Even though inflation has dropped a lot from its peak in October 2022 of 11.1 per cent, the highest rate in 40 years, it doesn’t mean prices are going down—they’re just rising more slowly.
High energy and food prices are a big reason why inflation is still above the Bank of England’s two per cent target.
The impact of inflation on small businesses
High inflation affects everyone, but it poses particular challenges for small businesses.
To alleviate inflationary pressures, the Bank of England usually raises interest rates, increasing the cost of borrowing which can significantly hinder businesses that rely on loans to sustain operations.
Moreover, employees may seek higher wages to offset the inflation’s impact on their finances. This presents difficulties if the company lacks the means to meet these wage demands, potentially prompting employees to seek opportunities elsewhere.
So, potentially you’ll be looking at extra costs for trying to recruit new employees while your business is trying to stay afloat during high inflation periods.
Additionally, businesses are faced with higher operational costs due to increased prices of raw materials, inventory, and fuel.
Tips to protect your business against inflation
- Strengthen supplier relationships
Inflation can create challenges in acquiring necessary raw materials as businesses are forced to fight over limited supplies.
Therefore, establishing a reliable network of suppliers is crucial to ensure a higher likelihood of obtaining materials at competitive prices.
Diversifying suppliers is also advisable instead of relying solely on one. This strategy can safeguard your business in case issues arise with any individual supplier.
- Minimise expenses
During times of high inflation, it’s a good idea to take a close look at your expenses. Look for ways to cut costs, like using video conferencing instead of travelling from Birmingham to Manchester for a client meeting.
Also, review your software subscriptions to see if there’s a cheaper option available or if you can negotiate a better deal with your current provider. If there are subscriptions that you or your team don’t really use, consider cancelling them.
Be cautious with your spending, focusing on essential investments to keep your business running smoothly, unless there’s a critical need that requires a larger financial commitment.
- Increase productivity and efficiency
Finding ways to make your business more efficient can really pay off. If you’re still doing things like invoicing manually, it’s worth looking into automated solutions.
By using digital tools to streamline your processes, you can save your employees hours of time each week. This frees them up to focus on other important tasks that help the company grow.
Improved communication both between employees and with your clients through efficient tools also enhances productivity across the team.
- Attract new customers
Believe it or not, inflation can actually be a great chance to bring in new clients to your business.
This is because some customers who currently work with bigger companies can no longer afford their services and might be looking for alternatives – and that’s where your business can step in.
Now is the time to think about how you can attract these new clients, without putting too much strain on your finances.
You could introduce resources like free webinars on industry trends, free consultations or send out free samples of your products to try and get their attention – something unique usually does the trick to kickstart a conversation.
Here’s how we can support you:
We offer a wide range of services, from providing advice on growing your business to helping you find ways to save money.
Even with the challenges of inflation affecting small business owners, there are steps you can take to safeguard your business and keep it profitable as costs rise – and we’re here to assist you through these challenges.
Contact us today to see how we can help you discover strategies to protect your business against inflation.
