I was with my accountant yesterday to finalise my tax return for the 2009-2010 tax period and had an interesting conversation about the economy in general and how that would affect my business over the next year.
There are several factors that will impact me, not least of which is the VAT rise. Increased VAT will impact profits – on stock purchases, on costs such as packaging supplies, and most of all will significantly increase delivery costs as VAT is now applied to many Royal Mail and to Parcelforce services.
What was more interesting was to talk to someone who has a much broader insight to the economy than I do. Whilst I speak to many companies who trade in the ecommerce space, either as online retailer or as service companies, my accountant deals with a much broader array of businesses covering the entire economy.
Without exception he agreed that broadly speaking there isn’t a single market sector that isn’t struggling financially. Most of his clients are at best seeing modest increases in business and profits, but many are seeing profits decreasing and in many cases their entire business contracting.
At the same time as rising costs and VAT increases there are increasing price pressures as consumers and businesses alike push for better deals and the best possible prices. In recent years further pressures from eBay, competition and from the consumers themselves, have driven down carriage costs, in many cases retailers have been forced to offer free or subsidised postage rates.
It’s encouraging to know that it’s not just myself being impacted by the economy. Although external factors are affecting my business I am taking steps to minimise the impact, am not totally reliant on a single income stream, and most importantly am fully aware of the parts of my business that need monitoring closely.
For many businesses however the economy is having a much more serious effect. It’s likely that online retail will continue to outpace high street retail and so eBay and Amazon sellers are at least trading in one of the most resilient market sectors.
It’s likely that Interest rates won’t stay at their current low rates indefinitely, in fact some are saying that they’re already too low and need to rise. You need to be prepared for both an increased cost in borrowing coupled with less disposable income from consumers who have become accustomed to exceptionally low mortgage payments.
What factors do you see affecting your business over the course of the next 12 months and what steps are you taking to minimise the impact of the economy on your business?
Are you changing your stock profile and if so have you changed the depth or breadth of inventory you hold? Is virtual stock )where you order on demand or drop ship) a part of your business plans? Have you changed couriers or suppliers? Are you implementing software or processes to automate your business to save money.