Following on from the Covid-19 pandemic and now the cost of living crisis, UK businesses have been faced with what feels like endless challenges.
Currently, with energy bills and fuel prices contributing to inflation of 11.1% in the 12 months to October 2022 according to the Office for National Statistics, it is not hard to believe that businesses are finding it tough. According to Reuters, nearly 2,000 businesses went bust in August, an increase of 43% from August 2020.
Meanwhile, a recent survey carried out by Nucleus Commercial Finance found that 72% of business owners feel that the current cost of living crisis is a cause for concern for their business’s survival. Furthermore, 23% of business leaders fear that their company will not survive the financial year.
You may be feeling like one of those business owners. Your company may be able to soak up some margins, but there will be a limit to how much that will be and, for many, that point could be nearing. To ensure you can stay afloat, you may be thinking about raising your prices.
Raising your prices too much could come with further issues
Of course, customers and clients don’t want to see higher costs for your products or services. Raising your prices in the current economic climate could reduce the number of customers able to afford your product or service, potentially even leading to customers moving to a competitor.
Instead of raising prices, there could be different ways to save money so you don’t have to pass these costs onto your customers and clients. Here are five alternatives you could consider to increasing your prices.
1. Pay less for products and premises
Firstly, investigate any underutilised assets you use to help run your business to see if there are potential savings there.
For example, if you pay for a specific app or piece of technology that isn’t frequently used, it could be beneficial to hold off or stop the subscriptions for some time. If there is no untoward effect on the business, then you could even get rid of it entirely.
Go through all your subscriptions, memberships, supplies, and utilities. Do you need them all to run your business? Are there any you can stop using? If you can’t, have a look at a different vendor for the same services and compare prices – you may find you are paying more than you should. Shop around and see if you can get the same product or service for a better price elsewhere.
Similarly, is the space that you use for your business fit for purpose? Are you using all of it? If not, downsizing the size of the premises could save money in both rent and utilities.
Home working might also be an idea if your business could still run with you and your employees working from home. Imagine the thousands of pounds saved by not having to rent a business space.
Alternatively, if you already own your business premises and don’t need everything you have, you could consider renting part of it out for some extra income, too.
2. Reduce the size of the product or service you offer
Rather than increasing your costs, reducing the size of your product or the quantity of service you offer but still keeping it at the same price point can save money.
This can be one of the most effective strategies for cutting costs. By limiting your services and projects that you accept or reducing how much it costs to make each unit of your product, you’ll be able to cut your spending for each customer, without having to upset them with a price hike in return.
To do this effectively and to ensure you retain your customers, you’ll need to continue showing that the value you offer in comparison to leading competitors is still there.
3. Come up with new ways to drive sales
Utilising your marketing budget more effectively could help to drive sales and lead to new customers, which can make up the shortfall caused by increased operating costs.
For example, you could consider new initiatives such as utilising a referral program to drive sales. A recommendation from a current customer can be just as effective in driving sales as a paid marketing campaign.
Meanwhile, with many customers now making their buying decisions through social media, marketing online and leveraging it correctly can connect you with an even bigger pool of possible leads.
4. Offer different pricing structures for clients
A great way to increase the value of your orders is to offer your products or services as bundles, encouraging your customers to make more purchases. You can also keep a “basic” version of your offering at your current price so that customers and clients don’t necessarily have to pay more.
This can potentially help to retain customers, boost sales, and even reduce any inventory wastage and distribution costs to maximise efficiency.
Offering multiple options of tiered pricing with clear, distinguishable features could keep current customers happy, while helping you to attract even more.
5. Analyse your business
Poor processes and repetition of tasks can waste time and cost more than necessary. So, going through your business and analysing areas of inefficiencies could save you money, streamlining other elements to avoid passing costs on to customers and clients.
For example, you’ve no doubt been in meetings that lack purpose and go on for what feels like a lifetime. Imagine what you or your employees could be doing to build the business in that time instead.
Similarly, what about elements such as paper consumption? Are you still working through a small woodland each month in terms of all the paper used? If a good computer system is put in place, the use of paper for many business needs can be made redundant, saving you money as well as being more environmentally friendly.
Multiple small changes like this can quickly add up, allowing you to trim your budget instead of having your customers make up the shortfall.
Get in touch
If you’re a business owner who’d like help managing their finances, please get in touch with us at Rosebridge today.
Email email@example.com or call 01204 300010 to find out more.
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.