Business coach Ray McCreadie says take time to review what’s working well and what needs minor tweaks in your firm.

He writes: "Businesses in Cumbria are feeling the pressure more than ever due to the cost-of-living crisis. The worldwide economic downturn has forced many businesses to rethink and adapt their operations. Reinvesting in business is essential for keeping profits, but some lack the flexibility to keep up with their reinvestment plans due to the financial pressure.

Numerous factors have contributed to a near-perfect storm in terms of the cost of living in the UK. To begin with Brexit has taken away a ready-made pool of labour, the national minimum labour rate has significantly increase labour costs, government borrowed billions of pounds during successive Covid lockdowns to bolster the economy, but those loans must be repaid, which means spending cuts and rising taxes while wages remain stagnant. Beyond the Covid-related borrowing, the situation has not been helped by rising global commodity prices and a difficult labour market. 

Domestic energy costs swelled by 67% between January 2022 and January 2023, while domestic gas prices soared by 129% in the same period. And despite the government introducing the energy price cap limiting the current cost, the increase still represented a huge cost for consumers across the UK. This was driven largely by Russia's war against Ukraine, an ongoing situation which has also led to an increase in agricultural products such as wheat as well as various metals, of which Ukraine and Russia are significant producers and exporters.

The effect is two-fold in that small businesses are seeing swift inflation in the cost of business services and materials, while employees are looking for higher wages and salaries to cope with the cost-of-living crisis. In terms of supply chains, transportation costs, as well as exporting and importing goods, has increased. High-energy businesses such as those in the hospitality, manufacturing, refrigeration, and warehousing sectors have been significantly impacted. As a result, more than half of small business owners predict they could close to bankruptcy as cost pressure bites. To make matters worse, the current political climate has left many small business owners with a sense of uncertainty, making it difficult to plan, meaning growth stagnates.

At the end of the day, small businesses are left with tough decisions. Try following this eight-point plan to combat falling sales, increasing costs and poor staff morale. A bit like a MOT for small businesses.

1. Review your pricing strategy – Can you charge more for your products or services, what are your margins for each product type. Look at the competition both locally and nationally, what are they doing. Analyse the way you package and distribute your product or service are they cost effective.

2. Revisit product offerings - Some products might be more susceptible to inflation than others. Eliminating the poor-performing products, take out the dogs and promote the cash cows. Doing this can help keep your business healthy and prevent you from wasting time and energy on inventory that does not serve you any benefit.

3. Expand your business plan visibility – Engage your staff in meaningful two-way conversations. Conducting a regular state of the nation reviews can help your business a lot. However, sometimes these meetings are not available to everyone, or they can even be a waste of time for some employees. Get the message across in a way they can contribute and feel part of the solution.

4. Reduce unnecessary costs - Since rising costs are one of inflations main consequences, reducing and cutting unnecessary costs can save you money. Adjusting financial forecasts can help determine where you can cut some of these costs.

5. Explore what-if scenarios - When the economy changes unpredictably, you may need to make different plans and imagine possible outcomes. After creating these scenarios, you can modify your objectives and targets according to how you anticipate things to change.

6. Bring in more cash - Bringing in more cash can also help your business. Cash flow is the number one concern of small businesses. It is no surprise that most accountants use a statement of cash flows to track how money flows in and out of your business. Without cash coming in, you cannot pay your invoices and will end up relying on credit. 

7. Audit current projects and spending - As part of your inflation plan, consider auditing your spending and current projects. An audit can help you evaluate the effectiveness and cost of your projects. By examining your projects and spending, you can identify which ones are successful and then decide whether to keep or stop them.

8. Finally, seek advice from your local business support agencies – These agencies such as the Cumbria Local Enterprise Partnership have business advisers that can take a fresh look at your business, a bit like an MOT for a car. You put your car through an MOT each year, but what about your small business?"