How to make your business grow, even in tough times

As Cheryl Sharp, CEO and Founder of Pink Pig Financials, observed, the year started with strong optimism. The impact of the Covid years was subsiding, it felt like the cost of living was easing, albeit only slightly, and inflation was moving in the right direction. And while those things may all still be true, businesses are still feeling the impact. Consumer spending is down and this has had a ripple effect across all sectors.

With so many SME businesses feeling the pinch this year, survival becomes the overriding priority. Price increases have been inevitable in a bid to keep up with increased supplier costs, some of which has had to be absorbed into the business. Most businesses are finding their profit margins squeezed in all directions which means that investment back into the business is having to be parked for the time being. Things like investing in new machinery or larger premises, and investment in people through training simply cannot happen in the current environment.

This is a high point of concern and could be highly detrimental to UK businesses. SMEs are the backbone of the UK economy, and more support is urgently required to help these companies survive. Larger companies have access to larger amounts of financial credit to help them survive during downturns. We saw this during the 2007/8 financial crisis and again during Covid. This gives them access to loans and grants that allow them to stay competitive in the market, but by consequence, this makes it difficult for smaller businesses to compete with them.

The current Government has tried to lend a hand to SMEs through the introduction of a small number of grants and loans, but these are primarily for technology or sustainability-based businesses and not suitable for everyone. The Government needs to do more for SMEs to enable them to ride the difficult times, just like their larger counterparts, to give them a fairer chance. Financial support in the shape of low interest or interest-free loans would be a good start. This would mean SMEs could remain more competitive on price, or even use the funds to purchase new equipment or invest in technology that would allow for greater efficiencies and enable smaller operators to get ahead of the curb.

Local government also has a role to play in supporting SMEs. Business rates could be reviewed to lower the pressure on small businesses, along with help facilitating access to grants and loans. Local governments could also help by providing free marketing opportunities locally, including website directories and Council social media platforms, encouraging locals to shop closer to home to support these businesses.

In tougher economic times, cash flow is vital for SME’s. Its important to look closely at the financials of the business to identify areas where money can be saved and efficiencies made. Looking at the books on a monthly or quarterly basis can help to pinpoint areas where savings could be made. Are there subscriptions you no longer need? Can any operating costs be reduced? What about looking at alternatives to reduce postage and packaging costs? Making the business as lean as possible in this environment is key.

Of course, with supplier costs rising, raising prices may be inevitable. This is never an easy thing to do and is often the very last resort. As business owners we worry that we will lose customers, but we also need to remember that most people are understanding and will share a loyalty with the companies they buy from. Most people appreciate that price increases need to happen sometimes and will most likely stick with companies and brands they like for the sake of a small increase.

Once areas for cost cutting have been identified, and prices revised, business owners should review their profit margins to see whether extra cashflow can be generated that can be reinvested in the business to enable future growth and stability. If this is feasible, think carefully about where the investment should be made. Could it be invested in employees, perhaps through wage increases or training to help reduce any staff turnover. Is there a new trend on the horizon that the business could capitalise on by investing in the right equipment now?

Business owners should be looking at their figures and using forecasts and predictions to plan ahead. Look at your competitors and other services and products in the market to see what others are doing and put together a plan to ensure you can continue to be competitive, either through price, quality, service or ideally, all of these.

The future is uncertain and if we have learnt anything over the last few years, it’s the need to have a business that is resilient to the unexpected. Reinvesting into your business each year is essential to fund the next stage of growth. Reinvesting can help improve future profitability as well as productivity. Having cash in the business, where possible, can also improve balance sheet strength and provide a buffer to help carry the business forward in the event of another dip in the market. Reinvesting comes in many ways – you might use it for marketing to help build and retain customers. It could be used to add new locations allowing the business to expand and reach new markets or by adding new products, services, and revenue streams to boost profits.

It’s a hard time for businesses of all shapes and sizes and of course the priority is survival. Beyond this, look at where you want the business to be in 12 month’s time and how you plan to get there. Where you can, put plans in place and set small but achievable goals to aim for. Keep looking for cost savings and efficiencies along the way and stay positive. There is light at the end of the tunnel. Where there is a dip, this is nearly always followed by recovery and then some. Stay in your lane, focus on what you are good at, and things will get better. Businesses that can ride the storm often come back stronger and better than before.

Cheryl Sharp, CEO and founder of Pink Pig Financials