Here’s how other companies are managing the growing costs of running a business
Last week, Pleo headed down to London’s SME Expo for two jam-packed days of networking, learning and insight sharing. One of the many panels focused on coping with the challenges of managing a business through the ups and downs, rising inflation and fierce competition. Our Commercial Finance Director, Karen Ko, had her say along with businesses including Biscuiteers, Ufurnish and Farmer J (who just so happen to be one of our customers!). These are our takeaways on what businesses can learn about keeping the lights on in a crisis.
What are the biggest challenges companies are facing right now?
Thanks to the current cost of living crisis, there’s no shortage of challenges. For many businesses, one of the toughest is concerns over junior staff pay. These workers tend to be paid the least yet work the longest hours, and they’re the ones feeling the impact of inflation the most. “Lower paid staff are unquestionably struggling”, says Harriet Hastings, Founder of Biscuiteers, a hand-iced biscuit brand.
But how can you combat this? Farmer J, a fast casual healthy food restaurant, has introduced an incentive scheme to drive workers to do better and get paid more. The ‘Farmer League’ has been a huge success: the business has become more efficient and staff are, on average, taking home 35% more than they did last year. “It’s important to share the success of the business with junior employees and make sure they get remunerated properly,” adds Jonathan Recanati, CEO and Founder.
Biscuiteers manufacture everything they sell. “Everything from packaging to ingredients and staff costs have gone up thanks to inflation,” says Harriet, which has hit them hard. To save in other areas, they do their own fulfilment, which helps to keep customers sweet as they’re only passing on the cost of postage.
For Deidre Mc Gettrick, Founder & CEO of Ufurnish.com, the biggest change she’s seeing is the cost of acquisition. Getting customers on to their site – an online furniture aggregator company – is becoming increasingly expensive. Social media and google and digital channels are more costly, because “everyone moved online during Covid-19, but now they’re going back to in-store and they’re reducing spend,” according to Diedre. Thanks to supply and demand falling out of balance, costs are shooting up for retailers and becoming unmanageable.
How to make the most of a crisis
Invest in your brand
Jonathan found it tough dealing with Farmer J’s investors, as their first instinct is to expect you to cut costs wherever possible. “Sometimes you need to put your foot down and invest for the longer term,” says Jonathan. That might mean investing in your brand or in your people, opening new restaurants or negotiating with landlords on rent. People are often sceptical about negotiating on bills out of fear of rejection, but Jonathan reassures us that landlords are often open to having a conversation, so it’s worth a try.
Deirdre echoed that statement, warning businesses “not to forget to invest, otherwise you won’t have a business going forward.” She pointed to Coca Cola and Pepsi’s reactions to the Covid-19 downturn as evidence. Pepsi continued to invest whereas Coca Cola pulled back, leading to a drop in sales of only 3% for Pepsi, compared to Coca Cola’s 28% loss.
Increase your prices, but don’t let quality take the hit
For those who are able to do so, putting up prices can be an easy win. Farmer J, for example, increased prices by 5% across the board this year but haven’t seen demand be affected. Jonathan puts this down to a combination of more people going into the office in London after Covid-19, (which is where their restaurants are located) and the fact they pride themselves on product quality and consistency. “People are more picky now, so even if you’re more expensive, as long as you deliver value for money, you’ll be fine.”
Think strategically and long-term
It’s no secret that marketing is often the first out of the door when a crisis hits. But for Biscuiteers, it wasn’t about cutting their paid media budgets but rather about pivoting their strategy. A few strategic changes – such as bringing PPC and paid search together to switch between the two – resulted in their paid media achieving 10% greater efficiency this year. They’re also leaning more into PR and partnerships in order to grow brand awareness without breaking the bank.
Spot opportunities to save
At Ufurnish, Deirdre’s first port of call was to identify where the bulk of their spending was coming from. “That’s where you can make cuts,” she says. Dierde realised that no one was using huddles in Slack, so they disabled this premium feature and stuck to Zoom and Google Meet instead. In total, Ufurnish reduced their marketing spend by 30% and achieved the same result, proving how beneficial a quick employee survey and subscription audit can be. Her advice to other businesses is to “think about it as if it’s your money and you’re going to the supermarket” as you’re more likely to want to be frugal.
Luckily for Biscuiteers, they have both a B2B and D2C arm of the business. Harriet saw that consumer businesses were having a tough year, so they started focusing more on B2B to boost revenue. “We opened up more wholesale channels instead of just luxury channels and expanded our direct to corporate sales,” which Harriet claims helped the business massively. Their customer loyalty scheme (known ‘prezzy points’) gives them real visibility of customer behaviours, which has helped them be able to offer people what they really want.
Turn to technology
Like a lot of businesses, Ufurnish has recently discovered the benefits of chatGPT. Deirdre tells us that before the technology became popular, “to craft an awards submission would take ages – now we have a key list of stats and you can just prompt the AI tool to write it for you.'' She claims it takes about 25% of the time, which is a huge time saver for those who don’t really enjoy writing and would rather focus on other things.
Technology can also help you to better manage your spending. Pleo, for example, is a spend management tool that gives you full visibility over what people are spending and when, making it easier to spot subscriptions you no longer use or bills that you could negotiate down to a lower price. Use our calculator to see how much time (and money) you could save with Pleo.
What does the future hold?
Unfortunately, none of us have a crystal ball, so it’s hard to know which move to make next. Biscuiteers are thinking bigger than one market or channel and are even considering wholesale opportunities, meanwhile Ufurnish is focusing on building brand awareness closer to home in the UK. Farmer J, on the other hand, is open to pretty much anything – as long as there’s scale potential and the risk feels worth taking. As for you? Hopefully these tips can help you prepare your business to weather these economic changes and come out stronger.
You might enjoy...
How to forecast your cash flow step by step, and best practices and trends.
Business financial management ► Find out how you can ensure your company’s success by developing a good financial management strategy ✓
Rather than feeling out of control, how about relying on a system that gives you efficient workflows and a detailed view of every expense?
Get the Pleo Digest
Monthly insights, inspiration and best practices for forward-thinking teams who want to make smarter spending decisions
Powered in the UK by B4B partnership, available soon