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Just 29 per cent of businesses are confident about the future over the coming decade and 32 per cent over the next five years, according to the latest study by Prospa.
However, when compared to the next 12 months, confidence jumps to 41 per cent, highlighting a steep decline in the long term.
“While short-term small business confidence saw a modest uptick in June, long-term confidence continues to decline,” said Beau Bertoli, co-founder and chief revenue officer at Prospa.
“While some businesses, particularly those with high turnover, are managing to find growth opportunities, the overall environment of rising costs, subdued consumer demand and economic uncertainty continues to weigh on small business confidence and sentiment. This data underscores the need for targeted support and policy measures that boost the resilience and sustainability of small businesses, particularly in the most affected industries.”
One major challenge for businesses is bringing profit in. Over the next 12 months, 23 per cent of small businesses are expecting revenues to decline, while 38 per cent expect it to remain unchanged. Meanwhile, 36 per cent expect revenue to increase.
Despite decent confidence in revenue forecasts, small businesses aren’t as positive as larger businesses. In fact, the larger the business, the more willing to take on debt.
Sixty-six per cent of small businesses with less than $100,000 in revenue said they have no current debt or plans to take on debt. Comparatively, 34 per cent of businesses with $2 million or more in revenue said they’ll keep or increase the amount of debt, 27 per cent of businesses with $500,000 to $2 million, and 21 per cent of those with less than $100,000 in revenue.
“High inflation and interest rates have strained household budgets and weakened consumer spending, while operating expenses continued to erode profit margins. This impact is being felt disproportionately among small businesses depending on size and turnover,” said Bertoli.
“Almost half (47 per cent) of small businesses with a $2m+ turnover expect their revenue to increase in the next 12 months, compared to 30 per cent of small businesses with less than $100k in turnover.
“Interestingly, businesses with $2m+ revenue are most likely to increase their amount of debt owed, with 37 per cent indicating intent to do so. On the other hand, small businesses with less than $100k in turnover are avoiding debt, with two in three reporting no current debt and no plans to borrow in the next 12 months. This cautious approach could reflect their limited access to credit or unwillingness to take on debt in an uncertain economic environment.”
All the uncertainty and economic strain are taking its toll on the wellbeing of business owners, with two-thirds experiencing elevated stress and burnout. Cost-of-living challenges and lack of consistent revenue were recognised as the main reasons for this.
“Certain industries, particularly hospitality and construction, are bearing the brunt of these stressors. Over a third of small businesses in construction (36 per cent) and hospitality (35 per cent) report that they are experiencing extreme levels of stress and burnout,” Bertoli said.
“Australia’s hospitality sector has seen a 41 per cent increase in insolvencies as reported by Equifax, reflecting the severe financial pressures and low discretionary spending affecting these businesses. Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat. The data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small business resilience.”
[Related: Aussie SMEs have ‘gone into hibernation’]
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