funded start up, even though we are very frugal in our personal lives we are now less able to support the business financially, as that money has to be used to pay essential bills at home. We're looking at cutting back on investment in trade fairs and new product development. Our business supports local manufacturing and a large proportion of our sales of high end fabrics and wallpapers are exports. This expenditure is ultimately critical to grow and help the business succeed so it would be great to see more Government support on this front."
"Compared to last year, we are seeing a large increase in small businesses seeking finance for stock, supplies and to help with general cashflow. Prices of some wholesale goods and raw materials are skyrocketing, having a massive impact on some SMEs around the UK. Even if these increases are passed onto their clients, it still means more cash tied up in stock and inventory, hence the need for funding. With the war continuing in Ukraine and Covid lockdowns in China, the worst could still be yet to come."
"The majority of my clients are SME manufacturers and they're being crushed by the increasing costs of raw materials, energy, wages, fuel and shipping. When you also factor in the additional costs of importing and exporting, such as customs paperwork, it's not surprising that many of them don't have the bandwidth to deal with it. As a result I saw a big drop in enquiries this month so I'm cutting back on everything I can in case the trend continues. We need practical financial help from the government now, not promises of a 1p drop in income tax in the future."
"Cost-cutting only gets you so far and with the go-to of utilities and communications part of the problem, options are limited. Businesses are forced to increase prices due to higher costs incurred, which in turn results in higher inflation. Economic stimulus is required in the form of real, thought-out, sensible tax and growth support for small businesses, something that seems to have been lacking for a number of years. If this Government is not careful the small business may disappear altogether."
"As a business coaching company specialising in support businesses, we work with many small and medium businesses across the UK. Inflation and rising living costs have had a domino effect on many SMEs. When someone's home costs increase, they tighten their purse strings and spend less, especially on support services. When business operating costs rise, they also tighten their purse strings, especially when it comes to support services. Whenever you need toilet paper, you need toilet paper. However, if you normally use a marketing service, a photographer, or even a coach, when the cost of living sores, people tighten their purse strings and often cut these services. As a result, people stop spending and stop growing, causing a domino effect. Each business then knocks on the next, creating a systemic, or economy-wide, domino effect."
Inflation and the cost of living continues to tighten its squeeze. We support FMCG and manufacturing businesses and so our business is reliant on consumers spending on the high street and online. Less money in the economy means less revenue for our clients, and often one of the first things to go with tightened budgets is what is spent on marketing. To try and combat spiraling costs, we've cut down client visits - one positive outcome that can be said of the Covid19 pandemic is that it normalised video conferencing. We've also put through inflationary increases in our prices, even though the rate of inflation we fixed on a few months ago soon became out of date, so those rises don't even meet a break-even in real terms. Something needs to happen to break the chain.