Whether you’ve just started a new business or have owned your own company for a while, you’re sure to have struggled with rising costs. Inflation and other factors have sent many prices through the roof, threatening the survival of small businesses.
The rising cost of living means consumers are becoming pickier with their money, impacting your margins. Finding ways to cut costs and increase margins is critical for small businesses to succeed in today’s market. Keep reading to learn more about rising costs and how you can manage them!
Rising Costs: Impacting New Businesses
It’s no surprise that small businesses are feeling the squeeze. Inflation has hit 30-year highs, and everything from fuel to food has skyrocketed in price.
Impact of Rising Fuel Costs
Many businesses rely on a fleet to perform daily operations, from delivery to service vehicles. Their ability to turn a profit from service calls and routes has diminished as fuel prices go up.
Gas prices have risen in part due to the cost of crude oil. Even businesses that don’t rely on vehicles as a part of their daily operations feel the sting. The high costs of transporting materials and consumer goods have caused prices to go up.
Fuel costs have put pressure on delivering packages or keeping facilities supplied with materials. Everything from restaurants to breweries to small manufacturers faces difficult decisions. Some are raising prices while others have chosen to close their doors.
Supplier Price Hikes
If you thought fuel costs were bad enough, the pain keeps coming. Suppliers of every good and raw material have increased their rates. While large corporations can absorb these costs easier, small businesses can’t compete.
Large corporations can often strike wholesale deals months in advance to secure the product they need. Smaller businesses often don’t have that luxury and are stuck with regular prices.
Suppliers have raised their rates to keep pace with the rising costs that impact their supply chain and have passed the costs down the line. If small businesses can’t pay, they won’t get the necessary materials.
Rising Energy Costs
Energy costs continue to rise from the conflict between Russia and Ukraine and other factors. Keeping the lights on and doors open incurs a heavy burden on local businesses. This is especially true for those involved in energy-intensive applications.
Finding ways to cut back on energy helps, but energy costs are difficult to avoid. One of the reasons electricity is rising is due to policy changes. Previously, electric companies had a lower ceiling for maximum charges.
Since April 2022, the cap was raised, and utility providers increased their rates. Another rate hike is possible in October, sending costs ever higher.
Supply Chain and Labour Shortages
As the pandemic swept the world, many in the labour market saw their opportunity to retire.
The labour market saw a significant increase in open positions with no one to fill them because of a sick workforce and a flood of retirees.
At the same time, supply chain disruptions around the globe created shortfalls in materials and products, impacting consumers and businesses alike.
Though some have theorised that labour shortages may be more myth than truth, many businesses have struggled to fill open positions. This is especially true for new and small businesses.
Payroll and benefits take up a significant portion of small business costs, and they’re only rising. Because the labour market is so competitive, attracting and maintaining workers often requires better compensation. The rising cost of healthcare and wages has taken a significant toll on smaller organisations.
Though the supply chain is recovering, shortages and disruptions are still common. Many companies are still struggling to keep a steady flow of supplies coming in.
The pressure is on, especially for those in the middle of the chain producing intermediary goods. On the one hand, they have customers begging for products. On the other hand, they have limited supplies and struggle to get more raw goods.
Diversifying your supply chain is one way to avoid shortages, but there is no perfect solution. Until shortages are resolved, increased costs and longer time-to-market will remain a thorn in the side of businesses.
Staying Afloat: Ways to Alleviate Rising Costs
Between rising costs and shortages, you might not see a way out. But you don’t have to join others who have shuttered their doors! Here are some ways to reduce costs and find steady customers!
Diversify Your Supply Chain
One way to combat rising prices and materials shortages is to diversify your supply chain. Instead of relying on one or two vendors, you can explore other options and improve your ability to source goods.
Diversifying your supply chain also helps you be resilient to any disruptions or shortages. If only one supplier faces an issue, your others will still operate.
Secure Pricing Contracts
Another way to reduce costs is to secure contracts and negotiate wholesale prices. This ensures a steady supply of necessary goods at a fixed price, reducing volatility.
Explore Grants and Subsidies
Many new business owners are unaware of potential grants and subsidies. Though they aren’t always available in every industry, they are a great way to offset costs and provide cash flow. If you haven’t already, consider exploring your industry to see what’s available to you!
Public sector contracts provide a secure and steady stream of revenue. They’re lucrative for many small businesses to find meaningful work and keep cash flow moving. Many small business owners are unaware that these contracts are available!
Pursuing local government contracts enables you to level up your business and provide a public service. Although not every industry will have a seat at the table, those that can reap excellent rewards.
Government Contracts for Your Business
Let’s face it: rising costs are hard to shoulder, and navigating the post-pandemic landscape is challenging. Government contracts are one sure-fire way to help you increase revenue and weather the storm. Don’t let the rising cost of living shutter your doors!
If you’d like to learn more about government contracts, how they can help your business, or how to apply for them, register for free today! We’d be glad to answer any questions and help you out.