Dealing with rising costs for businesses: 5 ways to get ahead in 2025

Yet again businesses are scrutinising operating models and plans, looking for ways to stay ahead as Budget announcements on national insurance and the minimum wage pile new cost pressures on top of those already weighing heavy.

Even before the Budget, when we surveyed business owners with a turnover of £5 million or more¹, nearly one in three² (31%) said they’re likely to make redundancies over the coming year. They’re still suffering from the cumulative impact of inflation, with many unable to pass on the full extent of cost increases, and demand in some sectors is down too, thanks to the continuing cost-of-living crisis. Worryingly, with cash reserves dwindling,² 30% of business owners are saying it’s likely they’ll default on debt over the next 12 months.

Faced with such challenges, what can you do to keep your head above water?

1. Prepare prudent forecasts for 2025 outside your sales target and budgeting process. Include downside scenarios, look at the impacts and think about how your business will respond. This ‘war gaming’ of your numbers builds valuable resilience and allows you to think about the future with a clear head before pressure mounts. Businesses that do this well build a fully integrated profit and loss account, balance sheet and cash flow on a receipts and payments basis as well as a funds-flow basis.
2. Automate where possible but don’t necessarily use the gains to reduce headcount. Instead boost margin by redirecting your staff’s experience and time into high-impact  work, for example boosting pricing models, building value-added products, increasing customer wins and retention, enhancing brand perception and so on. This enables investment to continue in lean times and builds your organisation’s knowledge and skillset pool.
3. Rework your operating model by dusting off your organisation chart, overlaying your technology stack and all the knowledge you have around your processes and activities. What’s actually needed versus nice to have? And is there scope for a new target operating model that’s lean, cost-effective and modern? It’s those businesses that make sure their operating model is fit for purpose through economic cycles and technology changes that succeed.
4. Look outside your business by benchmarking against your competitors, scrutinising  their margins and price points and considering new ways customers are interacting and purchasing. Technological change is immense and often businesses only learn what others are doing when they reach obsolescence themselves. We have found many easy wins when working with our clients on benchmarking not just financials but operations and sales. Leaders that go one step further by looking at other industries and applying different ways of working, pricing or routes to market are often much more successful at boosting profit and cash during tough times.
5. Focus on the valuable spend, which in business is often the more discretionary spend. Examples are investing in capital expenditure or marketing activity that generates more significant value. Although conserving cash and boosting profitability (or removing losses) is a quicker, simpler route, we find that trying to maintain spend with a high return on investment can pay off. Consider how you can strip out lower-value costs or activity first, even though these can be a little more integrated in the business and harder to remove. Be tough on ensuring a return on investment but do note this return may not be financial – customer experience or employee engagement are valuable returns too.

Focusing on these five areas can help you maximise value from spend on employees while also building their skills and engagement, discover ways to boost profit and cash, and help you build a business fit for the future by the end of 2025.

Do get in touch if you’d like a chat about your business, the challenges you’re facing and your aims for 2025 and beyond. 

Sources

1. The research was conducted on behalf of Evelyn Partners by Censuswide, among a sample of 500 18+ UK Business Owners (Businesses with a turnover of £5m+). The data was collected between 18.09.2024-02.10.2024. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.
2. Combines ‘Very likely’ and ‘Somewhat likely’