SMEs Carrying Spare Tyre of Costs

SMEs Carrying Spare Tyre of Costs as Overheads Spiral 

• Two thirds of SMEs claim they have a 'lean' cost base
• Yet many do not have time to invest in effective cost management
• Make It Cheaper and former Dragon Doug Richard team up to launch online 'business gym'

Small businesses are carrying a spare tyre of costs as they struggle to find time to control overheads, according to new research from business saving advisor, Make It Cheaper.

While some 63% of businesses owners optimistically describe their cost base as 'lean', the research casts doubts over whether this could be the case.      

The findings paint a picture of time-poor SME owners:

• Unable to focus effectively on cost management
• Shopping like consumers on business purchases so paying over the odds
• Failing to take advantage of bulk buying opportunities
• Making uninformed business decisions
• In the dark over energy contract terms and conditions

With this in mind, Make It Cheaper has joined forces with former Dragon's Den star Doug Richard to launch Business Fit - an online 'business gym' for small firms, with Doug as a digital training partner, coaching owners to cut the fat from their cost bases.

Doug Richard comments: "However lean small business owners think their cost bases are, it pays to have a regular health-check.

"With overheads rising considerably over the last six years*, SME owners may be surprised at how much weight can be shifted from their cost base by investing some time in taking control of costs and looking for the best deal - or letting an expert do it for them."

 Can't run, won't run?

SME owners are strapped for time - too busy running their business to look around for better deals on overheads.

On average, small firms spend less than two and a half hours a week focused on cost management, with over a quarter (28%) of owners spending less than one hour per week, according to the Make It Cheaper study.

Nearly half (44%) of SME owners believe they could reduce their cost base if they had more time to find and negotiate the best deals.

More than two fifths (41%) claim they simply don't have the time to shop around on business expenditure and over one third (38%) do not regularly switch business suppliers - with almost half (49%) either in the dark over or unsure of their energy contract renewal period.

Bad habits

Many small business owners have slipped into bad purchasing habits which are taking a toll on their business' waistline.

Make It Cheaper's research shows that more than half (60%) of small business owners tend to buy essentials for the business - including stationery, office equipment and IT hardware - through expensive consumer retail channels, whilst less than half (45%) regularly negotiate bulk discounts on materials.

Two thirds (61%) of SME owners also concede that it is easier to focus on sales than reduce costs.

Meanwhile, over half (53%) primarily base business purchasing decisions on their own instinct and experience, with only 47% making decisions based on information and research gathered ahead of purchase.

Jonathan Elliott, Managing Director of Make It Cheaper, comments: "Whilst driving sales is the bread and butter of any business, it is important to avoid falling into uncommercial behaviours that directly impact profitability.

"Every pound saved is a pound of profit made, without having to go looking for extra revenue, so now is the time for small businesses to go on a cost diet."

Business Gym

  The 'Business Fit' website will offer small business owners: 

• 'Training zones' of themed advice
• Business body shape diagnostic tool
• Contract end date widget
• Doug Richard and Make It Cheaper Directors as personal trainers
• Webinars / online master classes
• Renowned guest trainers / bloggers
• User forums to share tips and advice
• Competitions / prizes

 *Make It Cheaper & Cebr, 2011

 ends

  About the research

The Business Cost Index is based upon historical price indices published by the Office for National Statistics for labour, physical input & materials, telecoms, insurance, transport, energy and financial services. Supplementary historical price indices have been provided for rents using Cebr's Commercial Property model. Forecasts for 2011 to 2012 are based on Cebr's in-house UK Macroeconomic Model.

Economic modelling was supplemented by opinion research among owners and managing directors of 750 UK small businesses (with less than 20 employees), commissioned by Make It Cheaper and carried out by independent market research agency Coleman Parkes. 

About Make It Cheaper

Established in 2007, Make It Cheaper is the number one destination for businesses to get a better deal on their utilities and business services. Based in Central London, Make It Cheaper receives more enquiries and arranges more new contracts than any other business price comparison service. These include the business customers of most of the major domestic price comparison services with whom Make It Cheaper has partnerships, as well as business membership organisations, charities and trade associations. Acting on behalf of all these customers with total impartiality and free of charge, Make It Cheaper offers year-on-year savings across a range of products including business electricity, business gas, insurance and telecoms. Using its expertise and scale in the SME market, Make It Cheaper will typically save its customers over 30% of costs as well as a considerable amount of time that they can then spend on running their businesses.  

Make It Cheaper was recently a finalist for 'SME of the Year' at the National Business Awards, 'Young Company of the Year' at the CBI's Growing Business Awards and 'B2B Customer Service Team' at the National Customer Service Awards.