The Isle of Wight (IoW) has around 4,730 businesses and 5,600 business units operating to serve the island and beyond. It’s no secret that the UK and beyond is battling through one of the hardest economic times in many years, and the IoW is no different. The latest headlines state that 500,000 thousand brands in the UK will fail within the coming weeks due to rising costs fuelled by rising inflation rates – inflation is at 9% and predicted to reach 10% by August. Can businesses within the IoW cope with the rising costs? Let’s explore.
How Much Are Businesses Losing?
The statistics show that 87% of small businesses have lost substantial amounts of money within the last two years – the average is £20,981. That’s a lot for a small business that might already be relying on additional funding through business loans. Business loans have also become increasingly hard to acquire as lenders lock their doors.
The current statistics reveal that three-quarters of UK small to medium businesses are worried about the rising costs, and 18% of them have debt repayments that equate to 15% more than the revenue of the business. That might be the clue as to why so many brands are failing. Many brands were hoping to reduce their lending by 2022, with lending increasing by 14.4% during the pandemic. But with the rising costs of living forcing brands to spend over double what they usually would on expenses, how can IoW businesses cope with the rising costs? More in the next section.
How To Improve Revenue
The way to cope with rising costs is to increase revenue – lending more money is almost out of the question as interest rates. Commercial loans offered by the Bank of England have increased interest rates from 0.1% to 0.25% in 2021. In 2022, they increased that rate further to 0.75%. Instead, brands need to focus on improving revenue rather than lending more to stay afloat.
Naturally, it’s easy to assume that drawing in new customers is the key to success, but studies show that 65% of business will come from loyal customers. To encourage loyal customers to spend more, IoW brands can offer loyalty programmes like those found on www.incentivesmart.com. Encouraging spending through rewards is part of the emotional connection buyers forms when making purchases – they’re far more likely to emotionally connect with a brand, product or service when they know they’re getting something in return.
Studies also show that marketing is the most effective way to improve revenue. According to the statistic, marketing is for leading revenue growth at 34.8% of companies. However, alignment is essential – brands that align marketing with sales achieve a 20% growth in revenue. Below are some of the marketing strategies that yield the best results:
- Social networking
- Paid media advertising
- Email marketing
- Conversational marketing – events
- Point-of-Purchase Marketing
- Cobranding, Affinity, and Cause Marketing
A final way of increasing revenue relating to the current economic crisis is to increase the price of products and services. The latest reports by the Guardian state that three-quarters of brands are planning to increase the costs of products or services over the next three months. The report also states that 29% of brands already have increased their prices. The easy way to calculate what price to set is to divide the increase in costs related to the procurement of products and services by the original cost.
What Does The Future Look Like For IoW Brands?
All might not be lost. According to the World Bank, the UK has the highest rates of ease of doing business. There are tons of trade routes and trade deals that ensure the UK has access to the world. Strategically planning to cope with the rising costs of living – and, in turn, running a business – can help IoW brands succeed.
Still, the current statistics show that brands in England, Scotland, and Wales are experiencing an average increase of 18% in warehousing and staffing costs, meaning brands, at the very least, need to raise the price of products and services to succeed.
It’s unlikely that the economy will stabilise within the next few months, meaning many brands should urgently review revenue and expenses to calculate how to move forward. IoW businesses can indeed cope with rising costs with strategic planning, implementing ways to increase revenue, and potentially securing private loans when necessary.
