How are your profits looking? You can still beat rising business costs in 2024

A free digital masterclass is showing small businesses ways to protect their profit margins while the prices continue to soar.

No-one knows better than small business owners exactly how challenging it is right now to keep the lights on and the doors open.

In the current economic climate, where rising supply chain costs, labour expenses and interest rates are squeezing small businesses from every angle, understanding where and how you can control your costs can be a key ingredient for success when planning for the future.

Sound familiar? You’re not alone – in KPMG’s 2024 Enterprise Survey, 46 per cent of business leaders said one of their top five concerns for doing business in 2024 was controlling costs in an inflationary environment.

Kochie’s Business Builders host David Koch and KPMG Australia partner Dale Khoury explore this subject in depth in a free digital masterclass for businesses of all sizes, titled Are Your Business Costs Under Control? How To Help Combat The Rising Costs of Doing Business.

Register to watch the on-demand masterclass here, and read on to get a taste of what’s covered.

WATCH the free masterclass now

Join Kochie and business advisor Dale Khoury for our latest FREE digital masterclass to offer practical takeaways to help keep your business costs down in 2024. Register to watch Are Your Business Costs Under Control?, from Kochie’s Business Builders in association with KPMG Australia.

The perfect storm – and its impact on business

Dale Khoury, Partner, Enterprise Advisory at KPMG Australia understands the particular challenges facing Australian businesses and has insights to share.

“Different businesses are facing different challenges,” says Dale. “But there are pressures that are washing through the business sector.”

One of the most significant challenges businesses are grappling with is the sharp increase in supply chain costs. “Input costs generally are much higher than they were 12 to 18 months ago, and so people are struggling with really substantial increases in that period of time,” Dale explains.

Navigating the cost maze

Small businesses are searching for ways to protect their margins in this more challenging economic environment. So, where’s the best place to start reducing costs? Dale suggests focusing on two main areas:

• Gross margin: The difference between the cost of goods sold and the selling price. Increasing your price is one way to boost your gross margin, but there’s a fine balance because increasing prices can negatively impact the volume of sales. For example, if you raise the price of a cup of coffee too much, you risk losing the customer to a cheaper competitor.
• Net margin: The profit after all business costs have been accounted for. Businesses need to scrutinise their operating expenses to find areas where they can make savings.

“The only way you’re going to increase your margin is to increase your price,” Dale clarifies, emphasising the importance of thoughtful pricing strategies. “Business owners… have to struggle with, ‘Am I going to achieve the volume? And if I don’t achieve the volume, is the increase in price going to cover the lost volume?’”

Opportunities to control costs

While factors like interest rates and award wages may be largely outside a business’s control, Dale points out that there are still aspects business owners can control. Businesses can examine areas like consumables, hours worked, time-consuming manual tasks that could be automated or streamlined, and even rent to identify potential cost savings.

“There are a number of controllable expenses which give businesses some opportunity to bring down their overall cost bill,” he states.

Proactive negotiation with service providers and suppliers can also play a crucial role – for example, many landlords would prefer to negotiate a slightly reduced rent than have an empty property.

Beyond cost-cutting: Maybe it’s time to shift business models

Even with all efforts to streamline operations in place, sometimes rising costs can make an existing business model unsustainable, which means moving to something new.

“We’ve seen that happen during the pandemic in large numbers – and we continue to see it – where people go, ‘We have the infrastructure, we have the skills, we have the capability… but this line of business is no longer proving to be profitable. We need to change the business model and use that same infrastructure and capability to do a different line of business, which, hopefully, is more profitable’,” Dale observes.

Stepping back to step forward: Working on the business

Finding innovative ways to optimise costs and navigate economic pressures is essential, but business owners also need to focus on the bigger picture. The ability to step back from the daily grind and concentrate on strategic planning and growth is a crucial element that often gets overlooked.

Dale emphasises that many burnt-out business owners struggle with finding the headspace and confidence required for long-term investments that might take years to yield results. This is where the importance of delegating and separating roles within the business becomes important.

“Some business owners naturally take on a number of roles in the business,” says Dale. “And we always question whether or not they are best suited in all those roles.” Outsourcing certain tasks to experts allows business owners to focus on their core strengths and drive strategic growth.

The path to resilience

While there’s no single magic solution to offset rising costs, taking a proactive approach is paramount.

“Being forewarned is forearmed,” says Dale. By carefully analysing expenses, identifying areas for improvement, and being open to exploring new business models, businesses can increase their chances of successfully navigating economic uncertainties.

Register to watch our exclusive free masterclass: Are Your Business Costs Under Control? How To Help Combat The Rising Costs of Doing Business.

This article is brought to you by Kochie’s Business Builders in association with KPMG Australia.