One in four (26%) small business owners have already increased prices for customers as they look to manage rising costs, according to new research conducted by iwoca.
As prices for customers rise, the survey found that the SME owners' biggest worry over the coming year is the increased cost of running a business, with nearly half (46%) reporting it as their main concern ahead of supply chain issues and staff and personal illness.
Surging energy prices add to the costs of running a small business
One of the leading factors in increasing costs is rising energy bills. The survey found that over a third (36%) of small business owners saw their energy bills increase in 2021. During the year, one in five owners saw an increase of over 15%, and one in ten reported a hike of 20%.
Almost a third (30%) of small business owners say they will have to reduce their energy usage to save on running costs. Yet nearly one in five (17%) said that doing so would negatively impact their business.
This comes following a record rise in energy bills at the beginning of April and ahead of another potential spike in October.
Limited companies are more likely to feel the effects of rising inflation
Despite half (50%) of respondents saying they have been affected by rising inflation rates, not all businesses have been affected equally. Owners of limited companies were ten percentage points more likely to state that inflation has impacted their business than sole traders (56% compared to 46%).
However, they are more confident that they can manage the rising cost of doing business, with 26% reporting that they can afford to absorb the rising energy costs compared to 15% of sole traders.
Seema Desai, COO at iwoca said:
Small business owners around the UK face a double hit on energy bills – at home and for their business. Whilst households are protected by the energy price cap, businesses are left exposed to skyrocketing prices. Many small businesses cannot absorb the costs of higher bills, meaning customers will be hit by increased prices and business closures. It’s vital that lenders such as iwoca continue to support small businesses with flexible products that assist with cash flow and inspire confidence about their future.
Francesca Cingano, owner of Italian catering business Cateritaly, said:
As a small catering business, I can’t just turn off the lights or put solar panels on my roof to reduce my energy usage. I have to use dishwashers, cookers and fridges everyday to keep my company running – my energy bills have increased by as much as 20% already this year.
Up against these rising bills my options are limited – I can either absorb the costs or close my business altogether. Nonetheless, my ambition is to continue to grow my business and hope that more income helps me manage rising costs.