Small Business Struggling

Sep 5, 2019 | Small Business Finance

Australian small business owners are struggling to survive into 2021. Most small or medium businesses don’t survive, even when times are good. So what happens when you throw a once-in-a-century pandemic into the mix?

After the shock forced lockdowns the world experienced in 2020, businesses big and small had to adapt, pivot, innovate, and rethink how they will deliver their services during constant disruptions. For those who had a robust online store, their existing supply chains experienced massive short-comings and highlighted our dependency on international manufacturing and trade.

Snapshot of Australia’s Small Business Struggles 2021

Fast forward into mid-year 2021 and the Australian economy has bounced back, way beyond the governments exceptions.

The  KPMG survey, carried out in May 2021, finds that the lockdown has taken its toll with 86 percent of business leaders emotionally concerned at a personal level and with 94 percent saying the crisis had impacted their business – 52 percent of them ‘significantly’.

Notably, businesses with 50-499 employees were less likely to be concerned than larger companies. Nearly two-thirds of companies in the next category up (500+ employees and/or $500m+ turnover) said they had been significantly impacted.

Yet despite their lesser concern, smaller businesses were more likely to consider themselves still in the early response phase, or managing through the crisis. Nearly 60 percent of overall respondents put themselves in those categories, but 32 percent of larger businesses now reported being in the recovery phase, resetting and identifying market opportunities and adapting to the new world. (Source: Backbone of Australian economy set to bounce back: KPMG survey.) 

Small Business Recovery

For those small businesses that stayed afloat during the pandemic of 2020, implemented new approaches such as:

  • Using contactless deliveries to make their services available.
  • Requiring employees to learn new skills to support the changes to the business model.
  • Adopting new revenue streams, such as converting production lines to meet high demand products.
  • Installing new safety measures such as Plexiglass barriers between staff and customers, re-arranging seating and number of customers in their store at any given time.
  • Work from home and remote work hires outside their cities and countries kept costs down and people safe.

The changes small business owners had to make in order to survive the pandemic varied dependent on the size of the company. industry, regulations and adaptability of their workforce.

Accounting software company Xero has released a new small businesses economic recovery report based on data from its newly launched Small Business Index, developed in partnership with Accenture. The report found that Australia needs around 210,000 small business jobs to be created by the end of 2021 to fully recover from the pandemic shock.

It also found that younger staff, women and casuals, as well as those working in customer contact industries — such as hospitality — are more impacted by job losses. O’ Regan says the hospitality has lost overseas students as well as the working holiday visa cohort due to the pandemic and the international border closure.

Snapshot of Australia’s Small Business Struggles 2019

Australian small business owners are struggling to survive into 2019, as recently reported in the Sky News Australia and the Courier Mail.   More Queenslanders declared bankruptcy in 2017-18 than anywhere else in the country.  Industry leaders pointed to contributors including a depressed housing market, a rise in unemployment and a decrease in jobs created in the private sector.  In the 2017-18 financial year, 5,000 Queensland people or small businesses filed for bankruptcy and there were 9,000 cases of insolvency. Business groups are calling on the state and federal governments to bring forward shovel-ready infrastructure projects to help create jobs.

  • ASIC figures showing the number of companies entering administration rose 11.2pc last year
  • NAB’s cashless sales index is pointing to continued weak retail sales growth
  • Business groups warn weak trading conditions will lead to job losses in the retail sector
  • Economists say the retail sector is under enormous strain, with Bureau of Statistics figures showing sales turnover in April actually went backwards.
  • Consumers struggling with low wage rises and concerns about job security have kept their wallets shut, with retail turnover falling 0.1 per cent over the month.
  • NAB expects the unemployment rate will rise further, based on weak conditions in the retail sector.
  • The Reserve Bank has indicated it is looking very keenly at the unemployment rate. The RBA said it wants to see the jobless rate fall because that will mean more Australians are in work, pushing wages up and increasing their ability to spend money at shops and malls around the country.
  • Economists say it will be a weak year for finance jobs, partly due to the royal commission and weaker house prices.
  • The index on job ads showed financial and insurance services was the weakest performing industry of 2018.
  • Economists predict a weaker property market will also hit other sectors including construction, real estate and retail
  • New job advertisement data indicates the banking royal commission may have already curtailed career opportunities in financial services.
  • The SunSuper Australian Job Index which measures and tracks digital job advertisements across more than 4,000 sources. Also financial and insurance services was the weakest performing industry of 2018, with demand falling 9.6 per cent year-on-year.
  • Weaker house prices and the fallout from the banking royal commission will mean 2019 will be a weak year for jobs in the finance, construction, real estate and retail sectors, economists have warned.

Australian business owners are working long hours

With eight in 10 saying they sacrifice other areas of their life to focus on their business. Almost half (49 per cent) are working six to seven days a week to maintain their business, with 20 per cent working seven days.

Like their Australian counterparts, New Zealand’s small business owners struggle with business management, collection and overdue invoices. According to KPMG’s research practice, KPMG Acuity, and as revealed in their report “Keeping us up at night. The big issues facing business leaders in 2019”, Some other notable inclusions in the report

  • Research shows nearly half of small business owners are working between six or seven days per week.
  • 88 per cent of small business owners who struggle with an area of business management experience negative emotions like frustration, stress and feeling overwhelmed or burnt out.
  • 81per cent say they make sacrifices in other areas of life to focus on their business.
  • Three-quarters of small business owners admit struggling with one or more areas of business management – most commonly finance and accounting.

Small business finance management to keep growing

If your business is under cash flow stress this is the crucial time to manage your payments and protect your credit rating. Because getting quick access to alternative business loans can save a sticky situation.  Unsecured short-term business finance is based on your monthly cash flow and a good credit score. Defaulting on your loans or operating repeatedly in negative will impact your ability to get approved when you most need the money. Such unexpected situations may be;

  • a loss of a major customer
  • breakdown of essential equipment failure
  • a crucial opportunity has presented itself and timing is everything

Other key indicators that your business will need finance;

  • Expansion
  • Turning away new business
  • Current funding reaches limit
  • Unable to meet commitments
  • Slow paying debtors
  • Dipping into personal funds
  • Sudden departure and payout of key business partner

Different types of funding will be appropriate depending on their situation, stage in the business life-cycle and what is currently important to the owners.

How to choose the right business funding?

  • Are you a new business with less than 2 years trading?
  • Do you have any security to meet the banks requirements?
  • Is the companies receivables over $100K and or invoices at 60 days outstanding?
  • Do you have terms with suppliers, or need help financing trading stock?
  • Does the business have an overdraft or line of credit that is not flexible as your business grows?
  • Is the business seasonal with irregular sales?
  • Are you an importer / exporter dealing in overseas currency?
  • Do you have bad credit history?
  • Are you open to selling a share of the business via equity investment?
  • Understand the cost of unsecured versus secured finance and the impact on the profit.
  • Is a line-of-credit or a traditional fixed term loan suitable for your income stream?

Accrutus Capital can help new business owners with less than 2 years trading history, no financials and no security. We offer  working capital finance solutions where traditional bank finance is not an option. Call Accrutus Capital to discuss how to take advantage of fintech advances for small business.


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