Lower business costs mean that the recession might actually work out well for business-owners who can balance their books effectively during the recession.
26% of business-owners believe that because economic deflation could lead to lower running costs, it can be viewed as a positive thing, according to a Royal Bank of Scotland Survey.
And 66% of the small businesses questioned thought that inflation was going to level out or decrease over the next year.
But the lower running costs would have to be carefully balanced with effects on pricing products, pointed out Donald Kerr, commercial banking director with the Bank of Scotland. “Against a background of difficult trading conditions, the majority of companies are now being pushed by their customers to reflect these lower costs in lower pricing,” he said.
53% of the business-owners said they would freeze their prices for 2009 if running costs remain flat.
Interestingly, 71% of those asked said that customers are looking to buy in bulk and want discounts. Not that surprising, perhaps, but worth taking note of.
To survive the crunch, it might well be worth offering a few loss leaders to draw customers in and to retain their loyalty. And if running costs decrease over the coming year, you should be able to afford to pass on reductions to consumers by lowering product prices. You can find out more about how to cash in on price reductions passed on to the customer here.
It might mean your profit margins are squeezed for the next few months – but if it means getting a slice of the market rather than being left with nothing, it might well be worth slimming down your margins to ensure that you’re still shifting product.