If you’ve been in business for any length of time, you’ll know that inflation is rarely a one-off event. It arrives, it lingers, and — particularly when world events are pulling the strings — it refuses to follow any predictable timetable. Whether it’s energy shocks, supply chain disruption, or geopolitical instability sending raw material costs spiralling, the challenge for SME owners right now is real: how do you protect your margins when you don’t know how long the pressure will last?
The answer isn’t to panic, and it certainly isn’t to do nothing. It’s to take deliberate, structured action in two critical areas: your costs and your prices.
When margins are squeezed, the instinct is often to look at the big numbers — rent, payroll, major suppliers. And yes, those matter. But a proper cost review goes deeper than that.
Begin by categorising every cost as either fixed, variable, or discretionary. Fixed costs are largely unavoidable in the short term, but variable costs flex with activity — and that flexibility is your friend when volumes or margins are under pressure. Discretionary spend, however, deserves real scrutiny. Subscriptions, agency fees, non-essential services — these are areas where you can make meaningful savings without compromising your core delivery.
Beyond cutting, think about renegotiating. Suppliers facing their own pressures may well prefer to retain your business at a slightly reduced margin than lose it entirely. Equally, consider whether you’re buying efficiently — consolidating orders, revisiting payment terms, or exploring alternative suppliers can all reduce unit costs without changing what you buy.
Finally, look at your processes. Inefficiency is an invisible cost that inflation makes visible. Are there tasks your team is performing manually that could be automated or streamlined? Every hour of unnecessary labour has a margin impact.
Cost management will only take you so far. At some point — and often sooner than business owners feel comfortable with — pricing must be addressed.
Many SME owners avoid raising prices out of fear of losing customers. It’s an understandable concern, but it’s worth challenging. In an inflationary environment, customers generally expect prices to move. The question is not whether to raise prices, but how to do it well.
Start with data. Know your margins by product, service, or customer segment. Some areas of your business may be more price-sensitive than others, and a blanket increase isn’t always the smartest approach. Where you have strong relationships and differentiated value, you often have more pricing power than you think.
Be transparent with clients. A brief, confident communication explaining that costs have risen and your pricing reflects that is almost always better received than a silent change or — worse — a deterioration in quality as you try to absorb the pressure.
Consider structured increases rather than one large jump. Phased adjustments can be easier for customers to absorb and easier for you to manage commercially.
Inflation, particularly when driven by unpredictable world events, demands that business owners shift from reactive to proactive. The businesses that come through inflationary periods strongest are not those that simply endure — they’re the ones who use the pressure to sharpen their commercial thinking, streamline operations, and build stronger pricing disciplines for the long term.
Review your costs. Revisit your prices. And do it now, before the margin
If you would like to discuss how to ensure you remain profitable while inflationary pressures are evident please contact me via the website or at rogerpemberton@actioncoach.com .