Small and medium-sized enterprises (SMEs) across the UK are facing an undeniable reality—operational costs are rising, tariffs can only add to the challenge, and the pressure is mounting. Bank of England commentary is playing down recovery and for most business owners the reasons are obvious. From increased energy prices and supply chain disruptions to higher wages and tax changes, and uncertainty caused by the current US administration and tariff uncertainty adding fuel to the fire! Many business owners feel like they are in a relentless financial squeeze. If you’re feeling this way, you are not alone.
The big question is: What can be done? While challenges persist, the biggest danger is that SME business owners are passive; waiting for things to get better or waiting for that elusive market state called ‘Certainty’. There are six easy and practical steps, that SMEs can take, to navigate this environment and emerge stronger happier and healthier.
First, embrace technology. Automation and AI-driven tools can cut costs in areas like accounting, customer service, and marketing, freeing up resources for core business functions. Investing in energy-efficient solutions can also lead to long-term savings.
Second, renegotiate contracts and supplier terms. Now is the time to explore alternative vendors, bulk purchasing options, or cooperative buying groups to secure better rates. I have spent years training companies from Microsoft HP B&Q and others alongside hundreds of small family-owned businesses and I can tell you that in 40 years of consultancy I have never yet seen a business large or small fail to achieve lower prices and/or better service or better goods, when a simple annual competitive cost and value review is undertaken.
One big possibility is to use outsourced services. The Philippines and South Africa are world renowned for outsourcing jobs and functions such as finance, accounting, IT, help desks, online marketing and many others. English is spoken well; education and skill levels are extraordinarily high, and work ethic means reliability is secure. An excellent example of one such firm is Yempo
Third, rethink your pricing. Many SMEs hesitate to adjust prices, but small, transparent increases tied to value improvements can sustain margins without alienating customers. Again, as a business consultant this has been my bread and butter for four decades. Last night I was sat at dinner with a thriving small business owner who was proudly telling me he converted 70% of all enquiries into customer orders and 90% of all referrals. This business based in Somerset, specialises in domestic fencing and gating alongside arboreal services and employs five members of staff.
My reply shocked him. I said, ‘If your conversion rates for normal quotations is 1:2 or better you have plenty of room to increase price. In the UK a normal average conversion ratio over time for all businesses is 4:1. In other words four quotes to get one new client. Anything better than that is crying out for a test of price increases. As I said to my dinner companion, ‘In forty years I have never yet helped a business reduce their sales price; only ever increase. And by the way, you will never get a better price without thinking of one, and you will never get a better price without asking for one!’
Fourth, collaborate and innovate. Partnerships with other businesses can reduce costs, whether through shared resources, cross-promotions, or joint ventures. For example, two local retailers might share warehousing space to lower storage costs, or a café could collaborate with a bakery to create bundled offerings that attract more customers while minimizing individual expenses. Or you can instigate a mutual referral agreement. Where two businesses offer product or services to similar end users or buyers, why not both refer the others product or service it can be an easy win/win.
Fifth, leverage government support. There are various grants, loans, and tax relief schemes designed to help SMEs manage rising costs. For example, the UK government offers business rates relief, energy bill discounts, and apprenticeship funding to support workforce development. Additionally, schemes like R&D tax credits can provide financial relief for businesses investing in innovation.
One specialist firm Innovate UK provides grant funding opportunities to help companies turn innovative ideas into commercial products and services. It promotes Research and Development across a wide range of sectors, funding different stages of innovation, from early research to commercialisation.
These grants are highly competitive, with opportunities for both open innovation (encouraging cutting-edge projects from any sector) and challenge-led innovation (seeking applicants with a solution to a predefined challenge).
One final thought! Don’t allow fear uncertainty or doubt to have the upper hand.
The steps we have outlined are straightforward, and if you are in any doubt, take an intentional and methodical approach that is also manageable. And when you do that make sure you Test Measure and Adapt. If for example you want to test a sales price increase; start somewhere and simply implement an increase on all or just one of your service or product lines. As you do that ensure you measure the resultant changes if any to your quotation: order ratios
It’s not rocket science!
The Business Owners Digest by Kingsbrook This thought leadership article is produced by David Oliver and the team at Kingsbrook specialising in exit plans and business sale for SME business owners to explore more visit https://bit.ly/BODlink1
