Trade Business Costs – How Can You Remain Profitable?

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We are living in incendiary times, and in a number of different ways too. For business owners in practically every industry, though, there is a specific manner in which times have rendered themselves tough: economics. The UK has experienced months of unprecedented economic activity, from months of inflation worsened by inflationary policies to the onset of a technical recession. Trade businesses have seen costs rise for these and other reasons, with little hope for natural recovery; as a trade, what can you do to remain profitable?

Overheads

There are numerous business costs which factor into the overall profitability of a given enterprise. Many of these costs relate to the business’ premises, where simple ongoing costs like rent and utilities can suddenly become existential issues. With regard to rent, the fast outward development of many urban centres has led to significant increases in the value of urban and urban-adjacent land. Commercial landlords are able to use this information to increase the rent on their properties – also risking significant rises to Business Rates for the same property.

Meanwhile, energy bills have climbed significantly since 2021, having been impacted similarly to domestic properties but without an equivalent safety ‘cap’ for pricings. Between these rising costs, business overheads have dramatically increased for many. There are no simple answers here, save for seeking out cheaper premises – potentially at the expense of accessibility.

Business Costs

There are other ongoing business costs which relate more to the day-to-day running of a given business. Trade businesses have seen a significant uptick in the cost of raw materials recently, due to increased trade difficulties post-Brexit. The need for concrete blocks in construction has not diminished in spite of price rises across the industry, meaning that trade businesses must seek the best possible deals to minimise unnecessary additional material costs.

Staff and staff training are less tangible business costs, but which yield tangible results. Staff acquisition can be expensive, particularly if staff turnover is high; focusing instead on training staff from within can minimise the cost of hiring skilled tradespeople, while improving staff longevity internally.

Efficiencies

In many cases, maintaining profits against rising prices isn’t as simple as “finding lower prices”. Efficiencies need to be made in order to reduce unnecessary spend, which means reviewing existing processes and seeking alternatives. It may be that you assign a given number of workers to a given task, and that some workers are redundant; reducing team sizes for smaller jobs can increase profits through minimising redundancy.

Energy efficiency falls within this same bracket, too. Simple changes to equipment used or processes undertaken could reduce energy bills significantly.

Finance and Cashflow

When considering business profitability, conversations around financial structuring and cashflow are unavoidable. If you are a trade business relying on outside investment or credit, financials that indicative negative cashflow could spell the end of such investor relations. Positive cashflow can be encourage by temporarily shortening payment terms, or requesting payment from regular clients currently ‘on account’

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