Personalised business insurance
It’s no secret that it’s a difficult time to run a business. Fuelled by spiralling energy prices and rising interest rates, the ‘cost of doing business crisis’ is having a profound impact on many businesses’ budgets, while thousands are being forced to stop trading altogether.
So what can you do to keep your business afloat in this tough economic climate?
Here we outline eight cost-cutting solutions that could help you save money and reduce hidden expenses – as well as some things you shouldn’t do.
1. Become more energy efficient
Rising energy prices are already one of the biggest strains on small businesses’ finances – and with the Government set to cut financial support from April, many SMEs will see their bills go up even further.
One of the best ways for small businesses to cope with increased energy prices is to become more energy efficient. Not only can this save you money, it can also reduce your business' impact on the environment.
While some organisations will find it easier than others, there are steps every business can take to improve energy efficiency. For example, switching off machinery or equipment when it’s not being used can go a long way – even on standby, a computer left on overnight can cost your business £35 per desk, per year.
You can also save money by following the recommended temperature for your workspace. Based on guidelines from The Chartered Institute of Building Services Engineers, the TUC recommends the following temperatures:
- 13°C for heavy work in factories
- 16°C for light work in factories
- 18°C for hospital wards and shops
- 20°C for offices and dining rooms
EDF Energy estimates that overheating a workspace by just 1°C can increase your business’ energy bill by 8% – so turning down the thermostat could save you hundreds of pounds a year.
2. Claim everything you’re entitled to
All businesses incur expenses, and some of these expenses can be deducted from your income to work out your taxable profit – ultimately reducing your tax bill. These expenses might be known as allowable expenses or capital allowances, depending on the type of expense and the structure of your business.
One of the most common mistakes when completing a tax return is forgetting to claim everything you’re entitled to. And this can be an expensive error that leaves you paying more tax than you need to. Back in 2019, The Telegraph reported that 57% of freelancers and self-employed people forget to claim purchases under £10 – missing out on a staggering £24 million of tax breaks every year.
To make sure you don't pay more tax than necessary, get familiar with HMRC’s rules on allowable expenses and capital allowances, report them when you file your tax return, and consider consulting an accountant or tax advisor if you're unsure about what you can claim.
3. Look into small business grants
Sometimes worth thousands of pounds, small business grants are often available for things like job creation, high-speed internet, electric vehicles and software for accounting, ecommerce or customer relationship management (CRM).
And this money can make a world of difference to a small business – not only saving you from certain up-front costs, but also securing you resources that can support your long-term growth.
But small business grants can be highly competitive, and it can be difficult to navigate all the different funding sources, eligibility requirements and tax implications.
To make things a bit easier, we’ve put together a guide to small business grants that answers common questions, lists useful resources and offers top tips for grant applications.
4. Take care of your team
Research shows that it costs an average of 6-9 months’ salary to replace an employee – rocketing to 24 months’ salary for executive positions.
This number is made up of costs like advertising and agency fees, legal expenses and training, as well as less tangible costs like downtime between employees and reduced output while the new employee gets up to speed.
So while all businesses see staff come and go, reducing your employee turnover could save you thousands of pounds every year. But what causes employee turnover? And what can you do to reduce the number of employees who leave your business?
One survey found that some of the most common reasons for leaving a job include the commute, an out-of-touch culture, lack of work-life balance and management not prioritising staff wellbeing. On the other hand, flexibility, a manageable workload and an appreciative line manager were found to contribute heavily to employee satisfaction.
Check in with your team to find out how they feel about their workload, the company culture and their work-life balance. Make sure you're open to hearing suggestions for improvements, then develop an action plan.
5. Re-think your social events
Social events outside of work are a great way for your team to create and maintain relationships. But how can you justify splashing out on social events when money gets tight? And can you cut back without affecting company culture?
To help businesses get the best use of their budgets, we carried out a survey to find out what staff want at their Christmas parties. The results showed that low-key celebrations can go down just as well as extravagant events, if not better.
This is good news for businesses looking to balance their budget while maintaining a sociable company culture – staff are happy to have fun on a budget, so you don’t need to break the bank to put on a social event.
6. Review your business insurance
When you’re looking to save money, it can be tempting to cancel your business insurance, which may seem like an unnecessary expense if you've never had to make a claim. But dropping your policy altogether is a pretty shortsighted move that could end up costing you more in the long run.
Research suggests that there’s a connection between periods of economic downtown and a rise in risks like online fraud. And while a recession can increase the likelihood of certain risks, economic pressures can also make it more difficult for businesses to absorb the financial impact of issues like a lost phone, a cyber attack or a public liability claim.
A tough economic climate highlights the value of maintaining comprehensive business insurance, but there are still ways to get better value for money and potentially reduce your spending. And the key to doing this is getting the right fit.
Over-insurance happens when your cover exceeds the risks you face – meaning you’re spending money to get a level of protection that you don’t really need. The opposite of this is under-insurance, which happens when you don’t have the right covers or limits for your risk profile – meaning you’re spending money without getting the level of protection you need.
To get the right fit (and better value for money), think about your existing insurance policy. Are its covers, limits and excesses suitable for your current circumstances? Does it cover the risks you’re likely to face in the foreseeable future? If not, it’s time to get in touch with your insurer and make adjustments.
With Superscript, you can adjust your policy at any time – without any fees.
7. Invest in customer retention
You may have heard that it costs five times more to acquire a new customer than to retain an existing one. While this rule of thumb is now widely considered to be out of date, there’s still data to suggest that successful CRM can have a big impact on your business’ financial performance.
HubSpot recently argued that “effective customer retention will improve your customer lifetime value, translating directly to an improved bottom line” – highlighting research that shows improving retention by just 5% can drive profits up by more than 25%. So if you’re not dedicating any of your time (and budget) on customer retention, you’re unlikely to be making the best use of your resources.
Reflect on what you’re currently doing to maintain your customer base and where you have opportunities to engage even further – think about loyalty schemes, cross-selling and up-selling, exclusive content through newsletters, etc. You could even consider taking a CRM course to help you build your skills and establish an effective strategy.
8. Make use of freebies
From downloadable templates to open-source software, the internet is full of free resources that can save you both time and money. So rather than paying someone to create everything from scratch, see what’s out there that can be adapted to your specific needs.
But if you do decide to use any free resources, make sure you think carefully about copyright. Even if you don’t have to pay for something, you might have to give the creator or author credit. And failing to comply with copyright terms can leave you exposed to fines or lawsuits.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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