Tactics to offset rising business costs

Responding to market forces outside your control is one of the trickier aspects of running a business, and one we've faced a lot over the past few years. While you can't always predict a sudden change in revenue and costs, there are steps you can take to manage both.


Why prices increase

Various factors contribute to the current cost of living crisis, and businesses are affected differently depending on the industry. The main driving forces behind the current rise in business costs include:

  • Supply chain disruption increases costs for shipping and logistics, which is challenging for New Zealand as we rely on imports and exports for much of what we buy and sell.
  • Increasingly unpredictable weather patterns resulted in natural disasters, causing shortages and price spikes.
  • Finding and retaining skilled workers remains difficult, forcing the need to pay higher wages to retain staff. 
  • Rising interest rates make borrowing more expensive and harder to repay any debt coming off fixed rates.
  • Suppliers, partners or distributors could be seeking to increase their prices to cover their margins.

Most small businesses only carry enough cash to cover a month's worth of expenses, so you'll need to focus on activities that bring in money and make hard decisions on those that don't.

Solution part one: increase price and margin

If you're able to raise your prices without impacting demand or the customer relationship, your problem of rising costs could be solved. Customers do understand the need to increase prices over time, though if you are in a very price -sensitive industry, try it with non-core products and services first. Your competitors will be facing similar issues. 


Reduce the cost of your raw materials, supplies, or services without sacrificing quality or service by bargaining with existing suppliers. Proactively check out suppliers who may have more competitive pricing or volume discounts. Technology costs are a good example, where they should be declining over time. Consider contracts to fix supply prices for a period. 

Automate processes

Reduce the need for human intervention (which is usually expensive) by automating online payments, HR management, accounting platforms, inventory tracking, appointments and reminders. 

Buy in volume

Switch to bulk purchases if you have the cash reserves available, it's possible to store without spoiling and you get a decent discount.

Get paid early

Invoice as soon as you complete a job, or even better, get paid immediately with direct payment. If possible collect progress payments as you go.

Go hybrid 

If viable, offering employees the opportunity to work from home (even part-time) could allow your business to reduce the space you need. 

Go green

There are altruistic reasons for going green, but it's also financially beneficial. Start by turning off the lights and refraining from running machinery not in use. Reuse and recycle everything you can. While energy-efficient equipment and LED lighting can be a costly up-front investment, running such equipment costs less over time. Train staff. If everyone's working towards the same sustainability goals, saving energy and reducing costs becomes easier.

Seek out industry discounts

You may get a cost break on insurance, office supplies, training and education, software, or travel as an industry association or chamber of commerce member. BusinessNZ lists those included in the Affiliated Industries Group (AIG). Visit the New Zealand Chambers of Commerce website to learn the perks of membership.

Solution part two: Cut

The most straightforward way to manage rising costs is to delete them. By reviewing what is mission critical, there could be several costs you're able to remove (or significantly reduce). 

Review any fixed service plans or subscriptions that you don't need or can downgrade. Check if advertising is paying its way and beware of vanity advertising (you look good but no extra sales are generated). Download your latest cashflow statement and go through each item line by line and decide to cut or reduce.

Reduce hours

Shortening your opening hours can save labour, energy, and maintenance costs. Before going ahead, remember to analyse the impact on customer satisfaction, loyalty, and revenue.

Delete unprofitable products or services

It's possible you're making a loss from certain products and services. This can be fine if it's part of a strategy as loss leaders, where you make up the loss by selling other higher margin items. But sometimes, over time, certain aspects of your business deteriorate without you knowing. A mechanics garage will have a mix of WOFs, servicing, trailers, boats, maybe specialised heavy trucks and equipment. But one service line could be losing money. Set up profit centres by allocating a percentage of overhead to each sales division, to identify which products and services make you the most money. It makes trimming the fat easier.

Rethink staff 

Cutting back on staff is an option if it's the only way to keep the doors open. Remember there are processes to follow. It should be a last resort.

Delay purchases

Delay buying big-ticket items if they drain your cash reserves or require debt. You may get by for a time or think of a Plan B, such as repairing, renovating, or refurbishing.

Be tax efficient

Use a tax professional to identify claimable expenses, review your business structure, rein in costs, and minimise your tax liability.


The impact of the cost-of-living increase on businesses is significant and multi-faceted. If you have tight margins, as many small businesses do, any supplier price increase you face can be problematic. Possibly the viability of your business is at stake. 

But when you know where your highest costs are, you can plan for further cost rises and have strategies in place to manage.

Next steps

  • Collect any outstanding payments you're owed, starting with the largest and working your way down.
  • Work with your staff to identify how you can cut costs and become more efficient, and then strategise what methods will work best to find more cash.
  • Learn what support is available through memberships and government assistance and hire professionals to help you streamline your business depending on complexity.
  • Contact your banker or enquire online, visit a branch, or call 0800 272 222 to find out how to lower your finance costs.

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