In the midst of a pandemic and recession, small business owners in Australia are showing resilience and optimism, a new report says.
Commissioned by global small business platform Xero and authored by leading social commentator Bernard Salt, Rebuilding Australia: the role of small business looks at how small business has fared during COVID-19.
Salt told Food & Drink Business: “What we’re going through is terrible pain and hardship, it is very important to recognise that. The value of this report is to show that if we’re too focused on the pain, we’re not seeing is the green shoots, agility, optimism.”
Xero surveyed more than 1000 small businesses in early June. It found that while two in five had experienced a loss of revenue, almost one in 20 businesses had prospered. “They adapted, adjusted, found new markets, invested in technology, moved online, found new ways of delivering services, sought out new customers, and encouraged flexibility in their staff,” it said.
Salt said that one of the most telling aspects of the survey was that despite the exposure of small business to these difficult times, half the surveyed business owners were confident about the future compared to a quarter who were unconfident.
“Small business owners are born optimists,” he said, “That is why they are running a business, taking risks, employing people. They are survivors, optimists. It is hard-wired into their DNA.”
Salt was at pains to point out this was not to deny the devastating impact COVID-19 has had, as Australian Bureau of Statistics (ABS) labour force data released in late June showed.
Across three months to 20 May, the workforce contracted by six per cent; 821,000 workers lost their jobs including 106,000 waiters, 94,000 (retail) sales assistants, 44,000 baristas and 35,000 kitchenhands.
But while the job losses, which have occurred especially amongst the young and the low skilled, have been well documented, what is less well-known let alone celebrated, are the areas of job (and presumably business) growth over this period, the report said.
Jobs surged in agribusiness (the drought broke), in procurement (hoarding behaviour), as chief executives (sole traders), as web developers (as businesses headed online) and as artisans in a series of craft-related activities including leathergoods workers, jewellery designers and even boat builders.
Key results:
- 59 per cent of businesses report that the COVID-19 crisis has had a negative impact on business whereas 4 per cent report a positive impact;
- 60 per cent of businesses that thrived during the COVID-19 crisis expect to invest in technology over the next three months (July–September), whereas for businesses that struggled, this proportion is just 34 per cent;
- confidence about the state of the industry over the next six months (July–December) was highest among businesses in healthcare (62 per cent), manufacturing (58 per cent), construction (56 per cent) and lowest in professional services (30 per cent), accommodation and food (42 per cent) and education and training (42 per cent);
- 49 per cent of all businesses surveyed remain confident about the next six months whereas 26 per cent remain unconfident;
- 23 per cent of businesses that report having thrived during the crisis say they have further plans to adapt and pivot adapted and pivoted whereas for businesses that have struggled this proportion is 14 per cent;
- 48 per cent of surveyed businesses that have struggled during the crisis forecast future demand by assuming that things will return to normal once COVID-19 has passed, whereas for businesses that have thrived this proportion is 26 per cent;
- 31 per cent of surveyed businesses expect things to improve over July-September,
- 48 per cent expect improvement over October– December and 58 per cent expect improvement over January–March; and
- almost 1 in 4 (23 per cent) expect revenue to jump up by more than 10 per cent by December.
Circuit breaker
The pandemic has been “a circuit breaker forcing businesses to adapt and a defibrillator jolting business into acting with greater urgency”, the report said.
“Businesses of the future were always going to embrace change, to move online, to enable workers to work remotely, to digitise the payments processes, and to market their wares online. The coming of COVID-19 has accelerated these transformational processes.”
But it highlights that at the core of all change lies “the very real human business” of running a small business.
“Yes, the best of the ‘thriver’ businesses are more adept with technology and are more open to the idea of change. But deep down, one of the most telling data points to have emerged from the Xero survey was that regardless of whether the small business is a COVID-19 ‘thriver’ or ‘struggler’, the owner still substantially relies on gut feel,” it said.
When asked, “Looking ahead to the coming six months, how confident do you feel about the state of the industry your business operates in?”:
47.8 per cent were confident because:
- 48 per cent – my industry has largely been able to adapt to the COVID-19 crisis
- 40.4 per cent – consumer demand is projected to be high/bounce back
- 35.2 per cent – the government is helping stimulate the economy
- 21.1 per cent – the Australian economy is strong and will withstand any potential troubles
- 19.4 per cent – my industry is growing
26 per cent were not confident because:
- 55.7 per cent – impact of the COVID-19 crisis on ability to conduct business
- 46.9 per cent – potential local and/ or global recession
- 43.2 per cent – consumer demand is projected to be low
- 34.8 per cent – my industry is declining/ growth is slowing
- 21.2 per cent – global trade tensions
- 14.4 per cent – supply chain issues or currency fluctuations
- 3.8 per cent – skills/labour shortage
Salt told Food & Drink Business the drivers in some industries are harder to grip than others. The base data is a schedule of 430 occupations with 13 million workers. Areas that increased included agribusiness, as the drought broke and production increased, and logistics – procurement managers, warehouse staff and delivery drivers – due to hoarding behaviour and consumers staying home.
“Another element, not cleanly picked up by the data, is roles like a supermarket shelf filler, but it reflects the agility of the food & beverage sector. Yes, we can all hoard for a couple of weeks but then settle down as we place our faith in the supply chain as well as adapt to new realities,” Salt said.
KPMG chief economist Dr Brendan Rynne said Treasury is anticipating unemployment to peak at around 9.25 per cent in the December quarter 2020, and to gradually decrease after that. Unemployment at that level hasn’t been seen since 1994 as the country recovered from the early 1990s recession, Rynne said.
He said that with uncertainty high and confidence low, private investment will be low, with the government stepping in to “prevent the economy slipping off a cliff”.
“One area where this is notable is in the SME credit schemes – $40 billion in secured loans has been made available, yet take-up has only been $1.5 billion. This just shows that businesses don’t yet have the confidence to extend their debt levels. Simply, you can’t take an investment horse to water and make it drink,” Rynne said.
The report highlights the fact that COVID-19 has amplified the kind of skills and scale of transitions that were perhaps necessary for many businesses to survive and thrive into the 2020s.
“What small, and possibly also large, businesses must do, it seems, is to muster the resilience to respond, to adapt and to innovate,” Salt said.
“It’s a common narrative that we’ve heard previously: business must be agile. And this agility is more needed now and in the months and years to follow the COVID-19 lockdowns, in the broader process of rebuilding Australia.
“Indeed, this report maps out the landscape, both the good and bad, to enable agile businesses and their leadership teams to understand where the best opportunities might lie when we all reach this brave new post-lockdown world.
“Make no mistake, some businesses have flourished in these most trying of times. The objective of this report is to find those green shoots, to understand what might be enabling some businesses to succeed while others struggle, and to show that there is a way forward to prosperity.”
