Inflation has dropped significantly since it hit a record high of 11.1 per cent in October 2022 – the highest rate in 40 years.
However, that doesn’t mean prices are going down – they’re just not rising as fast as before.
One reason inflation has stayed above the Bank of England’s two per cent target is because energy and food prices have remained high.
Food prices are still 25 per cent higher than they were at the beginning of 2022, and petrol prices are climbing again.
High inflation impacts everyone, but it can be particularly challenging for small businesses.
To reduce the burden of inflation, the Bank of England typically raise interest rates which makes borrowing more expensive. This can obviously be detrimental for businesses that depend on loans to keep their company running.
Employees are also likely to request higher wages to compensate for the impact inflation is having on their personal finances, which can be challenging if the company does not have the resources to provide this increase. In this case, the employees may look elsewhere which will lead to recruitment costs.
Not to mention the higher operating costs with the price increase in anything from raw materials to inventory to fuel.
Finding ways to improve the efficiency of your business can be incredibly beneficial.
If you still rely on manual processes to do things like invoicing, look for automated solutions.
Using digital tools to boost your efficiency can save your hours of time each week by freeing up your employee’s daily routine to focus on other tasks to help the company grow and also enables them to communicate more efficiently which increases productivity.
High inflation provides a good opportunity to review your expenses. Look at ways you could reduce travel costs, for example, if your business is based in London and you have a meeting booked with a client based in Glasgow, consider a video conference instead.
Or if you have any subscriptions to software, see if you can find a cheaper alternative or negotiate with the provider for a better deal. You might even be able to cancel it if it is something you or your employees don’t really use.
Remain cautious with your spending unless a critical situation arises that necessitates a substantial investment to keep your business operational.
Surprisingly, inflation actually provides a really good opportunity to attract new clients.
Some customers may currently do business with larger corporations that they may no longer be able to afford – that’s where you come in.
Take this time to try and find ways to attract these new clients, as long as it doesn’t burden your finances too much.
You could offer free resources like webinars, free demos or product samples, something that is going to catch their eye and start a conversation.
Inflation can make it tough to get the raw materials you need because businesses start competing for them.
That’s why it’s really important to have a strong network of suppliers you can count on. This way, you’ll be more likely to get the materials you need at a fair price.
It’s also a good idea to have multiple suppliers instead of relying on just one. This can help protect your business if something goes wrong with one of your suppliers.
We can offer a wide range of services, including advice on business strategy and ways you can save your business money.
Despite the challenges inflation presents for small business owners, there are measures you can take to safeguard your business and maintain profitability even as costs increase – and we are here to help you do this.
Get in touch today for advice on strategies to protect your business against inflation.
