Small businesses putting prices up as running costs escalate
Increases in the price of fuel, raw materials and energy are key concerns for small business owners
- 75 per cent of small business owners have had to pass on rising costs to customers
- 28 per cent small business owners do not know how much their next energy bill will be
- Uncertainty about rising costs ranks as the no.1 challenge for small business owners
- 78 per cent believe the rising costs could jeopardise their long-term business goals and ambitions
Monday 25 July 2022: Small business owners are struggling to keep on top of rising costs and avoid passing them onto customers, according to research released today.
The survey, carried out by Smart Energy GB, revealed three quarters of small business owners have passed rising costs onto their customers. However, the vast majority - 86 per cent - are trying to minimise their overheads in an attempt to reduce further increases, or keep their prices the same, amid escalating costs. This includes carefully monitoring their energy bills (33%), shopping around for cheaper suppliers (33%) and putting a freeze on hiring staff (28%).
More than a quarter (26%) are working unpaid hours to alleviate some of the financial pressure they are facing.
In order to keep a closer eye on the intensifying costs, 72 per cent either have a smart meter, or are considering getting one, to better manage their spend on energy. It emerged fuel, raw materials and gas and electricity bills are the main rising ‘hidden costs’ putting pressure on the end price of their products or services – with 28 per cent of those surveyed not knowing how much their next energy bill will be.
Six in ten (61%) who are yet to increase their prices think it is ‘inevitable’ if the current trajectory continues, with more than three quarters (77%) fearing they will have to hike their prices within the next six months.
For those who have already had to do so as a result of the cost-of-living crisis, 85 per cent said it was the ‘last resort’. While many businesses say their customers have been understanding about the situation, over half (53%) believe they’ve lost some customers as a result of price increases.
The research was commissioned to mark the launch of Costs, Energy & Going Green, a guide with advice to help small businesses with the current challenges.
Fflur Lawton, Smart Energy GB, said: “Small businesses are facing many of the same challenges and price hikes that consumers are. It’s inevitable that increased running costs will be passed on to customers in some instances. However, new research has found that many businesses are trying their best to minimise the impact of these price rises on their customers and are going to great lengths to keep their overheads as low as possible.”
The study found small business owners estimate their outgoings have risen by 13 per cent since the start of the year. For 35 per cent of those polled, uncertainty about rising costs is the most challenging thing about running a business. Intensifying costs for the remainder of 2022 was a concern for 92 per cent, with
78 per cent believing rising costs could jeopardise their long-term business goals and ambitions.
In fact, working long hours and significant world events – such as the pandemic – also ranked as leading challenges small businesses are facing. Looking ahead, nearly seven in 10 (69 per cent) said plans are already being formulated so they can avoid increased prices for the remainder of this year and they are already looking at a number of ways to reduce their outgoings. Turning off appliances when not in use, reducing the amount of energy used and going paperless are the leading sustainable measures small business owners have taken to cut costs. More than one in four (27 per cent) have slashed the amount they are travelling for meetings, and continued to embrace video calls.
Fflur Lawton added: “When you are focused on keeping a business running smoothly, anything that helps make the day-to-day challenges a bit easier can be a welcome relief. As smart meters securely send data directly to energy suppliers, businesses only ever pay for what they actually use, which can be a great help with cash flow.
“There’s also no need for business owners to do manual meter readings as they’re sent automatically, so getting a smart meter installed can be a great time saver too.”
TOP WAYS SMALL BUSINESSES ARE REDUCING OUTGOINGS
- Keeping closer track of monthly bills
- Shopping around for different suppliers
- Monitoring energy usage more closely
- Not hiring more staff
- Shopping around for cheaper insurance
- Working unpaid hours
- Avoiding purchasing any new IT software
- Not purchasing any new office equipment
- Avoiding purchasing any new IT hardware
- Reducing marketing budgets
- Fewer company vehicle journeys to reduce fuel costs
- Changing to cheaper raw materials for products
- Encouraging more working from home
- Negotiating reduced rents
- Switching to greener solutions
- Retraining existing staff to avoid hiring someone new
- Introducing stricter rules for staff expenses
- Moving to smaller/cheaper premises
- Outsourcing certain jobs to avoid hiring someone new
- Getting rid of office space
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