The current economic state is hitting everyone hard. But what’s next for businesses and the cost of living crisis?
With so much change, SMEs are finding it especially difficult to keep up with rising prices. Employees are feeling the pressure as well, with many seeing their wages stagnate at a time when they seriously need that extra cash.
We need to discuss the impact this is having on all parties and what possible next steps are going to be required for creating any movement. We will also explore ways in which SMEs can support their staff during these difficult times.
What’s Causing This Economic Dilemma?
There are a variety of reasons for the current cost of living crisis. Organisations have been struggling to keep up with rising costs, while also trying to maintain healthy profit margins. This has been made worse by Brexit uncertainty and the continued fall in the value of the pound.
However, more recently the rise of inflation is outweighing salary increases, meaning people have less purchasing power than they did this time last year. This is having a knock-on effect on businesses, as consumer spending power decreases.
The British Chambers of Commerce (BCC) recently found that more businesses are reporting increased costs, with two-thirds saying they’ve been affected by inflation in the past 12 months. This is up from just over half in 2017.
How Are Businesses Being Affected?
The BCC’s research shows that businesses are being forced to increase their prices in order to stay afloat. This is particularly true for SMEs, who often don’t have the same price flexibility as larger businesses. As a result, many are struggling to maintain healthy profit margins and some are even having to make redundancies.
This proves that it’s not just businesses that are feeling the squeeze though. Employees are now living pay check to pay check in order to keep up with the rising cost of living, with many seeing their wages stagnate.
With this in mind, we are seeing more people working extra jobs, looking for overtime work or leaving their current roles in search of higher salaries. This is causing businesses to lose talent and skills, as well as increasing staff turnover rates.
Which Industries Are Feeling The Strain?
More volatile, consumer-facing industries are being hit the hardest by the current cost of living crisis. This is because they are more likely to be affected by changes in consumer spending habits.
Construction and capital goods industries are also at high-risk as consumers are making more careful decisions about where to spend their salaries. Cutting back on non-essential items like holidays, clothing, home refurbishments and online subscriptions have even had an impact on larger companies.
Slow or delayed payments continue to hit SMEs hard, leaving many on the brink of closure. This is particularly true for businesses in the construction and retail sectors, who often have to wait longer for payment due to the nature of their work.
What’s Next For Businesses and the Cost of Living Crisis?
In order to stay afloat, businesses need to find ways to increase their prices without passing on the full brunt to consumers. They also need to support their employees during this difficult time by ensuring they receive fair wages.
We will see a lot of businesses attempt to absorb the increases, but this will only be a short-term fix and won’t. The long-term solution lies in businesses and the government working together to find a way to ease the cost of living crisis. This may include measures such as reducing business rates, increasing the minimum wage or introducing new workplace benefits.
One way businesses can do this is by offering salary sacrifice schemes. This would allow employees to give up some of their salaries in return for benefits such as childcare vouchers or a bike-to-work scheme. This may help ease the financial burden on employees, while also benefiting businesses in the long run.
Another way businesses can support their employees is by offering flexible working arrangements. This could include things like flexible hours, working from home or compressed hours. This would allow employees to better manage their work-life balance and could help businesses save on costs such as office space and utility bills.
Should We Expect Any Improvement?
The future for businesses and the cost of living crisis is uncertain. However, it is unlikely to ease up significantly any time soon. With this in mind, SMEs need to start preparing for the long term.
Consumers can expect 2022 to be the worst year for inflation with some prices expected to drop by next year. However, this is something they are going to have to consider when job hunting and reevaluating savings goals.
Despite the optimism that this won’t last forever – just the fact we’ve had to struggle through what we have already is no doubt going to change the way businesses, employees and consumers behave.
So although we can expect falling prices and a likely pick-up in spending, people are still going to be overly cautious of how they spend going forwards. Many are looking at new ways to save, considering their workplace pension contributions and cutting back on inessential purchases as a new habit.
What businesses need to remember is that their employees are seriously feeling the pinch. They may be more likely to leave if they feel like they’re not being paid fairly, or if their workload is too high. This is why it’s so important for businesses to support their employees during this time and ensure they’re getting fair pay and conditions.
If you’re a business owner, now is the time to start thinking about how you can weather the storm. What measures can you put in place now to help your business survive? What changes do you need to make to ensure your employees are happy and healthy? Only by preparing for the worst can we hope for the best.
Relevance Is Just As Important As Reach
In these times, businesses need to think about their consumers and what’s important to them. This means creating content that is relevant and useful, rather than just churning out keyword-stuffed content that serves no real purpose.
It’s also important to consider where your consumers are spending their time. Are they on social media? Reading news websites? Listening to podcasts? By understanding how your consumers consume content, you can make sure you’re reaching them with your message.
There is a risk now, more than ever, that businesses and the cost of living crisis simply don’t mix. It’s becoming harder to reach consumers with a message that resonates.
Not only that, but the window of opportunity when people are the most receptive is getting smaller and smaller. With so much content being produced, businesses need to make sure they’re putting their best foot forward and creating content that is worth consumers’ time. Otherwise, you’re not going to be making an impact in the ever-more competitive market.
So what’s the answer? How can businesses adapt their content strategy to ensure they’re still reaching their target audience?
The answer is simple: be relevant. Create content that is useful, interesting and engaging. If you can do that, you’ll be one step ahead in these challenging times. But data is also a key factor.
Having the ability to consistently and accurately track the market as well as where and when conversions are coming in will be vital to shaping your marketing strategy.
After all, if you don’t know what’s working, how can you improve?
Useful data will also help brands make better decisions about where to allocate resources. And in these challenging times, that could be the difference between success and failure.
Lead With Purpose
Value for money is going to remain one of the leading decision makers for consumers. With the massive drop in disposable income – it goes without saying. However, thought leadership and ethical standpoints have become somewhat of a deciding factor when it comes to where consumers put their money.
Businesses that can show they are purpose-driven and have a message that goes beyond making a profit are businesses that will thrive. People want to know where their money is going, and they want to trust the businesses they’re supporting. So if you can show them that, you’re on to a winner.
But it’s not just about having a purpose; it’s about being authentic and transparent too. Consumers can see right through businesses that are trying to greenwash their image or make empty promises. If you want to win consumers over, you need to be genuine in your efforts.
And finally, don’t forget about your employees! They are your biggest asset and one of the main reasons customers choose to do business with you. Make sure you’re supporting them during these tough times, and they will repay you tenfold.
If you need guidance to help you through these uncertain times, fill out a contact form and I’ll be in touch. There’s no better time to start than now – we need to make a move.