'Acute financial acumen' needed in slump

Mar 24 2009 by Karen Dent, The Journal

THE cost of running a small business in the North East is expected to rise this year, while the prices customers are charged will remain flat or fall as firms try to stay competitive in a tough marketplace.

More than half (53%) of the SME owners in the region questioned for a survey said they expected their running costs to be higher this year than in 2008. More than six out of 10 (61%) of those quizzed for the Bank of Scotland report expected that the prices they charged customers would stay on hold as inflation either flattened out or decreased during the year.

And many said customers were pushing for lower prices because of the recession. Eight out of 10 said customers were looking to get the same goods or services for less, while 60% pointed out that customers were increasingly trying to dictate prices.

Bank of Scotland’s commercial banking director Donald Kerr said: “Against a background of difficult trading conditions, the majority of entrepreneurs are now being pushed by their customers to lower their pricing on goods and services.

“Small business owners will clearly have to demonstrate some acute financial acumen in order to balance the need to maintain margins whilst keeping product and service pricing in line with demand.”

On a brighter note, many small firms expected some of their overheads to become less expensive this year.

The majority predicted that commercial property prices would fall during 2009 and almost a third expected the price of office equipment to fall.