Limited time offer: No repayments on business loans for the first 6 weeks. Offer ends June 30. T&Cs. Apply now.

5 ways to adapt to the cost of living crisis

Five practical ways that small business owners are adjusting to rising supplier and production costs.

Cost of living

Five practical ways that small business owners are responding to the impact of rising production costs and cost of living increases on their businesses, customers and clients.

The cost of living is rising for small business owners and their customers and clients alike, with factors such as inflation and higher production costs contributing to that rise.

RFi research from the Australian SME Banking Council suggests that cash flow and business demand form the number one challenge for 25% of small business owners, and that economic and supply chain concerns are the number one challenge for 22% of small business owners.*

Rising costs can increase pressure on the buying habits of customers and clients, and on the cash flow of small businesses, affecting both demand generation and a business’s bottom line.

Here are five tips from small business owners showing how they are adapting to the rising cost of living, strengthening their business’s cash flow, and supporting their customers and clients in the process.

Supplier management

“We are holding higher levels of stock … to achieve lower bulk pricing with suppliers.”

Cost of living

Tom White of Discount Lighting has experienced price increases from suppliers twice in the past 12 months.

“Freight costs have dramatically increased,” he says. “We’ve absorbed some of these increases to keep our delivery costs affordable for customers, but we’ve had to increase our prices on some products to remain profitable.”

Tom identifies three main techniques he is using to alleviate the impact of these rising costs from suppliers.

“We are holding higher levels of stock of certain light fittings to achieve lower bulk pricing,” he says. “We’ve also reached out and directly negotiated lower prices with some suppliers.

“We are also working with suppliers to ship products that we don’t need to hold at our store directly from their warehouses to our customers to avoid doubling up on freight costs.”

Task automation

“We have implemented software solutions to automate mundane tasks.”

Cost of living

Jordan Cullen, owner and founder of Cullen Jewellery, says he has increased his business’s efficiency by adopting time- and money-saving techniques.

“We have implemented a custom software solution to automate mundane tasks such as  inventory management, order processing and financial management,” he says. “This not only saves time for our staff but also reduces the need to hire additional personnel.

“This approach allows us to keep our operating costs low and pass the savings onto our customers.”

New product options

“We’ve made the conscious decision to introduce a number of new, low-cost products.”

Cost of living

Diversifying their business’s revenue streams is another technique small business owners are using to augment existing income and counteract rising expenses.

“We’ve made the conscious decision to introduce a number of new, low-cost products,” says Aida Rejzovic, owner and founder of Sassy Organics. “These are still certified organic but are not as expensive as some of the higher-end brands that we stock at the moment.”

“Aggressive” digital marketing

“We’ve invested in various digital marketing strategies … to reach a wider audience.”

Cost of living

Todd Saunders, General Manager at personal protective equipment (PPE) company BIG Safety, explains how digital marketing has been key to keeping his business profitable in light of economic changes.

“One of the key techniques we’ve implemented is aggressive digital marketing,” he says. “With the rise of social media and online advertising, we’ve had to stay on top of our game to ensure our brand gets noticed.

“We’ve invested in various digital marketing strategies, such as search engine optimisation, email marketing and social media advertising, to reach a wider audience and get our brand in front of potential customers.

“We’ve also focused on providing a top-notch website experience for our customers.”

Customer empowerment

“We give customers the ability to choose the stones for their jewellery pieces.”

Many customer-facing businesses are also adjusting prices with their customers in mind, offering them the flexibility to keep costs down when needed.

Cullen Jewellery’s business model, for example, is focused on providing affordable purchasing options to its customers.

“We give customers the ability to choose the stones for their jewellery pieces, allowing them complete control over the price and the flexibility to tailor their purchase to their budget,” says Jordan.

*RFi Australia SME Banking Council, November 2022

Ask a Prospa specialist about how a Prospa Line of Credit can help support your business in times of uncertainty and make the most of growth opportunities.

The information in this post is provided for general information only and does not take into account your personal situation. Nothing contained in this post constitutes advice or an endorsement or recommendation of any kind by Prospa. Any links to third party websites are strictly for informational purposes only. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.