Inflation in the UK is at its highest rate for almost a decade, but what does this mean for businesses? How can they respond to rising prices without losing customers?
Inflation is a general and sustained increase in prices over time. It reduces the purchasing power of money, so as the price of items rise, more money is needed to buy the same items. Therefore, unless income keeps up with the rate of inflation, people are worse off.
With less money left in their pocket, unless your business delivers a product or service that is essential, your customer may not be willing or able to make that purchase.
We are all seeing price rises, whether that is our energy bills, the cost of filling up our cars, or the bill we’re given after going out for dinner. Although we have little choice but to fill our tank up, or pay the energy supplier to heat our houses, dining out in a restaurant as a treat at the weekend is a matter of choice.
So, if your business provides a product or service that is not essential, what can you do? Here are a few ideas on how you can weather the storm.
1. Review your pricing strategy
Although your costs are rising, unfortunately it is not just as simple as raising your sales price unless we see consumers’ income rise. A small increase may go unnoticed, but any significant rise in your sales price is likely to put customers off.
Rather than just upping your sales price, how about rethinking your pricing strategy? Have a good look at the goods or services you are providing. Identify those that deliver the highest margins and concentrate on these.
2. See where you can cut costs
Review the costs of your business and cut back where possible. Are all of your outgoings essential or can any be stripped back for at least the time being?
3. Streamline your processes
Review your core business processes, from how you invoice your customers to the way in which you market your products. Are there any processes which are essential to your business that can be improved and made more efficient? Streamlining processes can save you time, which can then lead to cost savings in your business.
4. Consider diversification
Diversify or branch out. Are there any new avenues you can add to your business which don’t require a big investment or outlay that may entice existing custom? Often it is easier to market and gain extra income by enticing existing customers.
5. Review your finances
Planning ahead for all eventualities is imperative during these times. A cash flow projection may enable you to identify those critical points and allow you to act now to prevent problems further down the line.
It is always sensible to think strategically about these aspects of your business. However, during times of soaring prices, it is more important now than ever.
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