Beat the budget blues by becoming your own disruptor

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As we enter a new year, the effect of Rachel Reeves’s budget is still sending shockwaves across boardroom tables. The costs are now crystal clear, but the action we need to take remains our immediate challenge. Doing nothing would effectively hit the profitability of our business by more than 10 per cent.

Whether it’s Covid, inflation or tax rises, there’s always something that can’t be fully anticipated. It’s like a plane hitting turbulence, when the pilot must remain focused on the destination and assess whether it’s just a bumpy ride or something more serious. In business, we need to avoid knee-jerk reactions, doubling down on those activities that add the most long-term value and eliminating those that don’t. Clear communication is also a top priority right now, as this is a worrying time for everyone.

Last year was a tougher year than normal for us at Ground Control, with a pause after a period of considerable growth in our revenues to focus on improving our efficiency. The benefits from the economies of scale we had anticipated are yet to fully materialise, due to a mix of pricing and cost challenges in some of our service lines, delayed projects and a degree of overcapacity.

The typical headline response expected from business to Reeves’s budget might be to make inflationary price increases and cut employment costs, but we know it is never that simple.

When Covid hit, we witnessed what was later seen as “a great leap forward”, where business survival depended upon reimagining how our enterprises operate. There was an even swifter adoption of technology, a shift to online, hybrid working (which is more contentious now) and much more.

The budget will drive a further wave of innovation and disruption in the private sector, principally focused on productivity and output to address the rising costs of employment. It needs to be a team effort, rather than top down from the board, as our teams closest to the customers are generally best placed to identify ways that we can save time, reduce costs, improve service and increase revenue.

All the activity that underpins our business model needs to be constantly challenged. Every action that drives the costs allocated to each £1 of revenue has to deliver value. Over time, like all business, legacy systems and ways of working can mushroom, slowing us down. Reviewing it all, a “zero base budget” approach (as if starting from scratch) can brush the cobwebs away, revealing longstanding practices that are no longer necessarily the best approach. It pays for us all to be vigilant about wasted effort, particularly in those activities that don’t get picked up by standard financial reporting.

In my experience, there are two main areas across the entire operations of any business that drive profits and reduce waste: pricing strategy and how well you utilise your resources.

Pricing is an art. It requires a deep understanding of the value to the customer as well as their alternative options, including switching costs. Being alert to pricing mechanisms developed in other industries that resonate with your own customers can often provide competitive advantage. One that has appeared more recently in many other sectors beyond software is subscription pricing. Recurring income almost always beats one-off sales as it is predictable, driving down the overall cost of acquiring customers, increasing the profitability of your business — if you get the subscription pricing and terms right. It also puts the spotlight on customer retention. Keeping them creates value each year; losing them destroys it.

How much your customers spend with you can often be increased by splitting products and services into modules, moving away from time-based pricing or cost-plus pricing to a specified package of services.

In our grounds maintenance and winter businesses, in particular, managing our income and costs better at peak times of the year can also enhance our profit margins. Another area to keep under the spotlight is the amount of money you lose from discounting. I’ve seen top sales people discount too heavily in the rush to get the sale, when better negotiation would have delivered a more profitable deal.

Finally, we use software from Microsoft called Power BI, which stands for business intelligence, to visualise our profit (including the cost of capital) by customer, as well as by product or service line, to determine where we are making our profits and to take action on loss-making contracts.

Yes, price increases are needed, where market demand allows, but they are only one piece of a complex puzzle. I’ve found many businesses don’t measure their resources well enough or think how to optimise them.

We can also expect AI to be a game-changer in resource planning, as AI agents become increasingly prevalent. In this environment it pays to think like a market disruptor, leveraging your business assets in different ways. In the past, the pioneering budget airline easyJet outsourced the administration of air travel to the customer through its online approach to booking and boarding passes. The taxi service Uber disrupted the market with geolocation data to match drivers to nearby customers, efficient route mapping and operating as a platform rather than a fleet owner. At Ground Control, we provide a national service across thousands of sites by partnering with local specialist field teams. Our scheduling software reduces travel time, as well as our carbon footprint.

The final major area of waste and inefficiency that rarely gets properly calculated is employee turnover. The full costs of the loss of experience and bringing new people up to speed is barely visible in the accounts. To try to minimise our turnover, we track multiple aspects of our employee engagement year-on-year as we know that when coupled with wide employee share ownership, it can make a meaningful difference to business performance. Engaged, motivated people, with a shared purpose, should lead to happier customers.

While businesses may be hit by the budget blues, they will have to rise to the challenge. My advice? Think like a disruptor, try to see into the future of your marketplace, and prepare to change, at a pace you probably haven’t experienced before.