Australian SME owners feeling the financial squeeze personally

A new study by YouGov paints a concerning picture for Australian small businesses. Cash reserves are dwindling, with over one-fifth (22%) having none at all and many more (18%) with less than a month’s worth of operating expenses. This financial strain comes amidst warnings of further interest rate hikes, making it even harder for businesses to save.

The retail and hospitality sectors are especially vulnerable. They’ve been hit hard by a combination of decreased consumer spending, rising supply chain costs, and increasing fuel and energy expenses. As Beau Bertoli, Co-founder and Chief Revenue Officer of Prospa (Australia’s leading online small business lender) points out, current economic conditions are pushing small businesses further away from the recommended 3-6 months of cash reserves.

Yet while the future may appear bleak from the outside, Australian business leaders are proving their resilience to adverse market conditions once again by taking a solutions-first approach. 

Overall, more than three in four (77 per cent) Australian business owners and decision makers say their business already have or are likely to actively adopt strategies in the next 12 months to manage the impact of rising costs. While over two in five (43 per cent) plan to reduce non-essential expenses and 38 per cent are likely to increase their prices in the next 12 months, nearly one in five (17 per cent) of metro-based businesses cite an increased support for technology adoption. 

“Technology will be a crucial lifeline for small businesses as they map out their cashflow over the coming months. Streamlining manual backend tasks and harnessing technology to create admin efficiencies will have a direct impact on the productivity – and therefore profitability – of the business. Our data shows business owners know this too and they’re taking the bull by the horns to ensure they not only survive but thrive in the current climate,” said Beau.   

The financial hit becomes personal 

However, the hard work and sacrifice made by SME leaders has steadily begun to impact their finances and lives on a personal level, with over three quarters (77 per cent) feeling the squeeze. 

As the business purse strings tighten, so too does the personal wallet as nearly half (46%) say they have reduced their own income, and a further 31 per cent have had to dip into their personal funds to pay business expenses. Yet despite switching or likely to switch in the next 12 months to lower-cost suppliers (19 per cent), reducing their pay or bonus (12 per cent), and even reducing their operating hours (11 per cent), undeniably the great toll taken is on the SME leader’s mental health. A huge 44 per cent note increased stress or burnout and nearly a third (29 per cent) cite less time to spend with friends and family due to rising costs and a challenging economic environment. 

“While Australia’s small business community has jumped hurdle after hurdle in recent years, the current economic environment is raising the bar higher than ever before. With cash reserves down, and the personal impact becoming increasingly evident, it’s critical that businesses assess the financial support available to them and access what they need to put themselves back in the race” said Beau. 

Belinda Keehn, Principle Creative Designer, founder and owner at BJ’s PJs: “As an Australian small business owner, the current economic climate is becoming increasingly tough to navigate. Rising costs and fierce competition from overseas has meant less business is coming through the door, making it harder than ever to keep the lights on. While BJ’s PJ’s boomed during the pandemic in line with the unprecedented appetite for loungewear, consumers are spending more on household bills and less on themselves.

When my cash reserves dried up, I made the tough decision to use my personal savings to pay off my business’ expenses. Since 2022, this equated to over AUD$100,000 – all of my savings. I also haven’t paid myself a salary in the same period, and am still unsure when I will be able to do so. 

“As the financial pressures have mounted, the knock-on impact on my personal life has been profound. The increased stress of trying to keep the business afloat has led to burnout, which becomes a vicious cycle that is hard to get out of. In the near future, I hope to see more government-led support for the small business community so we can continue to do our part to contribute to the economy.”

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