Three quarters of small businesses (78 per cent) see the cost-of-living crisis as the biggest threat to their survival in the coming year. Two thirds of Britain’s small business owners say the last two years have been the most challenging since they started their venture. So says PayPal in its latest Business of Change report.

Nearly half (47 per cent) fear the next 12 months could prove even more difficult.

It means small business owners are being forced to put together a survival strategy with almost half of the 1,000 surveyed saying they will increase their prices over the next six months. Two in five are holding off on opening new premises with 48 per cent unlikely to hire additional employees.

As far back as April 2022, Federation of Small Businesses (FSB) National Chair Martin McTague said that “the cost living crisis starts with a cost of doing business crisis”. His statement highlighted that the issue of cost in business has knock-on implications for the public, and more needs to be done to solve the problem at its source.

Seven in 10 (69%) small and micro business owners say the cost of living crisis is also affecting their mental health, according to a joint survey by the free PR platform Newspage. Of those surveyed, 14% of small business and charity owners responded that the cost of living crisis is having “a very negative effect” on their mental health.

We’ve put together a list of tips from various sources to help you mitigate the dangers of the cost of living crisis on your operations.


Increasing prices can be controversial, especially when people are already dealing with rising costs. However, if you are witnessing unprecedented expenses in your business, it will come to a point where you simply must pass the cost onto your customers.

If you have to adjust your pricing model, aim to minimise the change as much as possible while enabling you to operate profitably still. You need to remain competitive in the market, as a price change could otherwise send your customers elsewhere.

It’s also worth communicating with your customers about the price change and why it is needed – given the context, most are likely to understand and even expect it.


It’s crucial to understand your costs and how they fluctuate. This will enable you to see the actual impact on your expenses and take appropriate action. Holding regular financial audits will uncover any creeping costs you need to tackle.

Part of your audit will be seeking ways to lower costs. Examples include eliminating unnecessary expenditure (by cancelling contracts or other fees you don’t need) or reducing them (such as by finding cheaper alternatives).

By consistently auditing your costs, you will keep on top of rising costs and limit the pressure on your cash flow. 


One of the driving forces behind increasing costs is energy prices. A simple way to counteract the costs is to reduce your energy use.

Tips to reduce energy usage include:

  • Turning off equipment and other electrical items when not in use
  • Avoiding leaving equipment in stand-by mode
  • Use machinery with lower energy consumption
  • Leave equipment running for shorter periods, such as by speeding up turnaround time
  • Encouraging responsibility among your workforce, e.g. switching off lights at the end of the day

It’s worth noting that sustainability is growing pressure for businesses, so lessening your energy consumption will also help you to meet environmental targets while reducing your monthly energy bill. 


While prices will generally rise across the board, it may be possible to find better deals with different suppliers. Due to this, it is worth shopping around to compare the cost of supplies and utilities – such as electricity, water and gas.

If you find better deals, it may be worth making a switch. Discuss this with your existing providers first, as they may be able to offer a more competitive deal to keep you. You should also aim to uncover if there are any termination fees associated with exiting your contract.

If you don’t find anything better, there’s no harm done – but if you do, it could be an effective way to lower your costs.


Your partners and suppliers are likely to be experiencing the same challenges you are, with the cost crisis affecting many companies. The costs end up getting passed on throughout the supply chain.

It is wise to keep the lines of communication open with your suppliers so you are aware of any price changes ahead of time. This will enable you to plan accordingly, with full transparency of the impact on your business.


If rising costs are threatening to overwhelm your business and you do not wish to raise your prices any further, the best route forward is to find alternative solutions.

The most obvious example is searching for cheaper materials that enable you to provide your products and services at a lower cost. The aim is to not dimmish quality, so your customers’ expectations are met, but the overall cost per customer is reduced.


Everyone is being affected by the cost of living in the UK. With consumer confidence declining, you may encounter instances where your customers are reluctant to pay, or the process takes longer than usual.

Late, or lack of, payment will restrict SME cash flow and lead to more significant financial issues. When you may already be feeling the pinch, this isn’t ideal.

Fortunately, invoice finance is designed to support businesses in these circumstances. Your unpaid invoices are used as security against a loan, allowing you to unlock capital tied up in them. This extends the timeframe in which you require payment while easing the cash flow pressures in the meantime. With a factoring solution, the lender will even chase payment on your behalf if you wish.

If late customer payment does become a significant problem for your business, this could be the lifeline you need. 


If the problem continues to impact businesses negatively, the calls for support will only increase and may prove crucial to survival. It is wise to keep an eye on any upcoming support that may be made available and determine if you are eligible.

Even if the government chooses not to create a support scheme for SMEs, there may be assistance from other bodies, such as industry leaders, so it’s worth searching around.


With ongoing uncertainty, it may be tempting to avoid external finance. However, finding appropriate funding will enable you to overcome difficulties, improve cash flow and continue to grow despite the troublesome context.

Speaking to a financial broker will pinpoint the obstacles you are facing and the options available to overcome them. They will also be able to take you through the cost implications so ensuring you have funding that won’t strain your cash flow further.