About the study
Money conducted an independent survey of 261 Australian businesses – 88% of which are SMEs. It asked business owners if they had thought about closing due to challenges within, and external pressures on, the business to ascertain the fragility of Australian small businesses amid the devastating consequences of the pandemic.
Money surveyed businesses across a range of sizes: small (1-50 employees), medium (51-200 employees) and large (more than 200 employees).
Will businesses be making capital purchases in FY21?
The survey revealed that two in three businesses (66%) were planning to invest in equipment, vehicles, trucks or other capital in FY21. A greater proportion of small businesses were likely to invest in capital: 88% of large businesses, 91% of medium businesses and 92% of small businesses. However, only 41% of micro businesses planned to make capital purchases in FY21.
Across the states, more WA businesses (78%) are likely to be purchasing capital in the upcoming financial year. This compared with 43% of ACT businesses and 61% of businesses in Victoria.
The reality is that running a business is hard – and most have considered closing more than once
When asked to think about their business journey, just 38% of business owners said they have never considered closing due to challenges within the business or external pressures. A concerning 32% said they have occasionally been at this point, 8% answered often, and 23% answered rarely.
When comparing organisation size, large businesses seemed to struggle the most, with 55% of large business owners saying they often thought about closing their doors. This is compared with 44% of medium-sized businesses, and 25% of small businesses.
Western Australia could be the most difficult market for small businesses. Half of business owners in WA admitted they had thought of closing on a handful of occasions, compared with 35% of those in Victoria, and 27% in NSW.
What are the major challenges causing business owners to consider giving up?
Respondents were asked to nominate the major challenge that motivated them to consider giving up the business. One in three (35%) nominated financial issues as the number one challenge. This includes cash flow problems, the most common of all the challenges (chosen by 16% of respondents), inadequate revenue or profit (11% of respondents), and poor customer acquisition and retention (8% of respondents).
The results revealed that smaller businesses seemed more likely to experience internal issues, with 13% of small business owners citing employee issues as a challenge that motivated them to consider giving up the business, compared with 11% of medium-sized businesses and 7% of large businesses.
Across the country, a quarter of business owners in ACT said inadequate profit caused them to consider giving up their business. Businesses in Western Australia seemed to have similar issues, with 28% indicating cash flow issues caused them to consider the same fate.
More and more business owners are considering short term business loans to bridge cash flow troubles.
Knowing what they know now, would business owners go through the journey again?
When asked if they would go through the business journey again knowing the challenges involved, one-fifth (19%) of all business owners said they would not, with a quarter (25%) still undecided.
Small businesses seemed to be less inclined to want to go through the journey again, with 23% of small businesses saying they wouldn’t, compared to only 10% of those from large businesses.
Businesses in NSW seem to have gone through bigger challenges than those in other states. 28% said they wouldn’t go through the journey again knowing the challenges they would face, compared with 18% in Victoria and 16% in Queensland.
What sacrifices did business owners make to start, operate and grow their businesses?
Seeking to understand the impact of these challenges on the business owners themselves, Money asked respondents if they made significant sacrifices to start, operate and grow their businesses. Just 22% of respondents said they did not make major sacrifices.
Some of the sacrifices that 78% of business owners did make have altered their lives. A significant 40% admitted they spent less time with their family than they normally would, and 30% said that, for years, they paid themselves less than market rates.
Concerningly, those with smaller businesses seemed more likely to feel the impact on their social life, with almost half (47%) of small business owners saying they spent less time with family, compared with 39% of medium-sized business owners and 36% of large business owners.
28% of small-business owners also admitted to paying themselves less than market value for years, compared with 36% of medium-sized business owners and 19% of large business owners.
