Cost of living crisis: saving on business property costs

The impact of rising inflation and energy prices, supply shortages and geo-political tensions are becoming a reality for many SMEs. Here, we look at some of the cost pressures and offer practical tips to business owners preparing to navigate the crisis, which might help you and your business.

Review your premises

  • are your premises the right size?
  • are they in the most cost-effective location?
  • is every square metre used profitably?
  • could you conduct more business online?

Evaluating your business space is a good first step towards determining whether you may be able to negotiate cheaper rent or, if you’re locked into a lease, how to use the space you have more efficiently. With energy prices rising, it’s essential that every square metre of space is necessary and profitable, so identify ‘dead’ space in your premises and think of ways you could utilise it better. Consider whether your business could base itself in a cheaper location, too. City centre premises are convenient but aren’t always cost-effective.

Also, depending on your industry, it’s a good time to consider whether some of your business could be moved online, where the costs of a bricks-and-mortar location don’t apply.

Negotiate with landlords

  • can you ask for a temporary reduction in rent?
  • are you able to sub-let part of your space?
  • can you change the lease terms?
  • Could you get a discount if maintenance has to take place?

Negotiating with your landlord can help lower your business costs in the short term. During the Covid-19 lockdowns, many landlords agreed to temporary rent reductions, and in the current inflationary climate, with businesses moving to hybrid working models, commercial landlords might again be open to altering their terms in order to retain tenants.

Before meeting with your landlord, be prepared to explain why you are requesting a temporary rent reduction and have figures available to back up your request. Also, be open to other suggestions, such as an alteration of your lease terms, sharing your space with another business, or allowing the landlord to carry out essential maintenance while you are in situ, in return for a reduced rent during that period. 

Review your opening hours

  • are you losing money at certain times?
  • can you work from home on some days?
  • would ‘by appointment only’ work for you?
  • could you employ a shorter working week?

Reviewing costs and income during your opening hours can help you discover if your business is consistently underperforming on certain days, or during certain hours. For instance, if your costs to open on a Monday are consistently higher than your income on that day, it may be worth closing on Mondays or working from home. Alternatively, depending on your type of business, you could offer your services ‘by appointment only’ to ensure your income is guaranteed on less profitable days.

Negotiate with suppliers

  • shop around
  • offer larger deposits for a bigger discount
  • be professional, but be prepared to walk away
  • be flexible with your terms

Negotiating discounts and cheaper prices from suppliers can help offset rising energy costs. Always shop around before you start negotiations, so you’re aware of what other suppliers in the market are charging.

Make sure suppliers know you are someone who will give them repeat business over the long term, and if you have a track record of past purchases, let them know how much business they can expect from you based on those purchases. If you’re just starting out, provide them with a sales projections plan. Often, offering a larger initial deposit to a supplier will result in lower overall prices, so be flexible. If a supplier isn’t able to offer the price you’re looking for, be professional, but don’t be afraid to walk away and try another supplier.

Use cheaper electricity

Another way to reduce property costs is by consuming more of your energy at night when it is cheaper. A multi-rate business energy contract, sometimes called an Economy 7 business tariff, offers a lower tariff for seven hours during the night. However, the peak rate during the day is likely to be more expensive than a fixed tariff, so you need to think carefully about whether a dual tariff will actually save you money.

It won’t be right for every business, but this solution may be worth it if you can operate out of normal working hours, or if you consume a lot of electricity during the night – charging electric fleet vehicles or topping up storage heaters, for instance.

Read more about renewable energy.

Support for your business as costs rise

If you feel under pressure with rising costs, you’re not alone. Find services, resources and guidance, which could help you adapt, cut costs and plan ahead. 

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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