Experienced merchants likely already have strategies in place to navigate the rising cost of business in Australia. Yet many business owners will be experiencing severe price hikes for the first time; the number of registered businesses rose from 1.68 million in March 2009 to 3.03 million in March 2022.
Here are some ways to pivot and protect your business from the pressures of rising costs, whether you’re running your first business or your fifth.
Every sale you make costs your business a small amount of money. The costs to process a cash sale are largely intangible — time spent opening, counting, and closing drawers; visits to the bank; security measures, and more. The cost to process a cashless transaction is known as a transaction fee, and it covers the cost of moving funds electronically from a customer’s account to your own.
As cash payments become less and less common, it pays to know how to reduce your transaction fees and keep more money in your business. The simplest way is to switch to a fee-free EFTPOS solution. With fee free — or zero fee — EFTPOS, the transaction cost is passed on to the customer as a surcharge.
Consumers are used to paying a couple of extra cents for their daily purchases, so if your business is still absorbing the cost of processing transactions — now might be the time to consider implementing a surcharge. With Zeller, it’s as easy as toggling on a switch. You have the freedom to pass on your entire transaction fee, or a percentage of it.
Take a look at your offering – what makes the most money? Consider ways of further promoting those goods or services that have a higher turnover and markup. Conversely, consider reducing or removing what doesn’t make you money.
For example, if you own a café, think about removing the five least popular items from the menu. This forces customers to choose an item with a higher margin and reduces wastage.
Nearly 50 per cent of business owners expect to raise their price more than normal over the next three months. That number is even higher for retailers specifically; 59 per cent of retail merchants plan on raising the prices of their products.
Every sustainable business aims to maintain healthy profit margins. However, before passing on rising costs to your customers, it’s important to consider the impact of being more expensive than your competition — as well as strategies to mitigate any potential fallout. Often, it comes down to communication.
Strategic price increases — such as only to those products or services affected by supply chain issues — can help you retain customer loyalty in the face of rising prices. Another option is to assume a loss leader position: accepting a loss on certain products in the hope of upselling or cross-selling other products to make up the difference. Or, you could create product or service bundles by adding features that don’t affect your profit margins, yet have a big impression on the customer.
Any significant price rise should be done gradually and transparently. Australian consumers know the market is tough right now, and will be more understanding of gradual increases that are communicated frankly and honestly.
Now may be the time to consider expanding your product range to include items that are less costly to produce. Do some research into your industry; is there a flavour, style, accessory or service trending at the moment that has higher margins than your existing offerings?
If you run a boutique fashion label, perhaps there are lower-cost local fabric options to explore. Café owners could consider clever menu changes, such as switching fresh lettuce for coleslaw in burgers to save money and reduce wastage. Grooming parlours could even consider low-cost, homemade pet shampoo solutions made in bulk. Don’t be afraid to get creative.
The outbreak of COVID-19 marked the beginning of an ongoing labour crisis. From a lack of available staff to rising wages, businesses have been battling shortages in one form or another for the last couple of years. With fierce competition for skills across all industries fuelling the current shortages, it pays to consider how you can retain and attract the talent you already have.
Wages make up approximately 30% of business costs, which means raising pay across the board will have a huge impact on your bottom line. Consider how you can offer added value to a role outside of raising salaries (beyond government-stipulated increases). Extra flexibility, better work-life balance, clear career pathways and staff discounts are just a few examples of employee perks you can consider.
When staff feel valued, fulfilled and understood, they are more likely to stick around.
The more expenses you claim at the end of the financial year, the lower your tax bill. Unfortunately, 35 per cent of business owners admit to blurring the lines between their business and personal finances. Paying for business expenses with a personal credit card, or vice versa, makes it difficult to keep track of business expenses that reduce taxable income. For this reason, it pays to consolidate your costs in a single account.
When you use Zeller Mastercard for all business purchases, you benefit from clear oversight of every cent you spend. A quick glance at the real-time transaction summary can tell you if you’re sticking to your business budget.
Make the switch from a third party institution, and you could even save money: Zeller Mastercard has no annual card or domestic purchase fees.
Take a close look at your supply chain and identify any potential issues before they arise. If your suppliers are small in number, located overseas, or have long lead times, it’s a good idea to have a plan in place to reduce the chance of a stockout.
To mitigate that risk, consider creating backup supply chains that can be relied upon if unforeseen circumstances prevent your preferred supplier from delivering on time. There may even be local alternatives with shorter lead times, or the potential for you to bulk buy items that require minimal storage.
A healthy cash flow gives you the flexibility to avoid snap business decisions, and retain strong relationships with your suppliers. One way to improve your cash flow is to automate — or even avoid — processes like invoicing by investing in smart software.
An EFTPOS system that accepts card-not-present payments can help you get paid sooner. It’s also a convenience measure for your customer: rather than waiting for them to organise a bank deposit to pay for their purchases, you can take their card details over the phone and process the transaction in seconds. Funds accepted via Zeller Terminal are swept into your Zeller Transaction Account overnight, available for you to spend.
The fact is, small businesses are commonly paid late. 63 per cent of customers are often behind on payments, causing stress for 35 per cent of small business owners. For the average small business owner, invoice management takes up 12.4 hours a month. That time could be better spent marketing your business, or identifying opportunities for growth.
Across the board, businesses of all shapes and sizes are feeling the impact of rising costs. So too are the customers they serve. Take some time to reassess your current state of business and identify where savings can be made, technology can be relied upon, and supply chains can be optimised to ensure your business is best positioned for not only survival, but success.