The latest MYOB Business Monitor reveals that many Australian SMEs are bracing for a tough 2023, with more than half (52 per cent) saying the country will be in recession within the next 12 months and 57 per cent saying the economy will decline in the coming year.
And with the rising cost of doing business, some SMEs are trying to make the most of the situation by accepting the fact that they will be making less (or no) profit (31 per cent). Other SMEs have resorted to passing on the cost increases to customers (30 per cent) or dipping into their savings (24 per cent).
There are also difficulties such as the still ongoing COVID-19 pandemic and the natural disasters of the past year which affected 24 per cent of SMEs, according to the report.
MYOB also pointed out that while preparation for uncertainties can somewhat alleviate the situation, it does not necessarily make it easier for the SMEs that have already faced difficult challenges in the past couple of years.
“For the first time since the onset of COVID-19, the pandemic didn’t make the top five pressures facing SMEs,” Emma Fawcett, General Manager of SME at MYOB, said. “Instead, the main concerns are fuel prices, cost of utilities, interest rates, price margins and profitability, and cashflow. These are all indicative of the current economic environment and provide an insight into what businesses will be thinking about in the year ahead.
“Tellingly, these pressures centre on immediate business operations concerns, rather than looking at investment for future scaling or growth,” Fawcett added. “It suggests that businesses are focused on the most pressing and current challenges, rather than making bold, confident decisions about the future.”
Fawcett stressed the resilience shown by SMEs and the fact that they have made the best of another extremely challenging year.
“Lessons taken from the pandemic will hold small-business owners in good stead, though it’s likely left many feeling uneasy,” Fawcett said. “In fact, 65 per cent of respondents said the pandemic made them more conservative or cautious in their planning. While that might not be great news for the economy overall, making prudent decisions may help them to navigate difficulties ahead. The challenge will be how to balance that caution with enough confidence to keep their business thriving.”
MYOB cited its 2022 report SME resilience, which found small businesses were holding onto higher cash reserves to protect themselves following significant upheaval. Given the latest Business Monitor findings, MYOB believes that similar behaviour may be expected in 2023 and beyond.
MYOB also noted that some sectors, such as finance and insurance, have fared better than other industries, especially hospitality and retail, as they rely on consumers having more disposable income, and are thus more prone to be affected by a cost-of-living crunch.
“Business owners will need to draw on all the lessons learned over the past few years and ensure they’re making smart decisions and maximising their productivity as they prepare for the coming year,” Fawcett said. “I’d encourage consumers to support SMEs where they can as they get out and about this summer.”
