How to deal with rising costs for your business

We have 5 pieces of advice to help your business deal with rising costs.

All savvy businesses continually look for ways to save costs without compromising quality. However, sometimes external factors can make it hard to keep costs down. For example, with inflation on the rise, costs for essentials like materials and energy are increasing. In this climate even the most cost-effective businesses are having to crunch the numbers even harder.

Ensuring your business is delivering the best return on investment is a continual process, and one that requires creative thinking. Here we explore five ways to help you keep costs low and maximise returns – all while keeping customers happy.

Using technology to streamline and gain insights

The right technology can work wonders in streamlining business operations – not only cutting costs but saving time, energy and stress. From customer communications to team collaboration, supply chain and administrative processes, there are now a range of technologies that are reimagining operations in cost-effective ways.

For example, Customer Relationship Management (CRM) software helps you manage your customer relationships easily, automating communications smartly and ensuring you stay on top of enquiries and sales.

Such systems can integrate sales and marketing, using customer insight to automate personalised communications that reach the right customers at the right time. This not only saves huge amounts of time but can deliver insights that help build better products and services.

The initial outlay for such systems might be off-putting, but the return in time-saving and increased customer satisfaction (leading to greater sales) can be priceless.

Revisit the supply chain

Unnecessary waste in the supply chain can be pretty costly to businesses of any size.
What kind of tweaks can you make to avoid this waste? These can include ‘quick wins’ such as reducing the amount of packaging you use (not just lessening costs but a smart move for environmental sustainability). Or making better use of space. Warehousing is expensive – can you do more with your space? Could you share it with another business to cut costs? Or can you reduce it?

However, before making any changes, you need a full view of your supply chain strategy. Make sure you have documented and understood your supply chain so that you fully understand the impact of any changes you might make. Whatever costs you can save from your supply chain, make sure that you maintain focus on your customer – cuttings costs at the expense of service is always a false economy.

Negotiate contracts

Now is the time to revisit contracts across the business and make longer term arrangements where possible. Property and equipment leases are examples of agreements that have room for flexibility. Communicate with suppliers and be transparent about the current situation, especially if you are experiencing cash flow issues. Businesses often just want to ensure that they will receive payment at some point so opening lines of communication early is key.

Negotiation is a skill that many of us shy away from. Remember though, that negotiating isn’t about getting one over on another, it’s about reaching a mutually satisfactory outcome. Take time to speak with suppliers about costs and settlement terms. Have a clear understanding of what you can and cannot accept, do your research and don’t leave conversations to the last minute.

Don’t be scared of setting new prices

Sometimes even the savviest behind-the-scenes cost-cutting just can’t make up for a tougher trading climate, and there comes a time to increase prices. Businesses are often reluctant to take this step, worried about how it will be perceived by existing customers and aware of the competition undercutting. If you offer a high-quality product and great service, you will find that many customers are willing to pay more and remain loyal.

To maintain that loyalty, it’s important that you communicate with your customers. Explain why prices are increasing, giving them fair warning and thanking them for their continued business.

For new customers, think about your positioning. According to cognitive-behavioral economist, Leigh Caldwell, establishing price anchoring - juxtaposing your product or service against a far more expensive competitive version to make your offering more appealing - is key to setting higher pricing expectations, increasing demand and customer satisfaction.

Invest back into the business

In tough times, you have to speculate to accumulate - some cliches are true! What that means is that putting a stop to all spending in a bid to cut long-term costs might be more harmful in the long run.

That’s not to say this is a time to be reckless. It is important to use this time and available funds to futureproof your business to the best of your ability. This might include investing in a cloud system for better collaboration, broadband for efficient remote working for employees or cybersecurity to keep your data safe. The investment may seem counterintuitive but as the pandemic has shown, these are investments that will keep your business afloat even in the most tumultuous times.

Looking for more ways to streamline costs? Our V-Hub Digital Advisers are here to help. Get in touch for free support.