How your business can survive the cost-of-living crisis

Building financial resilience in a tough economy

While the Bank of England may have recently held interest rates steady after 14 consecutive increases, they are still the highest they have been in 15 years, and the negative impact of the cost-of-living crisis continues.

It’s safe to say we all face a financial juggling act that demands our attention and ingenuity to make every Pound stretch a little further. Whether you’re an individual or a business owner, the need to save money and manage your resources wisely has never been more prevalent.

Which means most business owners will be wondering how to survive the cost-of-living crisis and where to begin.

A fundamental starting point is a thorough evaluation of your company’s financial standing.

Begin by scrutinising your business’s income and expenditures, as it’s essential to have a precise overview of your cash flow to make informed financial decisions.

Comprehensively examine your monthly revenue streams, including sales, investments, and any other sources of income related to your business operations.

Once you have a clear understanding of your business income, it’s imperative to delve into your monthly expenses. Compile a list of fixed costs, which might include rent or mortgage payments, utilities, insurance, and employee salaries.

Simultaneously, assess variable expenses like inventory, marketing, and equipment maintenance. By differentiating these fixed and variable costs, you’ll be able to pinpoint areas where you can reduce expenses and optimise your spending. If your costs exceed your revenue, it’s crucial to identify cost-saving measures and potential operational efficiencies.

Beyond your income and expenses, have a detailed look at your business debts, including outstanding loans, credit lines, or other financial obligations. Managing your business’s debt is pivotal, as it can significantly impact your financial stability and growth potential.

Once complete, this comprehensive financial assessment will allow you to create a sound financial strategy that aligns with your organisation’s unique objectives and economic circumstances.

Create a budget for your business

Creating a budget for your business means developing a detailed financial plan that outlines your expected income and expenses over a defined period, typically monthly or annually. Start by projecting your anticipated revenue, taking into account factors like sales, partnerships, and any potential growth opportunities. By having a clear forecast of your income, you can set specific financial goals and benchmarks for your business.

Once you’ve determined your expected income, it’s time to itemise your business expenses. Categorise your costs into fixed and variable expenses. Fixed expenses may encompass rent or mortgage payments, utilities, and salaries, while variable expenses can include marketing, office supplies, and maintenance.

With a well-organised budget, you can prioritise your expenditures and allocate resources effectively, ensuring that essential expenses are covered without overspending. Additionally, it will help you identify areas where cost reductions or increased investments can be strategically implemented to optimise your business’s financial performance and adapt to the challenges presented by the economic landscape.

Reduce your business costs

Cutting costs need not be a negative thing, certainly if you identify areas where you can cut back without compromising the quality of your products or services. For instance, consider renegotiating contracts with suppliers to secure better terms or seeking out alternative, more cost-effective vendors.

Or review your energy usage and explore energy-efficient technologies to reduce utility bills and analyse your inventory management to avoid overstocking and reduce carrying costs.

Then approach your marketing and advertising strategies. Are there more cost-effective ways to reach your target audience? Explore the potential of digital marketing channels that offer a better return on investment. Could you increase your social media and content marketing to connect with your audience at a lower cost than traditional advertising methods?

What about your subscription services and software tools? Do you really need all of them? Eliminating redundant or underutilised subscriptions can free up valuable resources for your business.

Another critical aspect of cost cutting is employee productivity and operational efficiency. Streamline your business processes, delegate tasks effectively, and automate routine operations where possible. This not only cuts down on labour costs but also enhances productivity, allowing your employees to focus on more value-added tasks.

Remember, every saved Pound contributes to your bottom line.

Make more money in your business

Exploring alternative income-boosting strategies can be another powerful way to counter the impact of a cost-of-living crisis and high interest rates, as these additional income streams can provide much-needed financial stability.

For instance, if you run a retail business, you could explore e-commerce or affiliate marketing opportunities. If you offer professional services, consider offering training or consulting services in your area of expertise. These potential way to make more money can not only supplement your income but also help diversify your skill set and broaden your business horizons.

You could also consider diversifying your income. One way to do this is by expanding your product or service offerings. For example, if you run a restaurant, explore catering services or packaged meal kits for takeout or delivery. For service-based businesses, create digital products or online courses to reach a wider audience.

Additionally, reach out and form strategic partnerships or collaborations with complementary businesses to tap into their customer base. Such alliances can bring in new revenue streams while enhancing your brand’s visibility.

Lastly, don’t overlook the potential of tapping into emerging trends or technology. Keep an eye on market shifts and consumer behaviour changes. Embracing innovative technologies or adapting to changing customer preferences can create new revenue opportunities. Whether it’s adopting e-commerce solutions, incorporating subscription models, or exploring sustainable and eco-friendly products and services, these strategies can open up untapped income streams that align with the evolving needs of your target audience.

By spreading your income sources across various avenues, you not only increase financial security but also position your business for long-term growth and resilience.

Build an emergency fund for your business

Just as individuals have rainy-day savings, businesses should have a financial cushion to weather unexpected storms. Start by setting aside a portion of your profits each month into a dedicated business emergency fund. The ideal amount can vary depending on your industry and company size, but a common recommendation is to aim for at least three to six months’ worth of operating expenses. This fund can be a lifeline during unforeseen economic downturns, allowing you to continue operations and meet financial obligations even when revenue temporarily dips.

Along with saving from profits, explore other avenues to bolster your business’s emergency fund. Consider redirecting a percentage of any windfalls, such as tax refunds or unexpected profits, directly into this fund. If you receive loans or investments for your business, allocate a portion of these funds to your emergency savings as well.

Having a well-funded emergency fund not only provides financial security but also grants you peace of mind and the flexibility to make strategic decisions that prioritise long-term business stability even in uncertain economic climates.

Seek financial guidance

For business owners in the UK facing the challenges of a cost-of-living crisis and fluctuating economic conditions, seeking financial guidance can be a sound strategic move. It’s often prudent to consult with financial advisors or business coaches who can provide tailored advice based on your specific business needs and the unique financial landscape of the UK.

Access to experienced business and financial experts can help you understand complex tax regulations, identify cost-saving opportunities, and provide insights on investment strategies to preserve your business’s financial stability. They can also assist in creating a comprehensive financial plan that aligns with your long-term goals while addressing immediate financial concerns.

Some will even provide hands-on guidance, helping you identify areas in your business where you can make financial improvements. They can offer practical advice on budgeting, expense reduction, and revenue optimisation, all while providing a fresh perspective on how to adapt to the evolving market conditions in the UK. You may also find them to be a source of motivation and accountability, keeping you on track to achieve your financial goals and ensuring that your business remains resilient in the face of economic challenges.

Martin Baillie is a Business Coach and Growth Specialist at ActionCOACH Bury St Edmunds, committed to working with business owners to create sustainable, viable, profitable entities within the local community, and creating 1000 new jobs in the East Anglian region through that growth.

If you are looking to increase the profit in your business while freeing up time, and having a better work / life balance, there is no better time to start than now. Our business growth methodology is tried and tested, and we guarantee your results.

Contact Martin Baillie, ActionCOACH Bury St Edmunds now on Tel: 01284 334099. You can also follow him on LinkedIn , Instagram and Facebook