How we can save small business in 2020 (and why we need to).

Small businesses make up more than 99% of all Australian businesses. They contribute $380 billion to the economy each year and employ around five million people. Small businesses form the backbone of our economy and are key drivers of the country’s growth and employment. Back in August, the ABS found more than a third (35%) of Australian small businesses expect to find it difficult or very difficult to meet financial commitments over the next three months. We are now nearing the end of November and reality is biting hard.

South Australia lens

“Small businesses are the lifeblood of our state’s economy and we are determined to do everything in our power to help keep their lights on, their doors open and their hardworking people in jobs.”

SA Premier Marshall.

A recent Economic Briefing Report prepared by University of Adelaide economists from the SA Centre for Economic Studies (SACES) highlights:

• SA unemployment will rise to 10% by June 2021 and remain high into 2022
• Economic output will not recover for a year or more
• High household debt will hold back consumption
• Small businesses have depleted their financial reserves

The Business Impacts of COVID-19 Survey found that SA small businesses were almost twice as likely to report that they expected to find it difficult or very difficult compared to large businesses (35% compared to 18%). There are people behind these numbers. 100,000 people work for the SA Public Sector. But small business generates $35 billion to the state’s economy and employs more than a third of SA workers. There are more than 143,000 small businesses (employing fewer than 20 people) operating in South Australia, or 98% of all businesses in the State. And nearing the end of 2020, small businesses are hurting badly through no real fault of their own.

Prior to the COVID-19 pandemic, operating a small business was getting tougher under the weight of red tape and skyrocketing business costs such as electricity bills and council rates and taxes like the ESL and payroll tax. And then COVID-19 forced closure for many months in 2020, stalled consumer demand and confidence and created unprecedented uncertainty and stress.

The sudden lockdown last week cost small businesses millions of dollars despite thankfully only lasting three days. It isn’t only the kinds of small businesses with well-known challenges, such as restaurants and tourism operators and hotels, that have been greatly affected. So are other small businesses, in educational services and service provision. Many private-sector educational services, childhood-education centres, sports classes, and art schools, where physical distancing is a challenge, become vulnerable. Small businesses in the healthcare sector—including ambulatory care such as dentists’ offices and small private practices that patients may be reluctant to visit in person—have also been highly affected.

Permanent closures of small businesses are thought to generate longer-lasting unemployment than temporary furloughs and layoffs do. Small business are the entrepreneurship engines of the economy and also our economic multipliers. Many larger firms rely on small businesses as suppliers, direct customers for B2B services, or employers for many of their customers. And small businesses are community hubs, providing a heartbeat to local communities and vital physical places for people to interact.

Many SA businesses are no longer on the Federal Government’s JobKeeper wage subsidy which helped to meet payroll expenses. This means during last week’s lockdown, and any future lockdowns, many businesses have no safety net. Due to the State Government’s strong health management to date, Business SA’s Survey of Business Expectations for the September quarter found many businesses had returned to pre-COVID levels of sales. While 66% of respondents said they received JobKeeper 1.0, only 35% said they qualified to receive the JobKeeper 2.0 revised payment from October to December.

Small business owners are craving certainty and understanding from the wider community. Social media feeds has been flooded with community commentary labelling small business owners as “whingers” who have no right to express concern about foregone revenue during lockdown and who should just be grateful it only lasted such a short time. Many people do not understand the concept of profit margin on a sale. Net profit is what money is left over after all business expenses have been paid. For many small businesses, net profit sits around 5 – 10% of sales which is a slim margin for error. When forced to close even for a short period of time with no planning or warning, overheads still have to be paid including payroll and rent and replacement inventory. This money needs to be found from free cash flow or increasing debt and many small businesses have run down cash reserves during COVID-19 and are already carrying debt.

What you can do to help small business – spend locally

If small business collapses, the economy goes down with it. The idea that small businesses are infinitely resilient in a global pandemic and will just trade out of this is fanciful. Resilience has been overplayed in 2020. What can you do to help? Spend local this Christmas season. Please think about:

• Buying products from locally owned organisations
• Getting gift cards and vouchers for services from local businesses
• Sharing small business social media posts
• Getting takeaway from locally owned venues
• Shopping at locally owned shops like butchers and bakeries
• Checking in on family and friends who own and run small businesses to see how they are travelling
• Rescheduling not cancelling the events you planned at a small business
• Being patient and courteous to essential workers and respect COVID Marshalls and social distancing measures

Small business mental health

“What does the future hold? When will a lockdown happen again? Is my business doomed? Have I just been ruined by this? How am I going to make payroll? What if one of the team or a customer tests positive for COVID? What if this lasts another year?” 2am small business owner thoughts

The prevalence of mental health issues among small business owners in Australia is more than double the national average. More than half (56%) of Australia’s small business owners are struggling, compared to one in five people in the wider population. 57% of small business owners are overstressed, eight in ten are sacrificing sleep to keep the lights on and doors open, and most are paying themselves less than the average Australian wage. (Source - Smart Company, 2019 pre-COVID).

The impact of COVID-19 on small businesses is devastating and the toll it is taking on people's mental health is serious. Small business owners are running on empty and are under a particularly intense form of stress. There was a sense that things were starting to return to normal, there was a renewal of hope and recovering revenue and then last week’s “Circuitbreaker” lockdown in South Australia slammed many small business owners back in to the abyss despite acknowledging it was necessary. 

It feels like being caught between the Devil and the deep blue sea, trying to intelligently plan in a landscape with completely abnormal variables that change constantly. It is really, really difficult. Limbo is not the friend of creativity or sustained optimism. Absolutely exhausted and scared and still trying to put on a strong front to staff and customers, small business owners need your help this Christmas season.