Opinion: Why small businesses will hurt a little more in 2023
The challenges of the past few years are yet to disappear for small businesses, says Amanda Rose. So what can they do to tread water in 2023?
Small businesses have experienced a proverbial kick in the guts in the past few years. A global pandemic, rising costs of living, skill shortages, and much, much more have seen Australia’s small business sector struggle under what feels like a never-ending cycle of challenge and recovery. And for some — maybe even most — 2023 will continue to bring challenges to their door (and back pockets).
The small business sector contributes a whopping 57% of Australia’s GDP, creates more than 7 million jobs, and injects more than $430 billion into the Australian economy each year. Not surprisingly, the business exit rate in Australia began to rise from early 2022 and reached almost 4% as inflation and interest rates continued to rise.
This year’s unprecedented levels of inflation have had a significant effects on households, however, new research reveals that 72% of small businesses have also been hit by rising expenses this year, and 11% will, unfortunately, let go of some employees to make ends meet. Supplier costs, petrol, and labour came out on top as the costs that small businesses are struggling with the most, with a significantly taxing financial year forecasted.
The sting of rising inflation rates is on the back of the Albanese government announcing the increase of paid parental leave entitlements — one of the key recommendations from the recent Jobs Summit. Prime Minister Anthony Albanese has declared an increase in leave from 18 weeks to 24 for new parents, beginning in 2024. But what the current government fails to consider is even though small businesses want to provide all they can to help families, they are not in the same financial position as large corporations who can handle staff shortages and increase costs.
When multiple employees are on parental leave at the same time, these roles can be more difficult to backfill, and recruiting multiple short-term replacements can be timely and costly, especially if the positions are high-skilled roles. An added challenge is finding employees who are willing to take on short-term contracts.
While the measure is welcome for most, how can small businesses avoid being concerned? How are they going to run their business effectively and meet objectives in the coming years? Uncertainty of any type is difficult for business operations and staffing.
The government says it wants to fix inflation and manage debt levels to save our economy, but small businesses will continue to bear the brunt under all these bandaid approaches. There is still substantial disruption in parts of the global supply chain, huge knowledge gaps in leadership and technology, and a tremendous ‘talent debt’ after many tourism and hospitality staff pivoted careers and reskilled in other areas.
We need to think deeper into how to help small businesses survive, by offering funding to boost education and target the skills shortage, and seriously consider ways we can bring manufacturing back home. These considerations are only the icing on a much larger cake.
So, what do small businesses need to do to at least tread water during tough times?
Be ruthless with expenses
Take a deep dive into your monthly expenses. Do you really need the annual subscription, or can you get by using the free version? Review your suppliers and do some research on alternatives. Better yet, ask for a better price. If you have staff, ask them if they can recommend ways to reduce costs, as they are often your main operators ‘working the floor.’ Besides, asking for input reminds them of how much you value their opinions.
Take a long and hard look at your cashflow
There are some simple things you can apply to your daily operations to safeguard your cashflow. Reduce your terms to seven days, introduce late fees, and collect an upfront deposit for high-paying jobs. If you can, put aside a ‘safety net’ sum each week into an emergency fund.
Get creative
Brainstorm ways to bring in new business with your team. This could be as simple as running Google ads to increase leads, developing a social media strategy, or partnering with another business to promote each other. You may discover that your junior employee has a knack for social media and is itching to put their skills into use.
Ask for advice
As we all know, small businesses don’t have the resources of large organisations. When a crisis arrives, most can’t ring the CEO and ask them to handle it. They can barely get through, and right now they’re overworked and overwhelmed. It may feel scary to ask for help, but making use of your network is a great way to receive support and new ways of thinking. Start with your accountant– they know where the holes are in your finances and how to patch them, even temporarily.
Lastly, stay alert to the changes your government is recommended or legislation. You can’t put your head in the sand. Ask questions, advocate and speak up. If you don’t, you will never be heard.
Amanda Rose is the founder of Small Business Women Australia.
