How to manage cost of living challenges in your business

Living costs have reached an all-time high in Australia, with small business owners grappling with cautious consumers and price spikes. However, protracted high inflation and interest rate rises haven’t been enough to deter Aussie side hustlers, says Suzanne Mitchell, Australian Market Lead for GoDaddy.

A recent GoDaddy survey of more than 500 Aussies with a business on the side revealed how they are battling the cost-of-living crunch and why they remain confident amid the economic storm clouds.

Optimism is high amongst Aussie side hustlers, with three out of five of those surveyed expecting their business to grow this year, while more than a third tipped business to remain steady and only two per cent predicted their business to decline.

Side hustlers reported they had taken several different steps to shore up their business interests, with almost a third increasing their prices to offset costs and 29 per cent updating shipping costs or options.

More than a quarter of side hustlers said they had invested in automation or technology to help tackle the challenges they face. The survey also revealed:

15 per cent have pivoted from global to local selling
14 per cent have taken out a loan to help with cash flow
11 per cent have applied for government assistance or a grant

Let’s take a closer look at some of these tactics.

What if you must raise prices?

Most small business owners don’t rush to raise prices out of fear that they will lose customers. However, with the energy prices getting higher every quarter, it’s easy to see how price hikes can quickly eat into profit margins. If you do need to raise prices, ensure you communicate clearly and honestly with your customers through your email marketing or at the point of sale.

While there will always be some customers who bristle, many are likely to understand, given cost of living pressures are being felt widely across the country. If you have a service business like pet grooming, you could consider an email or social media marketing initiative to offer loyal customers your old price for a fixed period if they pre-book.

How to reduce shipping costs

Everyone loves free shipping. But, it’s not always feasible or profitable to offer free shipping from your online store. If you are looking to cut costs from shipping overheads, there are some tactics you can explore.

First, make sure you have a solid shipping policy on your website so you set clear expectations with your customers. Also, make your shipping costs transparent before the customer reaches the checkout – this can help prevent shoppers abandoning their cart if the shipping cost is a surprise. Check your current shipping supplier and see if flat-rate shipping is an option or if better deals exist.

Also, make sure you choose the right packaging and consider offering local pick-up for customers in your area or include free shipping on purchases over a certain amount to inspire upselling and increase your basket value.

How automation can help your small business

Leaning into technology has the potential to deliver efficiencies and time savings for small business owners, and you don’t need to invest huge sums or be a tech whizz to benefit. You can build automation into your small business in a few different ways, from linking your social media accounts to your website to using an online shopping platform or appointment booking function that manages inventory and provides analytics.

Artificial Intelligence is also an area of increasing interest for small businesses for its ability to assist with crafting copy – for example drafting social media posts – and aggregating insights about key topics like marketing or strategy.

Consider pivoting to local selling

Supply chain challenges and the global COVID-19 pandemic turned a spotlight on the potential advantages of local over global selling. There are a number of ways small business owners can enhance their local credentials, starting with having an Australian domain name extension like “.com.au” or “.au”, or even “.sydney” or “.melbourne” which instantly telegraphs your origin to local consumers.

You can also use your marketing channels and website to highlight the benefits of being local, for example, showcasing handmade or one-of-a-kind products that are unique compared to big box brands. Social media and email marketing can help you tell your local story and build a connection with your customers that can work to build loyalty.

It’s challenging to be a small business owner in the current economic climate, but there are proactive steps you can take to help your business navigate and even grow during the current cost-of-living crunch.

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