1. Consider your pricing strategy

Inflation, which is the rate at which prices rise, has increased sharply, reaching a 40-year high in July. Whilst expert predictions vary, consensus is that inflation is expected to remain high this year.

Philip suggests considering how your customers will react to continuously rising prices. And how this could affect demand for your products or services. Consider scenarios where you achieve lower volume of sales and how this impacts your cashflow forecasts.

Where price rises are unavoidable, remember you’re not alone, and check out what competitors are doing. Factoring this in to your pricing strategy.

💡 Check the news so you’re aware of new predictions and developments that could affect the cost of doing business. Know your limits, though – it’s a tough news cycle, so find ways to stay informed without harming your mental health. For example, you could set a time to check the news so you’re not overwhelmed all day. Keep up with good news, too, such as our small business success stories!

2. Communicate more

Most people are now aware, and some sympathetic, to how inflation drives up the cost of doing business. So, it’s time to get on the front foot. Be open and communicate with your stakeholders, especially if you feel you need to make changes to stay afloat.
• Speak to your suppliers. Discuss how you might share the burden of between your businesses. Remembering it is in their interest that you continue to work together. Options to consider include devising a payment plan to spread the cost of the goods/services you’re buying, negotiating better credit terms or, if your cash flow permits, requesting an early payment discount
• Be honest with your customers. Telling them in advance about changes to your business, such as price increases, assure them that you value them. This can help with customer retention and brand reputation
• Network with other small business owners. You could get moral support, share advice and hear about potential opportunities to collaborate or to refer each other to new clients

💡 Check out the resources and advice offered by small business organisations. The options include Small Business Britain, Enterprise Nation and The Federation of Small Businesses.

3. Keep a close eye on your operating costs

Most SMEs have, and continue to, search for ways to reduce costs, but Philip highlights two essential operating costs that may need a closer look.

Energy bills

When looking at your cash flow forecasts, consider ways in which you might mitigate the increase in soaring energy costs. For example, energy efficiency initiatives. Some may require investment, others may be possible from simple changes in operating practices. Even small individual changes could have a significant cumulative benefit. Also, consider if you can get a better energy supply deal by switching to a renewable energy provider

Staff costs

Businesses employing staff should always be thinking of ways to support and retain them, especially so during these difficult times.

“Irrespective of economic conditions, creating a positive employee experience is paramount. Talent is the most valuable driver for sustainable business growth.”

– Charlotte Bridgeman, our Director of Talent Acquisition

There may be difficult discussions when employees ask for pay increases, but you can also proactively support them in other ways such as making sure they’re paid on time and implementing or updating your financial well-being policy.

“Employees are at the heart of the business, especially in smaller structures. Creating a framework for their development and well-being with regular, open two-way conversations and building an inclusive culture will help you retain your talent. It is also important to monitor and measure employee sentiment so that you can give support where it’s most needed in your organisation.”

“Post-pandemic, you should think about what the future looks like. Take a close look at your needs and your employees’ to see what type of future workplace could work for your specific business.”

4. Monitor your cash flow

One of the most common reasons businesses fail is running out of cash. So, plan and monitor your cash flow more closely than ever, urges Philip.

“If you’re going to need additional funding, look for sources and make applications as early as possible. There’s nothing worse than trying to raise funds when things are dire, you’re already in a hole, and the funds are critical right now.”

We have put together a helpful list of 10 ways to fund your small business.

Customers paying on time is key to healthy cash flow. Consider what might be done to ensure this, such as re-evaluating your payment terms, strengthening your invoicing process and communicating well your customers well.

More on these topics is provided in our Masterclass series: Your step-by-step guide to mastering your cash flow.

5. Learn from the pandemic

Reflect on what you and other businesses did successfully during the pandemic to adjust their operations, and consider if there are any methods you can adopt now.

We have put together a collection of advice and stories from your other business leaders in our Coronavirus: Support and recovery hub.

Philip reminds small business owners about the need to be alive to the increased likelihood that key customers and suppliers might reduce their activities, or even fail. It is important, therefore, to monitor things closely. Identify options and be alive to the fact that you may need to respond quickly and decisively if something goes awry. Consider alternative source of supply suppliers and the potential to find new customers, perhaps even options to develop new sources of revenue.