Reviewing your pricing? Things to consider

The increasing costs of raw materials, energy, goods, services and wages mean small businesses face a lot of financial challenges. However, whichever sector you work in, your customers are probably struggling too. Customer behaviour is changing and small businesses must respond. Despite all the challenges, seven out of 10 business owners remain hopeful and positive about for the future. Increasing your prices might not be the best option for your long-term success. 

 

In a recent survey three quarters of small business owners said they needed to adapt to changing market conditions and rethink their approach. Selling online via ecommerce websites and online marketplaces and looking for new markets abroad are at the top of the list. 

 

Employees struggling to make ends meet as fuel and other costs increase means commuting to work is a concern. At the same time employers are looking for increased productivity to keep their businesses running. Understanding all your employee costs will help maintain your team so you can help each other through difficult times. 

 

Hybrid working is becoming more important to save on travelling costs as well as improving the work-life balance. Even loyal employees might move on if offered more pay or more flexible working elsewhere. 

 

As a small business owner inflation and customer cut backs are out of your control, but thereare still things you can do to help meet your business goals. 

 

Understand your finances. Good bookkeeping gives you all the information you need to understand your real financial position. Up to date and accurate financial reports help you spot risks and make good decisions. 

 

You can see exactly how increasing costs affect revenue and which customers have cut back on their purchases. A close look at your profit and loss report shows you what’s left after you’ve paid your expenses. It’s important to stay calm if the figures aren’t as you hoped. When you have reliable information at your fingertips you can decide how to improve your situation. Your bookkeeper can explain the details and help you compare options. 

 

Work with your suppliers. Like you, everyone in your supply chain must deal with changing conditions. If you have long-term relationships with your suppliers they will be keen to keep your business. Take the initiative and discuss options for longer payment terms or extra credit. Even small adjustments could make a big difference to your cashflow and help you manage until things improve. 

 

Review your spending. Do you have ongoing subscriptions or annual purchases that you no longer need? Checking all your costs line by line isn’t something you want to do frequently but you could identify significant savings. You might also reconsider activities you currently outsource that you can handle in-house like cleaning or call handling. Make sure you’re claiming all your allowable business expenses to help reduce your tax bill. Ask your bookkeeper about helpful reports to make your job easier. 

 

You could also consider working with local suppliers that might be more resilient and charge lower transport costs. Energy bills are a big concern so use a smart metre to monitor consumption. Consider investing in energy efficient lighting and heating to keep costs down. 

 

Consider remote or hybrid working. Teams often need to work together in the same place. However, remote or hybrid working could help reduce premises costs and employee expenses. Your employees might also see this as a benefit. 

 

You’ll need to consider technology, security and insurance to decide whether this would suit your business. If you decide to go ahead and you own your business premises you could let or repurpose the unused space. This could provide a valuable extra source of revenue. 

 

Manage your budget and cashflow. Carefully monitor and manage your cashflow to minimise late payments and enforce credit limits with customers. Before deciding whether to increase your prices use your financial reports to review the possible impact. You might identify loss-making contracts you can cancel. Think about your most price-sensitive customers who might look for cheaper alternatives. Can you afford to lose them? 

 

Alternatively, look at loyalty schemes, discounts for longer-term commitments and promotions to build up business during quiet times.