How to get business fit and keep your company healthy in 2022
It’s often the case that January is written off, what with the recovery from the pre-Christmas rush and the subsequent focus on the end of January deadlines for tax returns. But spending some time making sure that you are “business fit” will help you to keep your company healthy and, ultimately, solvent.
2022 brings with it some added pressures which will squeeze finances for individuals and business owners alike. So what’s likely to impact your finances in 2022 and what can you do to mitigate the impact?
Rising Energy prices
We’ll all be aware that energy prices are on the rise, so the cost of running your household or business premises will increase. Without government intervention, the energy price cap is set to rise dramatically, by as much as 50% – or £600 a year.
Higher rate of inflation
Inflation hit 5.1% in November, and it could rise further. To make matters worse, many of the items powering inflation are the things we can’t live without, such as fresh food and petrol.
Increase to interest rates
The Bank of England base rate went up from 0.1% to 0.25% in December last year and another rise can be expected in February. This will feed into borrowing rates fairly quickly – in some cases even before the rise itself is announced – so variable rate mortgages, credit cards and new loans are more expensive
Negative wage inflation and recruitment challenges
Inflation is rising but wages aren’t which could mean that we reach the point of negative wage inflation. Businesses looking to grow and recruit will find that they have to raise their financial offerings in order to attract and retain employees.
National Insurance rises
From April 2022 the National Insurance rate for employers and employees will increase by 1.25% which means that the cost of employing staff will go up.
Dividend tax rise
If you take more that the £2,000 tax free dividends from your business, the rate of tax you pay will increase from April 2022. Tax will change to 8.75% for basic-rate taxpayers, 33.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers.
Frozen tax allowances
The freezing of tax thresholds announced in March last year won’t have had an immediate impact, but over the years, as wages rise, it will effectively mean that more and more people will pay higher rates of tax.
So now you’re aware of some of the additional pressures 2022 is likely to bring, how can you ensure you keep you business fit for purpose? Here’s our Top Ten Tips to ensure a healthy bottom line.
1. Review and Plan
So much has changed over the last 2 years in business and it’s likely to keep changing in the months and years to come. Revisit your business plan and see it with a fresh pair of post-pandemic eyes. You might want to employ a business coach or take advice from someone who’s outside of your business to act as a sounding board and really challenge you to make some robust decisions about the direction of your business.
2. Review your suppliers:
It’s great to find suppliers that you’ve built a relationship with and trust, but make sure you review them regularly – do they still meet your business needs and offer you favourable credit terms? Ensure you nuture your relationships as your business evolves and grows.
3. Develop sound recruitment policies:
Build a team, lead by example and empower staff to take some responsibility. It’s an employees market at the moment so you need to make sure you offer your staff compelling reasons to work for you and stay invested in your business. Think beyond simple monetary rewards and look at how else you can attract and retain staff.
4. Take professional advice
We’ve already suggested a business coach or mentor. Make sure you also take proper financial advice and use an accountant. They offer so much more than number crunching and can help you proactively plan the financial success of your business.
5. Use free things
It sounds obvious but make sure you make use of free or low cost ways to maximise the profile of your business – social media., networking, online forums are just some that can be used to extend your reach and raise your profile.
6. Lean processes
Be efficient – invest in equipment or technology that can save you time. Remember there are only so many hours in the day and you need to use those hours wisely. Look to automate basic tasks where possible and use your time efficiently.
7. Focus on your cash flow..
Cash flow really is the lifeblood of your business, and is absolutely essential to feed bottom-line profits. Make sure you invoice regularly ( ask for payment or part-payment upfront where you can) and keep costs down – particularly important as 2022 brings increased costs of living. Run your business as you would your household – keeping a budget and looking for offers and deals where possible. For more advice on managing your cashflow, see: Bretts Business Recovery Ltd – Managing your cash flow – what do you need to consider? – Bretts Business Recovery Ltd (brettsbr.co.uk)
8. When planning, always overestimate expenses and underestimate revenues.
Being conservative in your numbers doesn’t mean you are willing to accept those numbers, it just means you are arming yourself with information you can work with. It allows you to gauge the kinds of efforts and activities you will need to put into sales and marketing.
9. Focus on sales and marketing even when you are busy.
Or in other words, don’t neglect your marketing efforts as you always need to planning for new work to keep your business sustainable both now and in the future. Don’t neglect the customers you didn’t get straight away – following up and keeping in touch can often reap rewards in the longer term. You should also test and measure everything. You can’t change what you don’t measure, and you can’t tell if your plan is working if you are not faithfully testing, measuring and tracking your results. Build in regular reviews of all elements of your business so you can see what’s working and what needs to be adapted.
10. Don’t discount, add value.
Whenever you discount, you are taking money directly out of your pocket and directly from your bottom-line profit. So don’t do it. Instead, create added value propositions all the way up and down your product or service line. Whatever the industry is, look to hold your price points, increase your margins with the low-cost or no-cost extras and any kind of freemium offerings. In the end, those little things won’t cost you a lot, but will build up tremendous goodwill and word-of-mouth with your customers and customer base.
For more advice on keeping you business fit for purpose, contact the team at Bretts Business Recovery.