Are small businesses destined to be sandwiched between a competitive landscape and an inflationary cost environment?
In an era when prices for nearly everything – from rent to utilities – have risen due to inflationary pressures, one business expense seems inexplicably stuck in time: audit fees.
The above excerpt from a recent Business Times article feels both right and wrong at the same time.
It is true that smaller audit firms are sandwiched between a competitive landscape and an inflationary cost environment. In addition, they need to grapple with the challenge of a dearth of human talent due in part to a brain drain away from the sector.
On the other hand, you could replace audit firms with just about any other business, and the above statement would still hold true!
As Warren Buffett succinctly pointed out, “if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.”
Our take is that the key to survive and thrive is really about operationally excellence and prudent cost management, so that you can essentially deliver more with the same or less. Case in point? Look at the stock performance of Meta since CEO Mark Zuckerberg proclaimed 2023 the “year of efficiency.”
Especially if you are a service business where manpower makes up a large proportion of your operating costs. In this new era of automation and AI, what can be automated should be. Such technologies can not only help to lower your costs, but crucially, to deliver a better service to your clients.
And perhaps, provide the justifications for the next price uplift!
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