The latest ASBFEO Small Business Pulse revealed that the business environment for small businesses in November 2024 remains well below the long-term average.
The ASBFEO Pulse dropped 0.1 per cent in November 2024 – the ninth consecutive fall. Over the past 12 months it has fallen 1.4 per cent.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said this represents a levelling out compared to previous quarters.
“Conditions have been rough for many small businesses with the post-COVID business environment 25 per cent below the long-term average. If you believe as I do that small and family businesses are the engine room of the economy, we have lost a cylinder in a 4-cylinder engine in the aftermath of COVID,” Billson said.
Business costs remain high
The Pulse noted the business expenses remain high across supplies, labour, and business essentials, particularly freight and insurance, which in turn has resulted in increased pressure on the profit margins for small businesses. Tightening trade credit and extended payment times from other businesses continue to weigh on small-business operating conditions.
In addition, corporate insolvencies have reached record highs (in nominal terms) after subdued ‘winding up’ activity throughout COVID-19. Small-business restructuring processes now account for one in five of these insolvencies, having steadily increased over the last 18 months. The ASBFEO noted that they are likely to continue to rise, with queries from small-business owners about small business restructuring remaining elevated.
And while interest rates have remained on hold for a year, the cost of finance remains high and small-business owners are seeking alternative financing options as a result, such as refinancing to reduce interest costs and options for tapping into business owners’ personal funds or other ‘internal’ funding. A small subset is seeking financing to keep their business afloat.
Potential signs of recovery
But while the small-business operating environment remains weak, there are early signals of increased interest in growth and innovation initiatives for existing small businesses. The ASBFEO noted that it received increased enquiries about starting new businesses.
“The ingenuity and perpetual optimism of enterprising small-business people are starting to offset these pressures,” said Billson.
In particular, the ASBFEO noted a rise in small-business owners researching possible innovation initiatives for their businesses – generally these are incremental innovations, which can make a big difference over time. Queries from small-business owners on marketing and advertising have also increased, especially digital marketing.
In addition, small businesses are increasingly considering hiring staff compared to contractor engagement, despite the persistently tight labour market. This is particularly occurring in health and social support workers and specialist information and communication technology workers.
“These indicators of a modest uplift in optimism are also reflected in increased queries from people considering starting a new business. This interest is particularly high in sectors that do not require significant initial capital outlays such as professional services,” Billson explained.
There is also an increased focus on technology. Entrepreneurs are increasingly looking to artificial intelligence to help them kick start their entrepreneurial journey by generating business plans. Queries about using digital platforms to connect and sell to customers have increased as well, coming from aspiring and existing business owners.
Interest in cyber insurance has also increased. Similarly, there has been a rise in small-business owners enquiring about how to protect their online businesses through measures such as multi factor authentication and e-invoicing.
“Small business is the beating heart of our communities and our economy and the greatest renewable resource in our country is the perpetual optimism of small-business people,” Billson said.
The Small Business Pulse is a health check of objective vital signs for small businesses while also taking into account various factors that drive decision-making for small-business owners.
