Small businesses being hit from all sides: Is change on the horizon?

These trends were outlined in a study by YouGov, commissioned by Prospa. Here, the struggling small business landscape was analysed.

According to the research, 76 per cent of business leaders anticipate facing at least one challenge. The most prominent concerns are:

• Reduced consumer spending (33 per cent).
• High operational costs (28 per cent).
• Maintaining product and/or service quality (27 per cent).
• Managing high demand (22 per cent).
• Shifting consumer preferences (19 per cent).

“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 cash flow,” said Prospa’s chief revenue officer, Beau Bertoli.

Concerningly, 18 per cent of small businesses across the country are operating without any cash reserves. Rising costs were a key contributor to this and, as a result, 77 per cent of leaders reported personal impact, including on their personal finances.

In response to this, 46 per cent of leaders have reduced their own income and 28 per cent have used personal funds to cover business expenses. This has resulted in 43 per cent of business leaders experiencing increased emotional stress.

Twenty-six per cent of business leaders are planning to seek external funds to support their business over the next year, compared to 23 per cent in 2023.

The most at risk industry was hospitality, with 89 per cent of workers in this space saying they are being personally impacted by the rising costs. Prospa recognised that for hospitality in particular, a tightening economy and decline in consumer spending are resulting in sector and personal impact.

Despite a grim outlook for small businesses across Australia, Prospa said that the number of businesses without cash reserves has dropped 4 per cent in the last six months.

This could be signs of recovery, especially off the back of the inflation figures falling within the RBA’s band, currently sitting at 2.8 per cent. Further, with interest rates positioned to be cut early next year, steadier times could be on the horizon.

“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,” said Bertoli.

“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.”

Related: The biggest hurdles for Australia’s small businesses

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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