A survey conducted among 500 SMEs has revealed that three-quarters of small business owners have had to transfer the burden of increasing costs onto their customers. As overheads continue to rise, 86 percent of businesses are taking measures to minimize expenses and either keep prices stable or reduce further price hikes.
Among the strategies employed, careful monitoring of energy bills (33 percent), seeking out cheaper suppliers (33 percent), and implementing a hiring freeze (28 percent) are common practices. Unfortunately, 26 percent of small business owners are even working unpaid hours to alleviate the financial pressure.
The primary contributing factors to rising costs, often referred to as ‘hidden costs,’ include fuel, raw materials, and gas and electricity bills. Of particular concern is the uncertainty surrounding future energy bills, with 28 percent of business owners admitting they struggle with the unpredictability of these expenses.
Recognizing the need to manage intensifying costs, 72 percent of businesses either have smart meters or are considering installing them to gain better control over their energy spending.
While 61 percent of businesses yet to increase prices believe it is inevitable if the current trajectory continues, a staggering 77 percent fear that they will have to raise prices within the next six months. However, for those who have already increased prices, 85 percent stated that it was a last resort. Despite efforts to communicate the necessity of price adjustments, 53 percent of businesses have experienced customer loss as a result.
To assist small businesses facing these challenges, Smart Energy GB commissioned the research to launch “Costs, Energy & Going Green,” a guide aimed at offering support in navigating current difficulties.
Fflur Lawton, a spokesperson for Smart Energy GB, commented, “Small businesses are grappling with the same challenges and price hikes as consumers. It is inevitable that increased running costs will, in some cases, be passed on to customers. However, our research has shown that many businesses are making genuine efforts to minimize the impact of these price rises on their customers and are striving to keep overheads as low as possible.”
The study found that small business owners estimate a 13 percent increase in outgoings since the beginning of the year. Uncertainty surrounding rising costs emerged as the most challenging aspect of running a business for 35 percent of respondents, with 92 percent expressing concerns about further cost escalations in the remainder of 2022. Moreover, 78 percent believe that rising costs could jeopardize their long-term business goals and ambitions.
In response to these challenges, nearly seven in 10 business owners (69 percent) have already started formulating plans to avoid further price increases for the remainder of the year. Sustainable measures such as turning off appliances when not in use, reducing energy consumption, and adopting paperless practices have become common strategies for cost reduction. Additionally, 27 percent have decreased travel for meetings and embraced video calls.
Fflur Lawton concluded, “When running a business, any support that eases day-to-day challenges is greatly welcomed. Smart meters securely transmit data directly to energy suppliers, ensuring businesses only pay for the energy they use. This feature can significantly aid cash flow. Moreover, the automatic transmission of meter readings eliminates the need for manual readings, saving business owners valuable time.”
Top Ways Small Businesses Reduce Outgoings:
- Keeping closer track of monthly bills
- Shopping around for different suppliers
- Monitoring energy usage more closely
- Not hiring additional staff
- Seeking cheaper insurance options
- Working unpaid hours
- Avoiding the purchase of new IT software
- Avoiding the purchase of new office equipment
- Avoiding the purchase of new IT hardware
- Reducing marketing budgets
- Reducing company vehicle journeys to minimize fuel costs
- Switching to cheaper raw materials for products
- Encouraging more remote working
- Negotiating reduced rents
- Transitioning to greener solutions
- Retraining existing staff instead of hiring new employees
- Implementing stricter rules for staff expenses
- Downsizing to smaller or cheaper premises
- Outsourcing certain tasks to avoid new hires
- Eliminating unnecessary office space