Cost of Living Increases in 2022
What impact do cost of living increases have on freelancers and small businesses
Surge in Price
If there is one thing the pandemic has taught us, it is that what goes up must come down. And so, what goes down must come up. It is a cycle. Sometimes a troublesome one. Although over the recent years many companies might have saved some expenses due to lockdowns and the necessity of ‘working from home’, there inevitably had to be a downside to the rapid shifts and changes on the market.
As the UK is now facing a surge in living costs, we have decided to prepare this article for you. In the paragraphs below, we will discuss the cost of living increase in 2022 and what you could do to mitigate its negative influence on your business.
Inflation on the Rise
The past three years have proven to be a difficult time for many businesses. Those with physical locations, customer-facing facilities, and services that demand a constant supply of resources and clients have been dealt a challenging hand. With the fall of the UK’s GDP (Gross Domestic Product) due to the pandemic, the inflation level has risen, making the crisis more vivid.
The price of living went up with wages and business’s profits plummeting, making the ‘business as usual’ policy futile. With these difficulties on the horizon, freelancers and business owners must find a way to cope with the economic crisis, which the pandemic has led to.
According to the Guardian, some business owners noted that their energy expenditure has doubled over the course of only one calendar year. This is, most likely, due to the deferred wave of the GDP crisis, which will also have its influence on the upcoming years. Moreover, the world is currently facing an energy crisis, which is inevitably going to affect the pricing of most utilities.
As anxiety over ‘budget squeeze’ becomes more apparent, many entrepreneurs are forced to reconsider their business models. When cutting expenses becomes impossible, changing their operating procedures might prove to be the only choice. After all, without a profit, a business is nothing more than an expensive dream.
Evaluate Your Situation
So, what could you do to save your business from going under? It is a complex question and as much as we would like to, we are unable to give you the ‘silver bullet’. There is simply no ‘one size fits all’ solution. But we can try to inspire some thoughts!
Review your business model and recognise where the majority of your income comes from. Take note of which services, which locations, or which products provide you with the most profit, and focus your strained budget on keeping them active. The evaluation of your enterprise should be free from sentiment and purely technical. When it comes to numbers, there is no place for emotional roller coasters…
Reconsider Your Price
How much is your work worth now? How much does it cost to produce/deliver what you provide? With the production expenses on the rise, the utility prices shooting up, and fewer sales coming through each week, you have to re-evaluate your pricing once more.
Think of how much you need to earn to break even. Then think about the profit you wish to keep on top of that. There is no use in squeezing your own budget and cutting your employee’s wages if there won’t be a reflective counterbalance coming from the outside. Your prices should mirror the changes within your business model, and provide a sustainable level of financial security for you and your team.
See Where You Spend the Most
Figuring out ways to alleviate stress from a strained budget takes effort. It is a process of evaluation, review, and elimination, which might take you quite a while to perfect. Of course, we do not encourage you to squeeze the budget without a thorough analysis of the potential outcomes, but only provide you with an incentive to look within. Namely – where you spend the most of your resources.
Although for some trades getting rid of a physical location or forfeiting a rental contract might not be possible, for many it has proven to work. Your office might be your biggest expenditure. Make sure to see into that. Find out where you spend the most of your budget and work out a solution, which would enable you to squeeze that part of your expenses.
Keep Your Employees Motivated
It goes without saying that a strong and successful team is often one that has a high retention rate. In other words, your workers are your enterprise. If you want to avoid the further complications of this anxiety and economic crisis, you should provide genuine support to your employees.
Inflation will affect their lives as much as it will affect your company. Their wages will lose value, making their lives harder and their anxiety heavier. It is time to keep your team united and motivated. It is the time to help them cope with what the world has thrown at you all.
Improvise Adapt Overcome
In the end, the world, like any market, is in constant flux. Everyday we live in a different, slightly warped, reality. Our attitudes and actions must reflect this constantly shifting reality if we are to succeed and avoid falling under the weight of the cost of living crisis. The human species has risen above any other beings because of our innate ability to adapt. We were always able to overcome challenges with the use of improvisation, intelligence, and applied knowledge.
If you want your business to stay ‘in the game’, you will have to make some changes. The UK in 2022 is facing a crisis full of anxiety, inflation, and difficulty. But it is also a perfect time for improvement. Remind yourself of the Marine Corps mantra ‘improvise, adapt, overcome’ and face this year’s challenges head-on. Your employees, peers, and partners need you to keep going, so don’t lose your stride and lead. Maybe it’s time to pivot into self-employment? Find out How Revolancer Works.
Before You Go
Freelance marketplace: Revolancer