Think small businesses are fleecing you? Think again

The great rip-off myth: small firms aren’t getting rich

Customers see prices rising and assume businesses are pocketing the difference. The reality for most small firms is brutally different. Rent, wages, employer NICs, energy, insurance, business rates and supplier costs are swallowing an ever-bigger share of every pound through the till. While billion-pound profits at banks, supermarkets and energy giants grab the headlines, Britain’s cafés, shops, tradespeople and micro-businesses are often surviving on wafer-thin margins. They aren’t sitting on fortunes. Many are absorbing price rises themselves because they’re terrified that passing the full cost on will drive their customers away.

THE GREAT RIP‑OFF MYTH

Consumers think businesses are ripping them off. Even the new Chancellor has got it in the neck for suggesting that big businesses could be making more because of the geopolitical instability that’s pushing up oil, energy prices and food prices and that they should be doing more to keep prices for customers lower. Some may be making more than expected or cashing in, but for most businesses the reality is the opposite because their own costs are rising even faster.

Existential

The public wildly overestimates the amount of profit businesses make and they think they’re being ripped off. It’s an existential problem for small firms in particular.

When big businesses are announcing their profits (think banks, oil companies, supermarkets) or we hear about prices going up again, there’s a tendency to hear the same moans: “Businesses are ripping us off.” “They’re making huge profits.” “Prices go up but service goes down.”

Most people’s perception of business profit is miles out. Of course, there are those that wallow in huge profits, but as the Competition & Markets Authority (CMA): Consumer Understanding Studies, have repeatedly found, consumers overestimate business profits, especially in retail and food sectors.  

People assume firms make profit margins of 20–30% when actual margins are more often 2–5%. Consumers also rarely understand supply‑chain costs, overheads or tax burdens.

The Business Department’s Small Business Perception Research shows the public believes small businesses make “healthy profits” too, while most small businesses themselves report flat or declining margins.

Consumers underestimate the impact of business rates, NICs, energy and rent. For most small firms, real profit margins are 2–5% if they’re lucky, and many are running at zero.

Headlines

Supermarkets may announce billion‑pound profits, but even for them the truth behind those numbers tells a very different story.

People think companies are rolling in money because they see big profit numbers, not profit margins and they have no idea what those profits have to be used to pay for.

If a chain sells £60bn of goods and keeps 3%, that’s £1.8bn profit. It sounds huge. But it’s the same margin as a small café making £3 on a £100 bill. The public sees the headline number, not see the percentage. However big the profit there’s then the question of what the profit is used for.

A £1.8bn profit is still huge even if the margin is small, but it’s not going into the owner’s pocket.  

Profit

That £1.8bn profit is not £1.8bn sitting in the bank. It’s already committed to keeping the business alive. Supermarkets for example must spend their profit on:

Store upgrades

Refrigeration, lighting, flooring, security, accessibility. A single refit can cost £1m–£3m.

Distribution centres

Robotics, cold storage, fleets, maintenance. A new centre can cost £100m+.

Technology

Apps, loyalty systems, cybersecurity, self‑checkout, AI stock management. Annual tech spend runs into tens of millions.

Debt repayment

Supermarkets carry huge debt loads to fund land, buildings and logistics.

New stores

A mid‑size store costs £5m–£10m to open.

Shareholder dividends

Public companies must pay dividends, often hundreds of millions.

Emergency reserves

For supply chain shocks, food inflation, energy spikes, pandemics, recalls.

Climate and regulatory compliance

Electric fleets, solar panels, heat‑resilient refrigeration, packaging changes.

Absorbing higher costs

Consumers think they’re being ripped off because big business headlines distort reality. People hear “Tesco makes £1bn profit” and assume all businesses operate like that. Small firms are assumed to be raking it in too. Supermarkets have been using some of their profits to hold down food price rises through heavy discounting. Food inflation in July 26 was 1.3% while general inflation was at 2.9%. That was the lowest food inflation rate since 2021. Small businesses struggle to hold prices down as long as possible and absorb their own price and cost increases for fear of losing customers if they put up prices for those customers.

Prices rise faster than wages

When food, energy and essentials jump in price, people assume businesses are cashing in, not realising business costs have risen even faster.

Businesses rarely explain their costs

Most customers never see:

• VAT

• employer NICs

• business rates

• rent

• energy

• insurance

• card fees

• supply chain inflation

• compliance costs

They see the final price and assume greed.

Poor service from big brands poisons trust

Call‑centre chaos, hidden fees, subscription traps, delivery failures; all from large companies. Consumers then assume all businesses behave the same way.

Media loves a “rip‑off Britain” story

It’s easy to report a big profit number. It’s harder to explain a 2% margin or what the profit is used for so the myth spreads. If the headlines say a supermarket made £1.8bn profit, consumers assume they must have £1.8bn sitting in the bank. They don’t. Most of it is already spent or committed.

The Reality

Small firms don’t have:

• huge turnover

• economies of scale

• cheap wholesale prices

• national logistics

• investor cash

• climate‑controlled warehouses

They operate on razor‑thin margins and rising costs.

If supermarkets keep 2–4%, small businesses often keep just 0–2%. Many are fighting to survive, not ripping people off. Most are trying to absorb the rising costs rather than push prices up for fear of losing their customers.

Show margins, not just prices

A message like: “Our margin on this is around 3%.” could reset expectations but customers probably won’t understand what ‘margin’ means in terms of money in your pocket and figures are a big turn off.

Explain price rises clearly

Short, human, honest explanation might work: “Our supplier costs have risen 18%, so we’ve had to adjust prices slightly.” People accept increases when they understand them.

Use supermarket examples

Consumers understand big brands. Use them to explain your reality.

Share cost breakdowns

Even a simple graphic builds trust.

Tell your founder story

Human stories beat corporate myths.

Use one strong fact

Evidence changes minds: “Business costs have risen 70% since 2016.”

Anger

Consumers aren’t angry at you. They’re angry at a system they don’t understand. The public only starts to understand the reality when it’s too late and a business is going under. Small businesses operate on even smaller margins than big businesses and face even bigger risks.

The public thinks businesses are ripping them off because they see big numbers, not big costs. The truth is the opposite. Businesses, especially small ones, are running on fumes, not fortunes. Transparency, evidence and storytelling are the only tools we have to help fix the myth.