Cost of living crisis; How do I make my business more sustainable?
How do I make my business more sustainable? A common question that is being asked at the moment amongst business owners. Read on for expert advice on keeping your business afloat during these challenging times…
Is your reaction to the increasing cost of living to simply ‘bury your head in the sand’?
Inflation is currently running at 9% to which the Bank of England has increased interest rates to slow it down! I’m not an economist but it seems obvious to me that this is not going to help.
It’s also being driven by dramatically increasing fuel prices so increasing the interest rate will only make matters worse as we still all need to buy fuel!
The increase in the cost of living is impacting all of us, driven by the run-away energy prices a typical household energy bill has increased by £700 already and a further £1,200 increase is predicted in October!
Our government is now paying out the “Cost of Living Payment” of £150 with a further £400 later in the year to ease the pain for some but inevitably people are cutting back on their expenditure to make ends meet.
This is of course impacting businesses. Many are cutting down on the very things needed to sustain their businesses during this time, such as marketing and technology.
Core disciplines of any business such as budgeting, performance management, or sales need increased focus for any business to ride out the current economic storm.
As a business owner you have three options;
• Sell more
• Increase prices
• Reduce costs
Or a combination of all three!
As we saw at the start of the COVID crisis, many business owners will hide their heads in the sand and hope everything returns to how it was – or they suffocate and die!
How do I make my business more sustainable?
Firstly, recognise that you are not an island! You need to look at what is happening in your market. What are others doing and how should you react – note I did not say blindly follow! If your competitors are putting up their prices could you maintain yours but grab more market share?
Also, has your business got a defined niche in the market where customers come to you because you have a product or service they can’t get anywhere else, so allowing you to increase your price without impacting your volume of sales?
Every business owner is shouting “I need to get more customers” so how much do you need to invest in increased marketing and increased sales activity to get more?
A quicker win is to increase the revenue from your existing customer base.
Ask yourself how much business you will lose if you do increase your prices. Is the lost business worth more than you gain through the price increase – it’s a pretty simple decision.
It may be better to encourage your customers to buy from you more often.
A voucher for a discount or complimentary product for the next visit could increase the number of visits. For example, a free bottle of wine for the table when you next dine at a restaurant.
Could you sell complementary products or services?
If you run a Garden Centre could you sell a cover and cleaning kit to go with each BBQ you sell? You may well be able to start charging for services that you have previously given away for free, such as delivery, installation, site surveys or introduce a call-out charge.
Reduce your costs to increase your profit.
Very much in your control and quick to show increased profits, investigate ways to reduce your costs.
Decrease your stock holding to improve your cash flow or alternatively buy in bulk to reduce the purchase price.
Be more efficient in the way you deliver goods by only delivering weekly or on specific days instead of daily. The customer may well be happy with a slightly longer wait in return for a reduced price, but you must tell them before they purchase.
Can your business get rid of your premises or move to smaller premises through introducing home working?
Are you effectively using automation to reduce the number of staff you need, or can you outsource non-core functions so they can be paused in times of reduced cash flow?
Finally, could you reduce travel by increasing the use of online meetings and better planning? If you have a service business, simply ensuring a fix first visit will make your team more efficient and reduce mileage combined with taking advantage of the various incentives to encourage you to buy electric vehicles will reduce your costs.
Act now!
Whatever you decide to do the key thing is to do it now! Don’t wait until it is too late to take action as you shut the doors for the last time!
As you may already know I am a business coach and in that role, I assist local businesses in many ways; whether it’s to steady the ship, growth planning, 121 support, mentoring and the person to keep you accountable to ensure your business is sustainable. I offer a limited number of free discovery sessions to business owners/leaders each month. If you would like to grab the opportunity to have time with me and see if I am the right fit to help you request a session here:
