Cost of running a small business set to rise

JUST when you thought you had managed to survive the ultra-tough trading conditions of 2009, the prospects look set to get tougher.

Small business owners should keep a tight hold on cash flow in the New Year, says MORE TH>N Business – because the cost of running a small business is set to increase.

A sharp rise in commodity prices is the culprit, according to the latest Business Inflation Guide (BIG) produced by MORE TH>N Business .

The quarterly inflation index says the cost of running a small business rose by 0.6% in Q3 2009 giving weight to claims that confidence is returning to the economy. But the BIG foreshadowed further cost rises to hit businesses in 2010.

The Business Inflation Guide showed fuel costs jumped by 3.42%, while raw material prices rose by 1.57% over the three month period. Meanwhile, gas prices fell by 16.99% and labour costs dropped by 0.22%. The overall impact meant manufacturing firms’ costs rose by 0.63%, while service firms saw a 0.55% rise over the quarter.

The BIG, developed in conjunction with Warwick Business School, is a quarterly index that measures a basket of 20 of the most important expenditure items for small businesses. In Q3 2009, the BIG recorded price increases in 12 of the 20 items.

Head of MORE TH>N Business, Mike Bowman, commented: “The results should come as good news to small businesses. The figures are a clear sign that growth is returning to the economy. However, the predicted sharp rise in commodity prices as we go into next year is likely to raise the cost of running a small business, perhaps more than market demand. As a result, it’s important that small business owners manage cash flow carefully as suppliers begin to push prices up again as markets revive. Business owners with a heavy dependence on heating, lighting and fuel are expected to experience the sharpest rise in costs.”