There are several challenges facing businesses entering a globalised and ultra competitive online sales economy in 2024. Inflation and rising operational costs are adding an extra layer of pressure to a market that was already flooded with newcomers during the pandemic. Luckily, a lot of these newcomers rushed in and didn’t seriously break down efficient methods to succeed online without compromising quality or customer service.
If you are starting now, you get that key advantage: you can analyse these challenges, make informed decisions, and start reducing business costs. This guide aims to go over practical ways your business can be as lean, efficient and cost-effective as humanly (and technologically) possible.
The 4 Biggest Challenges
Every year, businesses face various challenges, which is just part of the journey. However, in the past year, these challenges have piled up and made it really tough to make a profit. It’s worth noting that this didn’t happen suddenly in 2023; some of these issues have been building up for a few years. So, what’s causing costs to go up? Let’s take a closer look:
Inflation
Inflation has been discussed so often in the last 18 months it almost feels like a buzzword. It’s not. Inflation affects not only your customers’ ability to purchase your products, it hurts in a million different ways. It will make goods and raw materials more dear and difficult to get. It will shut down previously profitable trade routes and create supply chain issues. It will cause central banks around the world to increase interest rates and make credit much more expensive, hindering development and investment, as well as making loans more expensive to repay.
It’s a beast with many heads because it affects every part of your business, from your suppliers to your customers.
Rapidly climbing rents
Much like inflation, this situation is context-dependent and not as painful for everyone reading this. A quick look at a global survey, however, will reveal that the markets evading this trend are very few and far between. Congratulations are in order if you are in Midtown Manhattan or Dubai!
For everyone else, however, this is causing some unexpected effects, such as the concentration of retail chains and restaurants in very specific areas, marginalising SMEs in local business communities and towns. In some places, rent increases are comfortably in double-digit territory, which can be lethal for a lot of businesses that don’t have profit margins to accommodate such a radical increase.
Rent rises may have other effects still, like increasing the prevalence of remote work. The consequences of such a major change to the way we do business will have unforeseen consequences. We are already seeing indications that more remote workers means more people looking for larger homes. This will change the way we build, how our cities look, and, ultimately… rent too.
Energy costs
Even if it may seem the largest increases are behind us, the story of the last couple of years can’t be told without considering massive rising energy costs.
Even though looking at the graphics that portray this reality can leave us feeling hopeful, as they clearly show a deescalation at the end, the grim reality is that we are nowhere near what we expected before the conflict between a sudden disruption of geopolitical realities we had grown accustomed to began, with several large-scale conflicts disrupting energy production and distribution. The added pressures on governments all over the world to keep costs from spiraling can change many other aspects we took for granted, such as energy policies and investments, including the pace of transition to renewable energy sources.
Increasingly sophisticated customer needs
The trends lists are coming! As we approach the end of 2023, these lists start popping up all over our feeds, and some of them are definitely worth looking into. The “trends” have all been indicating a similar direction for a couple of years now, and that’s meaningful information. As people shop online more and more, they are also becoming more demanding. Highly technical features will start becoming staples, and development of things like voice search, AI-integrated shopping assistants, multimedia (including VR and AR), as well as added security features will represent an important added cost for those that want to keep up.
Why Cutting Costs Matters Moving into 2024
Many of these challenges are expected to persist or even intensify in the coming year, presenting significant financial hurdles for small businesses. It’s increasingly important to shield businesses against some of these major issues that they can’t control by increasing focus on what they can. Cost reduction and management must become not just something to be done in lean periods, but a sustained practice that guides day-to-day operations.
Here are some fundamentals:
Go Paperless and Lower Fraud Risk
Transitioning to a paperless system isn’t solely an eco-conscious choice; it’s a strategic move that can yield economic benefits. By reducing reliance on paper, businesses can trim supply costs while simultaneously lowering the risk of fraud often associated with paper-based transactions. This shift toward digital operations enhances security, streamlines processes, and ultimately saves resources. Sway’s QR Code feature, for instance, exemplifies this modern and secure payment method, offering businesses a cost-efficient solution with 0% transaction fees that not only contributes to sustainability but also safeguards against risks posed by paper transactions.
Invest in Customer Relationship Management
Implementing a Customer Relationship Management (CRM) system helps your business in more ways than one. It is meant, of course, to enhance customer interactions, but it has the added bonus of improving workforce productivity.
