While the forthcoming peak sales season may be lifting the spirits of some, Australian small businesses are feeling a high level of financial and emotional pressure.
The new research from YouGov, commissioned by online small business lender, Prospa, revealed that 43 per cent of small businesses are experiencing increased emotional stress due to lack of cash reserves (as reported by 18 per cent of small businesses) and rising costs which has financially impacted an overwhelming 77 per cent of SME leaders.
“Australia’s small-business owners have shown remarkable resilience through challenging times, but the financial toll is undeniable. The retail and hospitality sector in particular have experienced high volatility with supply chain disruptions, high inflation, and decreased consumer spending impacting their cashflow.” said Prospa Chief Revenue Officer, Beau Bertoli.
Concerns over reduced consumer spending and other challenges
The research also found that 76 per cent of business leaders anticipate challenges, primarily reduced consumer spending (33 per cent), followed by high operational costs (28 per cent), maintaining product and/or service quality (27 per cent), managing high demand (22 per cent) and shifting consumer preferences (19 per cent).
In response, there has been an upward trend in intent to access financial support, with 26 per cent of business leaders planning to seek external funds to support their business over the next year, compared to 23 per cent in 2023.
“While SMEs face significant economic hurdles in today’s climate, this peak sales season provides an opportunity to finish the year strong. Business owners can focus on marketing efforts to capture customer interest, shop around for competitive supplier rates, and consider external funding to give them an edge. By leaning into the resources available to them, small businesses can set themselves up for success ahead of the new year and focus on what they do best – running their business,” added Bertoli.
Aussie business leaders making sacrifices to keep doors open
With economic pressures mounting, small-business leaders are sacrificing their personal finances to stay afloat. In fact, 46 per cent have reduced their own income, and 28 per cent have used personal funds to cover business expenses. This has unsurprisingly resulted in high stress levels, as 43 per cent reported increased stress or burnout.
Those working in retail and hospitality were the most likely (89 per cent) to say they are being personally impacted by the rising costs. With these sectors having been disproportionately affected by a tightening economy and a decline in consumer spending, the report noted that the findings indicate a strong correlation between sector and personal impact.
Signs of stronger cash reserves on the horizon
While nearly a fifth of small businesses currently have no cash reserves to lean on, the number is down four per cent in the last six months. The promise that the RBA will continue to hold the cash rate in November in line with current predictions is also seen as a welcome relief for small businesses during the upcoming peak sales season.
“It’s encouraging to see small businesses building up their cash reserves despite having to battle the harshest economic conditions since the GFC. This progress shows resilience, determination, and most importantly – hope. With the right support and resources, Australia’s SME community has what it takes to not only weather the upcoming sales storms head-on, but also make the shopping frenzy count, setting themselves up for financial success in 2025 and beyond,” concluded Bertoli.
