Mindset is all-important when changes are required
Business owners, especially those exposed to disproportionately high energy costs and rising interest rates, are bracing for a challenging winter. Here, we offer some thoughts on what to consider as part of your coping strategy.
Assess your finances honestly
Surgically trimming your business budget is the obvious place to start. The challenge is to be smart about where to cut spending. You will find that when survival is the goal, it’s easier to make the tough choices. Managers can defy old mindsets and creatively search for solutions, not just the next lifeline.
The challenge is to make your decisions well defended and evidenced. To make sure they are, review your budget with key members of your financial team, advisers and accountants to get the insight you need to make the right decisions.
They may be able to pick up on something you missed if they have all your business information at hand, giving you the confidence to say you’re making the right choices, no matter how hard they may be.
This should be a triage of your brand, products and services. The aim is to cut loose what isn’t working, improve what might and keep doing what does.
A lot of businesses are struggling and will continue to struggle because of rising energy costs. The Government recently announced an ‘energy price guarantee’ for households, and an ‘energy bill relief scheme’ to support businesses.
Businesses can also look to reduce costs in the ‘normal’ ways – use energy-efficient lighting; turn down the heat; turn things off when not in use; be careful with kitchen etiquette (overfilling the kettle costs the UK £68 million a year in energy costs!); use energy-efficient tech; avoid energy waste, go paperless and so on.
You’ve heard these solutions before but really focussing on them and getting the whole team involved after an energy audit could save you up to 10% on your business bill, according to the UK arm of EDF.
If you are still worried about paying your business energy bills, contact your supplier, as they may be able to work with you to agree on a payment you can more easily afford. It’s always worth asking if in doubt.
Employment costs, which for a typical restaurant usually stand at around 30% of revenue, can be expensive. But the solution isn’t always to cancel your new hire.
Instead, you can keep your number of full-time hires down by outsourcing certain tasks to third parties. A popular function to outsource is payroll – you need to get it done but you’ll probably find you can save more by outsourcing it than hiring a payroll specialist.
It just so happens that Harwood Hutton has a superb outsourced payroll team, and we would be happy to take a look at your needs.
Not only does outsourcing provide better value for money, it reduces the need for a large office with large rent fees and expensive energy bills. You might then be able to move somewhere less expensive, or get rid of the office altogether and move to remote working.
To save on employment costs, start with employee expenses, not employees themselves. You can make savings by ending or reducing the frequency of any free lunches you provide, for instance, or toning down this year’s Christmas party.
Embrace remote working
After the pandemic, a lot of employers were probably happy to see their staff return to the office but that fondness doesn’t make it any less expensive than remote working.
When there are employees in the office, all those energy costs we’ve talked about are out in force, so you might want to reconsider your policy.
We’re not suggesting you go back to remote working completely but re-evaluate how your working week goes. For instance, is there a day where only one or two employees come into the office, unnecessarily racking up your lighting costs? If so, consider closing the office permanently for that day.
Negotiate with suppliers and your landlord
Like your energy costs, what or how you pay your suppliers doesn’t have to be set in stone forever. Ultimately, they want to stay in business too and might be struggling. Furthermore, your payments are their income, and they want to keep that coming in, if you’re reasonable.
A great way to get a better deal is to buy in bulk. Suppliers, eager to move their stock and keep a positive cashflow, might just agree to a discount for a particularly big order of supplies.
Likewise, if you’ve been in a building for a while, you may be able to negotiate a better deal with your landlord, particularly if you’ve been a good tenant and have paid on time every month.
You might be surprised as to what you get and you certainly won’t lose anything by trying.
Talk to us about your business budget.
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