Rising Business Overheads: How to Protect Your Margins

If your costs feel like they’ve been creeping up every time you look, you’re not imagining it. Almost every bill seems to have gone up this year, from the wage bill to the energy bill, and plenty of small businesses are feeling the squeeze.

And don’t worry, if this sounds irritatingly familiar, you’re far from alone. In the Federation of Small Businesses’ latest survey, 89% of small firms said their operating costs were higher than a year ago, and a third had seen them rise by more than 10%. At the same time, 53% reported falling revenues in the third quarter of 2026.

So here’s the thing: you can’t control the National Living Wage or the price of electricity. But you do have more control over your margins than it might feel like right now, and when it comes to saving money, every bit counts. Let’s talk about what things are in your control and the practical steps you can take to protect your margins.

What’s actually pushing costs up?

So hang on, let’s get to the bottom of what’s actually going on right now. Well, it’s rarely one big bill that does the damage. Usually, the culprit is actually several smaller increases landing at once. Here’s why things might be feeling expensive right now: 

• Wages and National Insurance: The National Living Wage rose to £12.71 an hour in April 2026, up 4.1%, on top of last year’s employer National Insurance changes. The FSB worked out that a small business with nine staff on the National Living Wage has seen its annual employment costs rise by £25,850 between January 2025 and April 2026. That’s roughly the cost of hiring another person, without getting the extra pair of hands.

• Energy: It’s not just the cost of the energy you use that’s gone up. Small businesses saw an average 40% increase in their annual energy standing charges from April 2026. That’s the fixed daily fee you pay just for being connected, whether you’re having a busy week or a quiet one. 

• Business rates: In England, Retail, Hospitality and Leisure relief ended in March 2026 and was replaced with new, lower multipliers. Combined with the revaluation, the FSB estimates small retail, hospitality and leisure businesses face an average 52% increase in bills, phased in over three years.

• Everything else: Supplier prices, fuel, insurance and software subscriptions all add up, especially the ones you set up years ago and haven’t looked at since.

You’ll especially feel these increases if you own a shop, café, restaurant or pub. And while none of them seem particularly huge on their own, together they can take a real bite out of your margins, which is why it’s worth keeping a close eye on every bill, no matter how big or small.

Start with your real numbers

Before you start changing things, get a clear picture of where your money is actually going. Most of the time, margins don’t just vanish overnight. Instead, it’s more of a gradual process, with margins shrinking a little at a time, often without you noticing.

Maybe a supplier has nudged up the price of a few lines, or a dish that used to be one of your best earners now costs more to make than it did last year. On their own, these changes don’t seem like much, but over a few months they can make a significant impact on what you’re left with at the end of the month.

A good place to start is by asking yourself a few simple questions:

1. What does each product or dish actually cost you now? Not what it cost when you set the price, but what it costs today.

2. What are your busiest and quietest hours? And are your staffing levels matching them?

3. What’s selling, and what’s just sitting there?

You might not have asked yourself these questions in a while, and the answers could be quite different from the numbers you’ve been working with. It’s also worth actually taking a look, rather than relying on memory or estimates. 

Costs and sales patterns change all the time, so it’s worth checking in on them regularly. If you’re using a POS system, most of this information is already in your sales reports. Checking them once a week, rather than once a quarter, means you can spot a problem while it’s still small. 

Build your rota around demand, not habit

For most retail and hospitality businesses, labour is the biggest cost, so it’s a good place to start. But that doesn’t mean you need to start cutting jobs or slashing hours.

In fact, cutting staff across the board usually backfires. Queues get longer, customers walk out, and your team ends up run off their feet. Plus, you risk losing someone who knows your business like the back of their hand. The trick is to have the right number of people in at the right times. We’ve all seen it: three staff leaning on the counter on a slow Monday morning, then one person struggling to cope with a packed Thursday evening. 

Make sure to follow data that reflects your current sales data rather than a schedule that made sense years ago. Our guide to staff management with Workforce.com shows how to plan shifts around your sales data. 

Here are other ways to save when it comes to labour costs:

• Compare your hourly sales against staff hours each week, and look for shifts where you’re consistently overstaffed.

• Stagger start times so you’re not paying four people to stand around waiting for the lunch rush.

• Cross-train your team so one person can cover two roles during quieter periods.

• And last but not least: look after the staff you have. Recruiting and training someone new costs far more than keeping a good person, and our guide to reducing labour costs covers more on this.

It’s also worth checking you’re claiming the Employment Allowance. It takes up to £10,500 a year off the National Insurance you pay on your staff’s wages, which is a lot of money to leave on the table. You can claim it through your payroll software, but you have to actually opt in, and plenty of small businesses never get round to it. 

Don’t be afraid to review your prices

This one is a little bit tricky, and often avoided until the last minute by many small businesses. Many feel awkward about putting up their prices, but absorbing every cost increase yourself isn’t sustainable either, Many business owners feel awkward about putting their prices up, but absorbing every cost increase yourself isn’t sustainable. Most customers know costs have gone up for everyone, and a small, fair increase rarely puts people off. 

