These are not the best of times for the economy. As small businesses were trying to navigate the challenges brought about by Brexit, the pandemic struck. Along with that came subdued demand and supply and staffing shortages. And now comes the cost of living crisis.
According to Goldman Sachs, the UK economy will enter a recession later this year. Both disposable income and consumption levels will fall. Inflation is at historic levels and soaring gas prices might push it to 13.3 per cent by October. According to the Bank of England, a long recession is in store for the UK.
The news from the National Institute of Economic and Social Research (NIESR) isn’t any better. They believe that both a recession and high inflation will hit the UK economy simultaneously. Two figures from their analysis seem particularly ominous:
- By 2024, the number of households living paycheque to paycheque will be 7 million.
- 5.3 million households are expected to have no savings at all by 2024.
The cost of living crisis will cripple demand, which will disproportionately hurt small businesses without adequate working capital and easy access to loans. This is especially true for businesses that don’t sell essential goods or services.
But while the immediate future does look challenging, there’s a lot that small businesses can do to adapt to this reality.
Ways to keep your small business afloat during the cost of living crisis
If you’re a small business in the UK, here are some suggestions to manage the cost of living crisis.
Cut down on expenses
The number one item on your ‘how to survive the cost of living crisis’ checklist should be to avoid unnecessary expenses. Start by categorising your expenses into ‘necessary’ and ‘unnecessary’. Ruthlessly cut down expenses in the unnecessary list and be optimal in the necessary category.
- Do you really need more office space or another location?
- Can you, in fact, work from home?
- Can you reduce what you spend on your business telephone and internet?
- Do you need WiFi or can you manage with a mobile hotspot?
- Is there a way to optimise your digital marketing?
These are some of the ways in which you can reduce your small business expenses to combat the cost of living crisis.
Use technology well
Technology can help your small business be more efficient. That is if you know how to use it well. The good news? Most modern technology solutions are affordable, scalable and easy to use for small businesses.
If you’re an online retailer, you can use technology to better target your customers, analyse whether your current marketing is working well and increase customer engagement through cost-effective channels like email and social media.
Payment and accounting systems, expense tracking apps, inventory management software, review management tools and HR management platforms can further reduce your workload and expenses and improve your productivity.
Automate administrative tasks where possible
The easiest way to be more efficient is by focusing more on revenue-generating tasks and less on administrative chores. The way to do that is through automation.
You can use AI to automate several aspects of your business from workflows to project management. Invoice automation can free you from having to manually generate invoices while increasing compliance.
Customer service is another area where you can use bots to give information on orders, shipments and return policies. You can also automate your marketing. By scheduling content publishing, for example, you won’t have to individually share posts on social media.
Review data regularly
Every action of your small business generates data. Once you start collecting and analysing it, you will discover multiple ways to improve efficiency and drive business growth.
The cost of living crisis might discourage customers from making unnecessary purchases. This means your customer acquisition cost would increase. The solution is to reach out to your existing customers and encourage them to buy more from you or refer others who might be interested in your product or service.
It’s another reason why you need a centralised database. Once you segment your customers based on their purchasing frequency and average spending, you can give them customised discounts or referral offers.
Data will also reveal where you’re needlessly spending. If paid advertising isn’t driving users to your online store on a social media channel, for example, you can take that off of your marketing mix. If a particular age group isn’t responding to your marketing, you can focus elsewhere.
Focus on customer communication
Increased marketing or social media spending isn’t what will help you manage the cost of living crisis. It’s customer communication. Now more than ever, you need to openly and effectively communicate with your customers. And email can help you reach and engage with your customers.
Customer communication begins with identifying the ‘who.’ Segment your audiences into frequent customers and those who may have bought from you once or twice but haven’t done so recently.
Next comes the ‘what.’ To your regular customers, offer new products that align with what they usually buy. You can also offer them limited-time discounts. To your passive customers, you need to send discounted offers relevant to their previous purchases.
Beyond sales, email marketing allows you to build a community. Share content around your product or service that will add value to your users’ lives. Be consistent in your emails but don’t be spammy.
Expand your revenue streams
Another way to offset the effects of the cost of living crisis is to add revenue streams to your small business. No, this doesn’t mean you have to invest more in your small business.
Can you start a subscription service for your product or service? Maybe a discount on your annual price would bring in more customers and revenue. Can you sell through social media channels to reach more customers? Can you offer an online course based on your experience in the industry?
How about branded merchandise? Can you start affiliate marketing where you get a commission on every sale that initiates from your website or social media channels? Any of these can become a revenue stream and help manage the cost of living crisis.
Athlete: Helping your business grow
Athlete is an Etsy integration service that makes your life easy while improving your business’s efficiency. Athlete is a Shopify app for Etsy syncing that allows you to ship your orders from either Etsy or Shopify.
By syncing orders and customer information, Athlete saves you time and gives a complete view of what’s happening with your orders through its dashboard. This allows you to see any errors immediately, which will improve your customer service. You can also manage loads of edge cases including upgraded shipping, tax and personalisation notes.
Those who adapt are the ones who will survive
The cost of living crisis seems unavoidable. That doesn’t mean failure is inevitable.
As a small business, even if the going seems good for the time being, you have to take a hard look at your operations and make the necessary changes to optimise resources and grow revenue. Act as if the crisis is already here.
Starting early gives you an advantage over others. It gives you time to execute the tactics mentioned above. It also allows you to try out different strategies until you find the one that works. That’s how you can ride out the crisis.