Rising prices hurt just about everyone, but small business owners face a double hit: the impact on their own spending power, but also less revenue coming in from cash-strapped customers.
The volume of retail sales fell 1.4% in March, with spending on food dropping by 1.1%. These are the first signs of the effect of high inflation, which for March was measured at 6.2%.
Managing your spending
The well-publicised drop in the number of streaming subscriptions is just one example of how household budgets are being slimmed down to cope with the cost-of-living crisis. Suggestions from government ministers to change shopping habits to own brand items may not have been well received, but there are other potential ways to make much larger short-term savings:
- At the immediate personal level, cancelling or suspending gym memberships and other exercise-related subscriptions could produce valuable savings.
- If you have time on your side, regular personal pension contributions can be put on hold or revised down until your finances are back to some sort of normality. Although it is also possible to opt out of workplace pension contributions, this is generally not advisable because the free employer contributions will be lost.
- If you are facing serious difficulty, it might be possible to temporarily stop or reduce monthly mortgage repayments. The decision will depend on the lender and mortgage contract and is not a decision to be taken lightly.
Some small business owners may have actually seen improved sales, with the amount spent on DIY and furniture increasing. However, most retailers will need to ensure their prices remain competitive to retain customers who are trimming household spending and cutting products seen as superfluous.
For small businesses providing services on credit, managing cashflow is essential, especially as clients might be tempted to delay payment for weeks or even months. The human touch is always important, and any potential non-payers need to be dealt with swiftly and decisively.
And of course, the business’s own costs need to be kept under review, especially fuel costs in the coming months. Budgeting for increased prices needs to be factored in to your planning.
If you’re walking this tightrope, the MoneySavingExpert website has a useful cost of living survival guide across a range of issues which can be found here.