Small Businesses Struggle for Survival

The last few years have been incredibly hard for small businesses, with the pandemic and cost of living crisis it is becoming more and more difficult for these businesses to turn a profit.

PayPal’s Business of Change: Wellness & Empowerment Report 2022 found that more than three quarters of small businesses found the rising cost of living to be the biggest threat to their business over the next year.

The survey of 1,000 small business owners in the UK found that nearly half of them fear the next 12 months could prove even more difficult, and one in 10 don’t expect to be in business within the year.

This is due to reduced customer spending, hefty fuel and energy price hikes and many other price increases.

Hannah Lancaster, owner of Ivy & Stitch, opened her business in 2020 making embroidered gifts. Starting up during the pandemic had a huge impact on her business.

“Starting a business in lockdown I think tricked me into a false sense of reality, as everyone was at home, on their phones and online shopping massively increased because of that.”

Spending habits of customers dipped massively after this, and are changing even more with the cost of living crisis. Hannah believes that the issues small businesses will face are being hidden by Christmas sales.

“The real test will come in the new year, when people have used up their disposable income over Christmas and now have to live with a stricter budget as to allow for the increase in everything else.”

However, the increased price of electricity and supplies has already started to impact the business. “My embroidery machine is running from 7am to 7pm most days, as well as lighting, computers, irons, etc, all of which eats into the profit margins now. Cost of stock has also increased along with packaging supplies and postage. All of these increases need to be accounted for, whether that’s by increasing the price you sell the products for, or taking a cut on your profits.”

The company’s prices haven’t had to change yet, but Hannah has grave fears for the future.

“Shopping with small businesses I always say is a considered choice. For speed, ease and often affordability, people will automatically turn to the likes of Amazon. However, when someone shops from your small business, they’ve considered other options and decided to shop from you instead which is always very much appreciated. The fear is that as the cost of living goes up, this could be ‘chosen’ less. Or the choice may be taken away completely by just simply not being able to afford it.”

Director of real estate and lettings company Diamond London, Rupi Reel, was hit hard by the cost of living but came out the other side with some innovative adapting to the business plan.

“As living costs increased, this therefore has a big impact on my business, as budgets for new property developments had to be adjusted and we did incur losses due to this.”

After 10 years it was time for the business to make some real changes for survival in a tough new climate.

“We have now re-budgeted for multiple developments we have planned to ensure all the costs are met and the company doesn’t incur further losses.”

“It is a very difficult time as the interest rates have in addition increased and more people are unable to secure mortgages, so we have changed strategy to sell to bigger companies who would buy more than individual person.”