Australian SMBs remain buoyant despite economic storm brewing – PayPal Australia study reveals

  • 82% of Australian SMBs expect to weather the current economic climate, which 74% believe will become a recession in the next 12 months.
  • 71% are equally or more concerned about the current economic conditions as they were about COVID-19 
  • Applying past learnings and upskilling in technology seen as key strategies for SMBs to maintain financial health
  • 59% of Aussie SMBs say high cost-of-living and its impact on consumer spending is the biggest threat to their business

New research from PayPal Australia reveals a growing concern among Australian small businesses, with the majority (74%) predicting a recession in the next 12 months. The research, which explores SMBs' attitudes towards current market conditions including pressures related to the rising cost of living, did however find that 82% expect to weather the storm and still be in business after that period.

The four biggest potential threats to SMBs over the next 12 months according to the survey are the high cost-of-living impacting consumer spending (59%), rising energy and fuel prices (52%), maintaining a steady cashflow (37%), and increasing cost of materials and other supply chain (25%). The culmination of these threats is so great that 71% of Australian SMBs feel the current economic climate is equally or more concerning than COVID-19’s impact on the economy.

These concerns are so profound that they have led some SMB owners and decision makers to literally lose sleep. Seventy-four per cent (74%) say they have suffered sleepless nights due to worries about their business.

Despite the fears and concerns, there appears to be a healthy amount of confidence among Australian SMBs, with eighty-two per cent (82%) expecting to be in business 12 months from now.  

When asked what tools, techniques and resources they employ to take control of the financial health of their business during the current times, over half (55%) said that learning from past mistakes was key, and 34% say they have upskilled themselves with technology, including learning to use financial management software.

One-in-six small businesses (16%) take a ‘head in the sand approach’ to their finances, agreeing that they ignore the financial health of their business because they’re worried about what they’ll find out. This compares to two-thirds (66%) who are focused on monitoring their finances in a systematic way and being closely across the details of their business’s financial position.

One business owner that knows about adaptability all too well is Richard Kelsey, the Co-founder and Director of Beer Cartel. After being in the unique situation of seeing an uplift in demand across their online store during COVID-19, Richard and the team revaluated the business’ operations and decided to temporarily close their retail store during the height of the pandemic and shift more of their staff to online. This simple, yet effective move helped Richard instil a resilience strategy that he believes will help Beer Cartel to manage the current economic challenges being faced.

“The move to divide the team with half based at home and half on-site in the warehouse forced us to embrace new technology, adopting video calls, Slack and project management software, which we had not used prior to the pandemic. We also started to get creative with our products, like creating a quarantine beer advent calendar building on the success of our very popular Christmas beer advent calendar”, said Kelsey. “Now faced with cost-of-living pressures, we’re looking to launch value packs and as well as a loyalty program to help support customers who might be price sensitive.”

Australian small businesses have been described as the backbone of the economy and there’s no denying that with the freedom of running your own business comes responsibilities and hard work. To keep their businesses going, half of small business owners and decision makers (48%) regularly work weekends and try do everything themselves (46%). More than one-third (35%) regularly go for six months or more without a holiday and over a quarter regularly work more than 12 hours a day and pay themselves less than other staff members (both 27%)

“If there’s one thing the COVID-19 pandemic taught us, it’s the resilience and adaptability that Australian small businesses can show in the face of tremendous adversity,” said Vanessa Patrizi, Head of Small Business at PayPal Australia. “Despite the challenges, most small businesses expect to navigate this period of uncertainty by using past learnings and digital-first approach to prosper. It is during these times of adversity that some of the biggest success stories and innovation can happen.”

About the research
PayPal’s 2022 Australian SMB Research surveyed 413 small business owners and decision makers over 18 years of age. 200 were male and 213 were female. 73% of survey respondents were business owners, while 27% were in business decision making roles, like a managing director or similar. Out of those sampled, 35% were Gen Y and Millennials, 39% Gen X, 23% Boomer, and 14% Gen Z. The research was conducted nationally with a state split of NSW (27%), VIC (28%), QLD (23%), SA (9%), WA (10%), ACT (1%), TAS (2%), NT (0%). The research was in field from Monday 4th July 2022 until Tuesday 19th July.

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