It's not easy to be an SME

However enthusiastically the government extols the virtues of an economy driven by  entrepreneurship and small businesses, the fact remains that it’s not easy being a small company.

I’m sure the large number of resellers that fall into that category would readily agree that these are tough times.

Small businessmanA recent survey by the Forum of Private Business found a significant chunk of small firms were being forced to absorb  increased energy, transport and raw material costs because they weren’t in a position to pass the costs onto their customers.

While this is bad news for those companies, I have to confess to a sneaking regard for the two-thirds that have been able to pass on increases in energy prices and imports (due to the weakness of Sterling) to their customers at such a difficult time economically. Whether this is the right thing to do is another matter.

You might expect customers to kick up a bit of a fuss at the prospect of paying more for something at a time when the economy is so sluggish, but perhaps they will remain stoical, as part of a mass passive acceptance being passed down to the next rung in the ladder, a collective shrug of the shoulders and a “Sorry, guv, but nothing we can do about it.”

On the flip side, those businesses that have absorbed the costs themselves might find life harder initially but could it potentially be turned to their advantage? If they are now operating in an environment where two-thirds of their competitors are starting to charge customers more for their services, doesn’t that make them more competitive against them?

There’s a balancing act between taking a hit to keep customers on board or spreading the pain and hoping they’ll stay with you. But if small companies can take the hit and stay in business, they can potentially offset some of the pain by winning new customers. They might also gain a psychological advantage with customers against their rivals if they are not seen to increase prices every time their costs go up, especially if those companies that do raise their prices don’t reduce them when or if fuel or energy costs or currency factors head in the opposite direction in the future.

This was first published in October 2012

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