Nearly half of Australian small businesses have considered closing their doors indefinitely, according to a new report, amounting to a $50 billion hit to the economy as the small business sector struggles to find a resilient means of weathering the storm.
The news comes via the latest Resilience Report from accounting software company, Reckon. The report says that in the wake of the pandemic, as well as the bushfires, as many as 47% of small Australian businesses have considered closing up operations.
1.8 million, or 78% of the 2.3 small businesses in Australia have felt significant stress and financial pressure in the wake of the pandemic, and on average, small businesses lost $21,823 due to poor resilience, according to the report. In addition, the report states that 54% of small businesses in Australia have lost money recently as the direct result of a lack of resilience.
In total, this amounts to a $50 billion hit to the economy.
Reckon’s CEO, Sam Allert said that “running a business is extremely rewarding, but success sometimes comes at the end of a bumpy road.”
He continued to explain that “things have been tougher than usual for Australian businesses recently – from drought, to fire, and a global pandemic. That is why it is more important than ever for us to talk about resilience and what it means for the small business sector.”
“The findings suggest that being able to identify and use all the right resources to succeed professionally and personally is a hallmark of the most resilient small business owners. Those who do so are naturally better at bouncing back during tough times,” Allert added.
The report found that organisations that exhibited the characteristics of resilience were more than twice as likely to weather financial storms, sudden disruptions and freakish economic halts, as we’ve seen with the COVID-19 pandemic, than their non-resilient peers. The report shows that they were 43%, as opposed to 23% more likely to fiscally succeed, as well as reporting overall happiness levels (93% as opposed to 43%) and finally ranked higher job satisfaction (80% compared to 40%).
“Empowering Australia’s small businesses for success is critical to maximising the sector’s health,” Allert says. “Given the challenging times, our aim is for the Reckon Resilience Report to spark a national conversation about developing even more resilience within the sector and how that can empower small business owners to continue driving success for themselves,” he said.
“Anyone who has ever faced a challenge and come out stronger will know exactly why the experts say resilience can be developed. Resilience is a skill and – like any skill – it can be learned and improved.”
Authors of the report noted that Australian small business owners are largely resilient, with around 74% responding that they’re confident in their organisation’s ability to recover the economic hit of the pandemic and regain revenue, while 64% said it won’t take too long for their business to recover from the economic hit.
For those that haven’t, the report goes on to explain how a number of small businesses and management teams have developed their resilience, with more than half of the respondents saying that it’s essential to deploy the appropriate tools and resources in the development of resilience.
The tools often deployed by these leaders hoping to improve their resilience go as follows: mentors (33%), business and financial experts (16%), books (16%), mental health professionals (16%) and online resources (10%) rounding out the list.
The report notes that small businesses that turned to accounting software were 9% more likely to develop a resilient organisation than those that don’t.
The authors of the report noted that their measurements of resilience were based on the resilience scale that was developed by a team of researchers at the University of New Mexico’s Department of Psychology. Their methodology included surveys with 514 small business leaders, as well as 505 Australians aged over 18. Interviews were compiled with datasets and population estimates garnered from the ABS to come up with a reliable set of predictions.
“Dealing with cash flow issues given the COVID-19 pandemic is an example that will resonate with many small businesses. Not having the right tools to make it easier for customers to pay you faster could really put the brakes on a business’ cash flow. While it seems like a small thing, not everyone is using payroll software, which streamlines the JobKeeper payments process.”
“Those who can identify and draw on the right resources will find the going easier,” Allert says. “They can tap into JobKeeper – ready payroll software or engage professional accountants to quickly access the Government stimulus funds and retain staff through the current challenging circumstances. They’ll be much more likely to bounce back,” he concluded.