Fortunately, to make a difference you don’t have to make big, across-the-board increases. Smaller, targeted changes usually work better. Let’s have a look at some practical ways of managing prices:

• Start with your bestsellers: A 20p increase on something you sell 200 times a week is worth more than a big jump on something nobody buys.

• Look at portion and pack sizes: Small tweaks here can protect your margin before you need to touch the headline price.

• Bundle items together: Meal deals or product bundles raise your average spend without changing individual prices.

• Use menu engineering: If you run a café or restaurant, work out which dishes are both popular and profitable, and give them the best spots on the menu. Our guide to menu pricing walks you through it.

• Explain the why: If you’ve got lots of regulars, they’ll probably notice a price change, however small. Rather than hoping nobody spots it, be upfront about it. A short Instagram post or a friendly note by the till explaining that your costs have gone up goes a long way. Most customers understand, and they’ll appreciate you being honest with them.

But don’t just set your new prices and walk away. Keep an eye on how each item sells over the next few weeks. Customers don’t always react the way you expect: some price rises go completely unnoticed, while others can quietly push people towards a cheaper option or somewhere else entirely. If something suddenly stops selling after a price change, you’ll notice straight away, and you can always bring the price back down or try a different approach before it starts costing you more than you’re gaining.

Stop paying for stock that doesn’t sell

It’s easy to think of stock as money in the bank, but if it’s just sitting on a shelf, it’s really cash you can’t use. In hospitality, it can be even worse, because unsold stock often ends up in the bin. The good news is that a few simple habits can make a big difference:

• Order based on what actually sells: Gut feel only gets you so far. Your sales history shows exactly what’s flying out and what isn’t, so you can order with confidence. Our guide to inventory forecasting explains how.

• Set low-stock alerts: That way, you’ll know when it’s time to reorder, without overbuying “just in case.”

• Keep track of waste: Try logging everything you throw away for a few weeks. Most businesses are surprised by how much it adds up to, and it often points straight to the items you’re over-ordering.

• Clear slow-moving lines early: Use bundles or promotions to shift them before they turn into a write-off, and think twice before ordering them again.

Get smarter about energy

Energy is one of those costs that can feel completely out of your hands. Although you can’t do much about your tariff, you can control how much you use. Even small changes can make a real difference, and here are a few ways you can do it:

• Get a smart meter: If you don’t have one already, it shows you exactly when you’re using the most energy, which makes it much easier to spot where you’re wasting it.

• Switch off what you don’t need: Coffee machines, extra lighting and equipment left on standby can quietly run up your bill overnight. Make switching them off part of your closing routine.

• Look after your fridges and freezers: Keep them serviced and check the door seals regularly. A fridge that’s struggling to stay cold works much harder and uses far more power than one in good condition.

• Shop around before your contract ends: If your contract runs out and you haven’t arranged a new one, you’ll usually be moved onto a more expensive out-of-contract rate. Start comparing deals a few months before it’s due for renewal.

Here’s the thing, though: there’s no need to obsess over every penny of energy you use, but it does pay to be strategic, aware, and intentional about when and where you’re using it.

Go through every contract and subscription

Yes, we know what you’re thinking – yawn! This is the most boring job on the list, but it’s often one of the most valuable. You’ll want to set aside an afternoon to go through your bank statements line by line. Look out for:

• Software and subscriptions: Are you paying for tools you’ve stopped using, or for two that do the same job?

• Suppliers: When did you last compare prices? Even if you’re happy with your supplier, a competing quote gives you something to negotiate with.

• Card fees: Check what you’re actually paying per transaction, including any monthly or hidden fees.

• Insurance, waste collection, phones and internet: These often roll over at higher rates without anyone noticing.

Check your business rates bill

If you rent or own a shop, café or pub, you’ll be paying business rates. It’s basically council tax for your premises, worked out from how much your property would cost to rent. The rules changed quite a lot this year, so it’s worth a quick look to make sure your bill is right. Councils do get it wrong sometimes, and you could end up paying more than you need to.

If you run a retail, hospitality or leisure business in England with a rateable value under £51,000, you should be on the lower 38.2p multiplier. If your bill says otherwise, give your council a call. It’s also worth checking whether you can get Small Business Rate Relief, which could cut your bill or even wipe it out completely. And if your rateable value looks too high, you can challenge it with the Valuation Office Agency.

How to protect your profit margins as overheads keep rising

Rising business overheads aren’t going away any time soon, but that doesn’t mean your profit margins have to keep shrinking. You don’t need to tackle everything at once, either. We recommend focusing on one or two areas to start with, such as reviewing your rota or adjusting your prices, and building from there. A few hours saved each week, a slightly better margin on your bestsellers, and a little less waste can soon add up to real savings.

Here’s what’s important to remember: the small businesses that get through tough periods are usually the ones that know their numbers, spot problems early, and aren’t afraid to make small changes often. If you’re using a POS system, your sales and stock reports are a great place to start, as they’re already telling you most of what you need to know to reduce business costs and keep your margins healthy.