Steering Your Business Through The Cost of Living Crisis

It’s been a trying few years across the board, a (continuing) global pandemic, lockdown restrictions, travel bans, staff shortages, supply chain crunches and now rising inflation combined with a cost of living crisis. As a business owner, it’s understandable if you are a little worried. What will happen next? And how do I prepare my business so that we are still standing on the other side? We have collaborated with the financial adviser Victoria Devine, owner of Zella & She’s On The Money (SOTM) to help explain what on earth is happening, plus recommend a few strategies that may help your business battle the storm.

“We are certainly facing some challenging times ahead, but as we witnessed through the pandemic, businesses were able to think creatively and shift their offerings to ensure they stayed afloat through an intensely dark period.”

— Victoria Devine, Owner of Zella & She’s On The Money (SOTM)

SQ: Can you explain the current Australian cost of living crisis in simple terms?

V: The cost of living situation in Australia is intense right now; the Consumer Price Index (CPI, which measures household inflation) has increased by 6.1% over the last year, which is the largest increase we’ve seen in over twenty years.

This is a result of all the global economy has faced over the last few years. We’ve experienced bushfires, floods, a global pandemic, and war. To say it’s been a tumultuous period would be underplaying the chaos and heartbreak of it all. Because of this turmoil, there have been huge supply chain disruptions (for example oil supplies from Russia, or produce from flood-affected regions in QLD and NSW) - which means everything has become significantly more expensive. As well as the increased expense of everyday living, interest rates have risen which causes the sting of inflation to burn that little bit more.

SQ: How does this affect my business?

V: For lots of Aussies, everything feels expensive right now and as a result, many consumers may be moving to reduce the amount they spend on non-essential items, which could impact your business. Importantly, we need to remember that economic ups and downs are normal and that there are things we can do to safeguard our businesses from any negative repercussions.

SQ: What advice do you have for business owners who may be navigating a cost of living crisis for the first time?

Firstly, take deep breaths! We are certainly facing some challenging times ahead, but as we witnessed through the pandemic, businesses were able to think creatively and shift their offerings to ensure they stayed afloat through an intensely dark period.

As we enter this new cost of living crisis, Australians will pare back non-essential spending, which can be scary to hear especially if the product or service you provide could be perceived as unessential. To help combat the loss of income you may experience, consider ways you could save money in your business such as;

  • cancelling subscriptions that aren’t essential
  • review your insurances
  • re-negotiate your lease

Another thing to remember is that the pandemic created a push to support local businesses and that sentiment has stuck around. Australians better understand the value in spending their money at smaller, more localised businesses and there’s a sense of pride in doing so. To make the most of this sentiment, stay top of mind by utilising marketing tools like social media or email marketing, or by implementing great deals in-store to encourage people to engage with your business.

Clients and customers are also more likely to show loyalty to you if you have a great connection with them, so remember to work on those customer relationships to increase the likelihood of repeat visits!

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SQ: Can you share insights from the SOTM community about how Aussies are changing or adapting their spending due to the cost of living crisis?

V: There is certainly a fearful sentiment in the SOTM community connected to the current cost of living crisis. Our demographic is very much millennial based and for many of our listeners, this is the first time they’ve experienced significant hikes in their everyday spending. Many are struggling to wrap their heads around having to pay more for items that formerly cost them so much less (petrol and lettuce continue to blow minds the most!) There has absolutely been a shift towards cutting down on non-essential spending, but on the flip side of that, some people are dealing with the stress of the unknown by spending more, (which we understand, but don’t endorse!)

SQ: How can businesses put strategies in place to best protect against similar situations in the future?

V: It’s important that your business sells products or offers services that are able to withstand the ebbs and flows of a constantly evolving market.

Tip: Study what businesses in your field did to stay operational during the peak Covid crises. Beyond that, it’s important to have enough cash reserves in the bank so that when you are experiencing tougher financial times you can still pay the bills, rent and your staff. An emergency fund in business is just as important as it is in our personal lives, so prioritise that as soon as you can!

If you are looking for ways to do more, yet simplify your business operations Square can help. Read Aussie business stories and find more handy tips and tricks on Townsquare.

This article is only for educational purposes and does not constitute legal, financial or tax advice. Make sure you consult a professional regarding your unique business needs.