By Zilla Efrat
According to the 2023 Small Business Data Report, published by the Council of Small Business Organisations Australia (COSBOA) and Square Australia, consumers are still pulling in their belts.
Indeed, 69% of the small businesses surveyed for the report said they had felt the effects of tighter discretionary spending in the last six months of 2023.
This follows a slowdown in sales in 2023. Year-on-year sales growth at the end of 2022 was 26.8%. However, at the end of 2023, it was 4.5%, the report notes.
But there is some good news for some in 2024. The report predicts consumer spending sentiment will be strongest across three sectors: travel, experience, food, drink and entertainment.
Cost of living crisis bites
The news comes as Australian small businesses and their customers continue to be affected by rising interest rates, inflation and cost-of-living pressures.
According to COSBOA CEO Luke Achterstraat, businesses are also contending with dynamic conditions, such as supply chain disruptions and ongoing uncertainties.
This, he says, has influenced their hiring decisions. Similarly, the Reserve Bank of Australia has found that businesses’ intentions to expand their workforce in 2024 have fallen from 2023.
Reflecting on the report’s findings, Marco Lamantia, executive director of Square Australia, says: “Aussie businesses are showing their ingenuity and resilient best by continuing to grow, despite the challenging macroeconomic environment. They’re being proactive and turning to technology to help them do more with less.”
Navigating rough seas in 2024
So how can your businesses navigate the continued economic turbulence in 2024? Here are some starting tips:
Set your course
US military general Omar Bradley once said: “Set your course by the stars, not by the lights of every passing ship.” Remember your vision and purpose, why your business exists, what gap it fills, who it helps and why you shouldn’t give up. That may keep you focused on the path to your intended destination and prevent you from taking knee-jerk twists and turns around every time the seas get rough.
Plan for all scenarios
Embrace scenario planning by identifying the driving forces of your business and possible changes in your operating environment. By considering the different scenarios that may arise, you can better plan for how to deal with them and mitigate their risks.
Cut costs wisely
Don’t just cut costs. Pruning the wrong costs might hinder your business’s growth. Compare your cost structures with other businesses in your industry and with your past figures to identify areas for improvement.
Allocate strategically
Strategically reallocate resources such as people, money and time to the activities required to achieve your goals and priorities. CPA Australia says if you don’t do this strategically, you may need to reverse any cost-cutting measures in the future.
Lower debt
Reduce your reliance on external debt by focusing on boosting the productivity of existing assets and employees. Remember that cash is king and the more you have of it, the less external finance you will need.
Improve cash flow
Improve your cash flow by chasing late and outstanding payments from your customers and making use of your suppliers’ payment terms. Prepare regular cash flow forecasts and get rid of slow-moving stock.
Manage risks
CPA Australia adds that you should also develop risk management strategies to address risks such as relying too heavily on a small number of large customers or just one supplier. It also advises not relying too heavily on one type or source of finance.
Don’t set and forget
Keep revisiting and updating your business plan and budgets so they reflect the current circumstances as business conditions change.