Cost of Living Crisis: How to Adapt & Thrive as a Small Business

First Brexit, then Covid and now the cost of living crisis; it’s no wonder Britain’s small businesses are feeling the pressure. This hat-trick of challenges is not only stalling growth, but with costs soaring while consumer spending plummets, it presents a very real risk of tipping the country into recession.

According to accountancy firm BDO’s bi-monthly survey of 500 business leaders, more than half cite supply chain issues, rising energy prices and record levels of inflation as the three biggest threats they currently face. Another 18% believe the cost of living crisis will have a more negative effect than Covid.

It’s a sobering situation. With business owners still fighting for survival rather than looking at financial prosperity, it may well signal another year of poor growth. But Britain’s SMEs are nothing if not resourceful. To ease the pressure, we’ve put together some tips and strategies to help you come out of the current downturn fighting.

Adopt technology to drive growth

There’s no doubt the cost of living crisis for small businesses is acute. With high inflation and runaway energy prices squeezing household incomes, spending has fallen dramatically. But technology can cushion businesses from the worst of the spending drop by increasing efficiency, automating operations and offsetting some of the cost of rising wages.

The move towards online shopping has been growing steadily for years. However, Covid accelerated the trend, forcing many SMEs to rapidly adapt to cater to consumers in lockdown. Having an online store is now commonplace, and remains so even with the reopening of customer-facing businesses. This substantially increases customer reach and convenience.

Modern tech has also brought with it a flexibility that benefits SME operations. Whether it’s online payment systems like Square Payments, HR management programmes or accounting platforms, they’re designed to be budget-friendly and scalable as a business grows. In addition, this software allows businesses to monitor employee expenses, track inventory and keep a better handle on costs – something which is more important now than ever.

And the benefits don’t stop there. Tech can deliver the digital tools necessary to enable workers to stay connected in an increasingly remote work environment. According to the Office for National Statistics, 84% of workers who worked remotely over lockdown intend to continue to do so post-pandemic. For businesses looking to reduce staff churn and maximise productivity, offering a hybrid setup is therefore key.

Cutting the cost of cybercrime

As if small businesses didn’t have enough to deal with, the cost of living crisis has coincided with an increase in digital crime. Last year, there were more than 400,000 reported cases of cybercrime and fraud, with losses equating to more than £3 billion in the UK. Of those, around 86,000 were related to online shopping. Furthermore, a 2020 Government report found almost half of businesses suffered security breaches or attacks in the preceding 12 months, with the average loss per business being around £3,200.

Having a secure online checkout can minimise the chances of a data breach or financial loss while giving the user greater control over stock management, employee access and transaction details.

Keep connected with your customers

Tech also has its part to play in keeping businesses connected, particularly at a time when consumer confidence is at an all-time low. By using automated email marketing, you can stay in regular touch with existing customers and inform them of the latest deals and special offers.

Not only does this build customer confidence in your product and encourage loyalty, automated emails are also extremely cost-effective, making them suitable for businesses with lower marketing budgets.

Taking it a step further a customer loyalty programme can really sweeten the deal and persuade customers to commit to purchases. Take coffee shops, for example. A ‘buy five coffees, get your sixth one free’ incentive can be an effective way of encouraging people to come back. It also comes with the bonus benefit of providing an opportunity to gather data on buying habits - which you can use to inform your marketing strategy.

Expand revenue streams

The cost of living crisis is making consumers think carefully about where they spend their hard-earned cash. And with less money in their pockets, combined with dwindling consumer confidence, businesses are having to work harder for each sale. Not only are they having to manage spiralling costs, but they also have to persuade customers why they should buy their product or service too - all while trying to remain affordable and profitable. Inevitably, there will be businesses that go under, and, while that’s a real risk, adding alternative revenue streams can be a way of clawing back sales.

This doesn’t have to involve vast research or expense. Often, leveraging existing products and presenting them to the consumer in a new way, e.g. via a subscription service, selling branded merchandise or offering click and collect, can be enough to boost business. Selling existing lines through social media channels can also increase your marketing reach and entice new audiences. Similarly, drawing on your own industry experience to create tutorials and online courses can add another string to your business bow.

Alarming headlines about the soaring cost of raw materials and record fuel prices make it hard to see a bright future. But it’s not off the table. There are already signs that the worst of the current inflation has already passed, with the prices of commodities, such as wheat and oil, falling in the past month. Whilst it may be some time before this is reflected in lower prices, adopting methods such as levelling up your tech, can help you weather out the economic crisis in the meantime.