Why your business needs 28% more turnover just to stay where you are

Ask a business owner how much they’d need to raise prices to keep their lifestyle exactly as it is today, and you’ll usually get one of two answers. A shrug or a number that’s wildly optimistic.

Run the actual maths and the real figure is closer to 28%.

Not to grow. Not to expand the team or hit some ambitious five-year target. Just to stand still. To end up exactly where you started.

That gap, between what owners think they need and what they actually need, is one of the most dangerous blind spots in business today. Here’s how it builds, why almost nobody sees it coming, and what to do about it before it becomes a crisis.

The real cost of standing still

Picture a business turning over £250,000, paying corporation tax at 19%, and leaving the owner with £50,000 to draw each year. A few years ago, that was a perfectly reasonable, comfortable picture.

Then inflation hit 10% in 2022.

Suddenly the owner needs to draw more just to maintain the same standard of living, pushing income up to £55,000. At the same time, corporation tax climbed from 19% to 25%. On paper, that’s a 6% rise. In real terms, it’s a 30% increase in the tax rate itself.

To cover both the higher drawings and the higher tax bill, turnover needs to reach £293,000.

Fast forward three more years. Inflation settles at a steadier 3% annually, but the pressure doesn’t stop. Profits now need to hit £60,000 to protect that same standard of living, still taxed at 25%. Turnover has to climb again, this time to £320,000.

Add it all up, and turnover has needed to grow by £70,000, or 28%, just to leave the owner exactly where they were when this all began.

Why almost nobody sees this coming

Here’s the uncomfortable truth: most business owners have not raised their prices anywhere near 28%. Most have never been told the number is that big, because year-end accounts only tell you what already happened. They’re a rear-view mirror, not a windscreen.

If your business has a March year end and your accountant delivers your accounts in December, you could be finding this out 21 months after the year in question even started.

By then, if drawings have already crept up with the cost of living but turnover hasn’t kept pace, the shortfall has already happened. You’ve effectively spent tax money you didn’t have, and you won’t find out until long after the fact.

It’s not just corporation tax

Corporation tax is only one piece of the puzzle. The cost of running a business has been quietly climbing on multiple fronts at once:

• Minimum wage for over-23s has jumped from £9.50 to £12.71, a 34% increase
• That rise doesn’t stay at the bottom of the pay scale. Once the floor moves that much, the rest of the pay structure typically has to move too, to protect the gap between junior and senior staff
• Employer National Insurance has increased, and the threshold at which it kicks in has dropped

Put it all together and it can now cost £4,000 to £5,000 more per year to employ someone on a £25,000 salary than it did just a few years ago. Multiply that across a team of ten, and the pressure becomes very real, very fast.

So what do you actually do about it?

The answer isn’t to panic and slap 28% onto your prices overnight. It’s to know the number exists, and to build a plan around it while there’s still time to act, rather than finding out when it’s already too late.

That starts with proper management accounts, produced monthly or quarterly rather than once a year. Numbers that show you where you stand while there’s still time to change course, not a historical record of what already happened.

And once you can see clearly, shift the focus. Trimming a few pounds off a phone bill rarely moves the needle when the gap is this size. Growing turnover, even modestly, while holding costs steady flows straight to the bottom line, and it’s usually the single biggest lever available.

The question every owner should be asking

Forget “how do I cut costs?” for a moment. Ask instead:

• Do I actually know what my number is?
• Have my prices kept pace with the real cost of running this business, or just with what “feels” reasonable?
• Am I finding out my position in real time, or 21 months too late?
• If nothing changes, will I be standing still, or quietly slipping backwards?

Most business owners have never sat down and worked out their own version of this figure. They’re flying on instinct, using last year’s accounts to make this year’s decisions, and hoping the gap isn’t as big as it actually is.

It’s time to find out for certain

Get in touch with the team at A4G today, and we’ll help you work out exactly what your number is, build management accounts that show you your real-time position, and put a plan in place so you’re growing on purpose, not just running to keep still.

Don’t wait 21 months to find out you’ve already fallen behind. Book a call with A4G now and take control of the number before it controls you.