With speculation that hundreds of businesses – dubbed ‘zombie businesses’ – are being propped up by Government stimulus and will potentially fold in September, new figures suggest that the problem could we bigger than we anticipate.
New research reveals:
- 62 per cent of SME business owners have been on the brink of folding their businesses in the past due to financial and other struggles.
- 78 per cent of owners say they have made major sacrifices for the survival of their businesses.
- If business owners knew then the challenges they would go through, just 56 per cent of owners say they would still have opened their business.
The findings come from an independent survey of 261 Australian business owners (88 per cent of which are SMEs) commissioned by free online financial information platform Money.com.au.
Respondents were asked to nominate the major challenge that motivated them to consider giving up the business. One in three (35 per cent) nominated financial issues as the number one challenge. This includes cash flow problems, the most common of all the challenges (chosen by 16 per cent of respondents), inadequate revenue or profit (11 per cent of respondents), and poor customer acquisition and retention (8 per cent of respondents).
Fourteen (14) per cent of respondents said issues with people in the business had been the challenge that motivated them to consider closing. This includes employee issues (chosen by 10 per cent of respondents) and business partner or investor issues (4 per cent of respondents).
Personal issues and lack of work-life balance were the major challenges that prompted a further 14 per cent of business owners to consider closing.
Respondents were also asked as to whether they had made significant sacrifices to start, operate and grow their businesses. Just 22 per cent of respondents said that they did not make major sacrifices. For those that did make major sacrifices – the remaining 78 per cent – those sacrifices altered their lives.
Money.com.au asked respondents would they go through the business journey again if they knew the challenges they now know. A worrying 19 per cent said they would not have started their business at all, and a further 25 per cent are undecided.
“Understanding the fragility of Australian small businesses can help us gain insight into the potential devastating consequences the pandemic will have on the sector,” said Money.com.au spokesperson and licensed financial advisor Helen Baker.
“It is important that our governments understand how vulnerable SMEs are to external influences, and yet how crucial the sector is to our economy. Small businesses deliver 35 per cent of Australia’s GPD and employ 44 per cent of our workforce. The government and public were shocked to see queues outside Centrelink offices right after business shutdowns were mandated, and today millions are on JobSeeker or JobKeeper.
“The Money.com.au survey gives some insight into why these numbers are so high: with cash flow and low income bringing major ongoing challenges, there is no way all small businesses can absorb losses from enforced closures. The survey also gives us an insight into the mental, emotional and physical impacts that business owners have dealt with to keep their ventures going. The government should continue to prioritise small business in its support measures throughout the coming months, closely monitoring how the sector is responding to those measures, as well as the shutdowns, along the way.”