CRMs enable businesses to better understand customer preferences, which will allow you to market your products more efficiently. By allowing your team access to data and empowering better decisions, it also frees up your team to do what they do best instead of spending so many hours iterating on ad hoc tasks. For example, when a customer books an appointment at the salon, the CRM can send automated reminders, reducing no-shows and ensuring a full schedule.
If the software is taking care of that busy work, the salon’s stylists can focus on delivering excellent service rather than managing appointments manually.
Regular Maintenance to Avoid Costly Repairs
Equipment purchases can feel like wonderful business. A lot of the time, they’re deductible. There are several ways in which overly relying on brand new gear can hurt you, however, especially if you are operating a lean cost-effective business. Unexpected expenses, even if you can compensate for them afterwards in tax returns, can hurt you in the short-term. Downtime can hurt you even more. Having your team busy dealing with these disruptions, especially if they’re unexpected, is not something you want.
Remember: the tax deduction works the exact same way if you’re replacing something broken or updating a functioning piece of gear.
Regular maintenance will extend a product’s lifespan, reduce the disruption of unexpected repairs, keep your fixed costs down in the long-run, and preserve valuable resources for better things.
Leverage Energy-Efficient Practices
In the quest for cost reduction, energy-efficient practices offer significant savings. By upgrading to energy-efficient lighting and appliances, implementing smart energy management, involving employees, and focusing on regular maintenance, businesses can cut electricity costs substantially. Every penny saved on energy bills, no matter how small it may seem, contributes to overall financial health of the business. Remember: whatever you’re saving anywhere can be applied elsewhere.
Smart Inventory Management
Inventory management practices are becoming ever more critical in light of supply chain challenges. By utilising advanced inventory tracking software, businesses can gain real-time visibility into their stock levels, enabling better decision-making and reducing the risk of overstocking or understocking.
For some businesses, if they deal with perishable items, seasonal objects, or merchandise with volatile pricing, over and understocking can be a make or break issue.
Staying vigilant and diversifying suppliers, combined with regularly comparing prices, ensures you remain competitive and your fixed costs remain predictable. The fewer surprises one faces in terms of inventory, the better. The key is to switch from a reactive to a proactive approach, powered by technology and supplier relationships. This will safeguard businesses against disruptions, optimize capital allocation, and offer a simple way of minimising supply chain costs.
Utilize Local Networking and Partnerships
Building local partnerships can lead to shared resources and collective bargaining power, which will lead to cost savings and a collective safety net against unexpected outcomes. The possibilities really do depend only on your imagination, but shared marketing initiatives or group purchasing discounts are common. Some tides really do raise all ships, and cooperating with businesses that know your region and your customer-base well can have a plethora of advantages.
For example, collaborative partnerships can lead to streamlined supply chains. Businesses can work together to consolidate orders, reducing transportation and logistics costs. This not only saves money but also contributes to a more sustainable approach by reducing the carbon footprint associated with multiple deliveries. Local networking also allows businesses to tap into a diverse talent pool. By sharing skilled workers or collaborating on training programs, businesses can access a broader range of expertise without the expense of full-time hires. This approach is particularly beneficial for seasonal or specialized skill requirements.
Optimize Payment Processing with Sway
For many small businesses, transaction fees are a silent profit-eater. While opaque payment structures can sometimes hide the reality of payment processing, with hidden and variable fees, on some purchases they can eat more than 10% of your revenue. For many businesses, that value alone will exceed their profit margin.
Sway, a versatile payment processing app, offers a solution that is robust, simple, predictable, and true. By enabling unlimited bank payments without fees and a low 1.5% fee for card transactions, Sway helps businesses save significantly on payment processing costs.
This approach not only reduces expenses but also streamlines transaction processes, making it easier for your customers and for you. Sway’s platform isn’t just about processing payments; it’s about building a smarter business. Features like customer analytics and management tools provide insights that can drive cost-effective strategies and foster customer loyalty.
Wrapping Up
As we head into 2024, reducing business costs will be more important than ever for small businesses. By adopting strategies like efficient payment processing with Sway, going paperless, and investing in CRM systems, businesses can reduce their costs and increase their profit. Any business owner can embrace these strategies and watch their business grow in efficiency and profitability in no time.
So why don’t you get started now? Cut down on payment processing costs by setting up your Sway account in the next 5 minutes and start taking payments with 0% fees.