1st September, 2020
Cash-strapped small businesses admit life’s tough right now, but the sector is showing green shoots of positivity and resilience as Australians favour buying local.
More than a third (35 percent) of Australian small businesses expect to find it difficult or very difficult to meet financial commitments over the next three months, figures reveal.
Small businesses were almost twice as likely to report that they expected to find it tough compared to large businesses, results from the Bureau of Statistics reveal.
The research found 41 percent of businesses have experienced a revenue drop in the last month and 22 percent had an increase in operating expenses.
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“Businesses reported that their decisions related to expenditure on capital were significantly influenced by uncertainty about the future state of the economy (59 percent) and future expected customer demand for their products and services (40 percent),” said ABS head of industry statistics, John Shepherd.
The survey also includes insights into how business expenditure on capital has changed over the last three months. It is part of additional information being released by the ABS to measure the economic impact of COVID-19.
Data was collected between 12 and 19 August.
But, there’s light at the end of the tunnel. The Christmas trading period is expected provide a boost for the sector, with Australians spending more than $52.7 billion across retail stores during the festive season last year.
And while the chips have been down for particularly Victorian small businesses in a second bout of lockdowns, a whopping two-thirds of small businesses adapted their business in response to COVID-19, research by Allianz Australia found.
In fact, one in five (20 percent) have altered operations entirely, ranging from adding new delivery services to creating unique discounts for pensioners and those unemployed, and even providing materials that customers can make their own soap and sanitation products with.
Some businesses even launched into the COVID-19 market and managed to make their mark with a limited marketing budget.
Queensland’s Reever Botha launched a gut health product in the thick of pandemic restrictions, which has achieved $250,000 in sales since March. PuraU is a gut cleanse kit made from natural ingredients including turmeric, ginger and zinc.
Botha and his business partner Vlad Kosovac have poured almost $100,000 into the business in the past 12 months, finally clearing regulatory hoops and launching into a very different business landscape than they’d hoped for.
Botha says the single most important aspect of creating a trusted business is branding.
“We wanted to create a brand that consumers would feel connected to, and that consumers can trust and feel proud to be a part of,” he said.
The fact is, small businesses are resilient by nature, with many business owners accepting that revenue won’t be at usual levels this year and using the lower trading period to build online stores, pivot toward new opportunities, reshuffle the workforce and improve marketing activity.
ABS data shows some have invested in digital operations (18 percent) leading to improvements in web, social media and e-commerce, making it easier to help more Australians support small businesses in new ways.
And, in order to keep things ticking along, businesses have drawn down on cash reserves to maintain minimal business operations until revenue increases (22 percent) return.
A move toward supporting local is also making a big comeback this year, with 78 percent recently polled by Allianz Australia showing greater motivation to support local small businesses in the wake of COVID-19.
Allianz Australia chief market manager Nick Adams said support for local business isn’t just about the products and services they buy, it’s about supporting the community, with 65 percent wanting to spend locally, especially businesses close to home (63 percent).
The biggest motivation for shopping with small businesses was supporting the staff from their local neighbourhood that are employed locally (70 percent).
“Nearly half of Australian small businesses have experienced reduced revenue due to COVID-19 and a further one in five are not earning any income currently,” said Adams.
“These businesses carry great economic value, but also incredible practical and emotional value to the communities in which they’re located across the nation.”
A second report by Nielsen agrees that a significant shift toward buying local is in play, which is keeping many small businesses ticking over. The shift was driven by fears about the COVID-19 spread, and has sparked an opportunity for retailers and manufacturing able to meet the demand, the research reveals.
Small businesses are also taking advantage of a range of support measures in place. While JobKeeper has provided emergency payroll assistance, there are other measures out there, including state and local government funding, depending on where you live and what sector you operate in.
There’s also the possibility that small businesses could receive government-funded assistance to access professional financial advice.
CPA Australia and Chartered Accountants Australia and New Zealand are proposing a government-funded voucher system to ensure small businesses can access urgently needed professional advice on their viability once stimulus measures end in September.
The call follows a similar proposal from the Australian Small Business and Family Enterprise Ombudsman Kate Carnell, which recommends a small business viability voucher program.
“Under the program, a business owner (or their accountant) would apply for the voucher with services provided by a relevant accredited professional,” said Carnell.
“This would ensure small businesses have access to expertise in judging business viability, so they can make an informed decision about whether to turn their business around or exit.”
Are you struggling to chart a course for your business beyond the troubled waters of 2020? MYOB recommends you take the first step towards a brighter future by consulting with a professional business advisor. Find an advisor near you today.