While turmoil reigns in Westminster, in the ‘real’ world, people and businesses are facing many challenges, including double digit inflation and rising interest rates. With costs inevitably rising, how best can business owners ride the storm?
One obvious way to help maintain margins, which are being eroded by increasing costs, is to raise prices, and many businesses will be doing so.
We’d suggest to do so as an automatic response may be kneejerk; by all means, increase prices if it’s right for your business, but take a step back first to assess.
An increase in prices may result in a fall in sales or enquiries. To help combat this, try to demonstrate to customers the value you bring, to make them still want to spend with you. If the service you offer warrants a price increase, and your customers will go with it, then it may be right for your business. If, however, you sell widgets and you increase your prices, then your customers may source their widgets from elsewhere. Our advice is, think first before you reach for the price increase button.
If you decide a price rise isn’t right for your business, then you will still need to take steps to ensure you don’t stand still, or worse, go backwards, because your costs are still rising.
First, look at what costs you can cut. Where are you over-spending? Where are you not getting value for money? Do you have any wastage or inefficiencies? Hitherto, your business may have been able to carry these; that time has now passed.
For example, you may be in premises that are too large for your business. Until now, you’ve been able to bear this additional cost, but with energy bills rising, now may be the time to relocate to smaller premises, or perhaps sublet part of the building.
Carry out price comparisons, to see if you can get a better deal from your suppliers. Any small costs you save in raw materials or supply may, collectively, add up to a significant sum.
Look at your people. Are they working efficiently? Are they deployed in the best areas of the business? This doesn’t mean you should be considering redundancies; this might, in fact, be an opportunity to invest in training or retraining, so you can move people around, and get a better overall result from your team.
And talking of investment, if you have the funds available, now could be a good time to invest in equipment, to make your business more efficient and help to keep your running costs down.
The Super-Deduction Scheme will continue to operate until 31 March 2023, where companies investing in qualifying new plant and machinery assets can claim a 130% super-deduction capital allowance, plus a 50% first-year allowance for qualifying special rate assets. It means businesses can cut their tax bill by up to 25p for every £1 they invest in super-deduction assets. Also operating is the Annual Investment Allowance, which until 31 March 2023, remains at £1million.
All of these measures should help bring down costs for businesses, as we face an uncertain economic future.
At Optimum Professional Services, we specialise in working with our clients to help them develop and grow their businesses. If you’d like to talk to us, for an initial free first meeting, please get in touch.