Small businesses and tradespeople in New Zealand may be more affected by inflation than other business owners and professions. This is due to the fact that tradies have to cope with the rising costs of living coupled with increasing material costs and rising labour costs.
This perfect storm may impact a tradie’s cash flow and make it difficult to continue running their business. Add to this the lingering skills shortage, rising inflation, and the pending challenge for tradie small business owners becomes clear.
Due to existing economic conditions, homeowners might delay major renovations or repairs if their finances are being squeezed. For tradies this can lead to a drop in profits once you also factor in rising material costs. While these are factors that simply cannot be controlled, as a tradie there are proactive steps that you can take to ensure that your business remains stable and trading during periods of rising inflation.
While economic conditions pose challenges for tradies and can be especially challenging for small business owners, there are steps that tradies can take to offset the impact of inflation and increase their cash flow.
From reviewing your tradie services to auditing your supply chain to reducing your exposure to risk via small business insurance such as business insurance and Public Liability insurance here are five steps you may consider implementing in your business to help withstand difficult trading periods.
Step 1: Rethink the tradie services you provide
Reviewing your products and services and how you price them can help your trade business increase its profit margin. It is important to identify which of your tradie services are providing the greater returns for your business and which are not.
You might consider revamping the tradie services you are currently offering and focusing on your high-profit services. Can you bundle some of your tradie services to help customers save money on larger projects? It might be possible to split some of your larger services into smaller jobs to allow customers to tailor their services and purchase only the items they most require. While each individual job may be smaller, that doesn’t necessarily mean that your overall revenue will be smaller.
Step 2: Audit your supply chain
Next, you may consider conducting a supply chain audit. A disruption to your supply chain could mean that you are unable fulfil your obligations to your clients. For many busy tradie small business owners, it can be easy at times to fall into the trap of ordering their stock and materials from the same suppliers all the time – even when they increase their prices.
If that’s the case, now may be a great time to look at all options and find reliable and less costly suppliers, which over time will enable your trade small business to reduce its expenses and save money on every material purchase. Taking the time and effort to conduct a supply chain audit will help you save money while also helping to ensure that you are able to deliver jobs for customers on time and at a more competitive price.
Step 3: Audit your finances
This task can also help you improve your bottom line if it’s been a while since your last audit of your operational expenses. It is important to find ways to cut costs on everything, from utilities to supplies. An important part of this process can be an audit of your marketing activities and channels.
You may be able to streamline your marketing budget by gaining a better understanding of which marketing activities and channels are performing well and which are not. In a small business there is no room for marketing that doesn’t provide returns.
Step 4: Invest in technology
Technology and innovative new business tools aren’t always embraced by small business owners or tradies to streamline their operations. Technology and new smart apps can enable your tradie small business to streamline and automate its business processes – and in doing so you may save time and money when it comes to running your business day to day.
Embracing new technology solutions for tradies can help you and your team save time and introduce new efficiencies into your tradie business. When considering technology business solutions for your business it is important to think about both the current and future needs of your business.
Step 5: Ensure that your staff feel valued
As a general business rule, it costs more to find and hire new employees than it does to keep the employees you already have working in your tradie small business. As a result, staff retention is considered a top priority for small business owners.
In your tradie small business you may benefit from creating a workplace environment that encourages and promotes loyalty. Listen to your employees and make sure that you are creating a work environment that is welcoming to all. It is sometimes cheaper to give your current staff a pay raise than it is to find and hire new employees. Treat your employees well and they will be more inclined to treat your tradie small business well in return.
BizCover helps tradie small business owners throughout New Zealand to reduce the risks to their business via business insurance*, including Public Liability insurance, and small business insurance. Visit bizcover.co.nz and get business insurance for your accounting small business without drama and get on with your day.*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. © 2022 BizCover Pty Limited. BizCover Limited is owned by BizCover Pty Ltd (ABN 68 127 707 975)
