Navigating Inflation as a Sole Trader: Practical Tips for Your Business
As inflation rates surged in early 2022, sole traders initially managed to mitigate its effects by increasing their prices for clients. However, their ability to keep up was limited, and as of March this year, it seems that a pricing ceiling has been reached. Recent research conducted by Hnry reveals that only 28% of sole traders have recently raised their rates, compared to 56% who did so last June.
The research also highlights that many sole traders are facing challenges due to inflation. They report paying more for suppliers and services, saving less, and even depleting their savings. In fact, half of all sole traders believe they have worked for less than minimum wage in the past year. To help ease the strain of inflation on your sole trader business, here are three practical suggestions:
1. Automate Your Processes
Research conducted in October 2022 shows that sole traders are only spending around 55% of their working week on actual work. The remaining time is consumed by tasks such as administration, taxes, finding work, and travel. By automating repetitive and time-consuming tasks, you can free up more time to take on additional projects or larger contracts, ultimately boosting your bottom line.
Identify the tasks that you would prefer to outsource, such as chasing invoices or finding new clients. Streamline, automate, or utilize AI to eliminate those tasks from your workload. This could involve creating a booking form on your website, building an automated sales pipeline in Excel, or partnering with an accounting software company that handles invoice reminders. Digital Boost offers courses that can help you streamline work and enhance productivity.
2. Maximise Your Tax Deductions
Claiming all the tax deductions you’re entitled to can result in significant savings for your business. Surprisingly, less than half of all sole traders in Aotearoa claim all the tax deductions available to them. On average, unclaimed business expenses amount to $5,611.
Start by understanding that you can claim a tax deduction for business expenses directly related to earning income or running your business. However, not all expenses qualify, and some deductions may be industry-specific. Consult the Inland Revenue Department’s website and other resources to learn about different types of business expenses. Additionally, consider seeking advice from an accountant or a registered tax agent like Hnry to ensure you’re not missing out on any potential deductions.
3. Prioritise Your Mental Health
As a sole trader, your well-being directly impacts your business. Taking care of your mental health is not only essential but also makes good business sense. During challenging economic times, the temptation to work harder and longer may arise, but this approach is often unsustainable in the long run. If you find yourself putting in extra hours, create dedicated time and space for self-care and rejuvenation.
Explore practical tools and tips from experts to cultivate a mentally healthy approach to your business and personal life. Resources like the Brave in Business e-learning series, wellbeing webinars, and resilience tips for small business owners can provide valuable guidance. Remember, being a sole trader can be challenging, especially when starting out, so don’t hesitate to lean on your networks and seek support when needed.
By implementing these practical suggestions, you can navigate the challenges posed by inflation and position your sole trader business for success.
Your Outside Team