A study of Australian businesses commissioned by Money.com.au has found an alarming number of SMEs have come close to going under, fuelling speculation on the number of so-called ‘zombie’ businesses expected to fold in September.
An independent survey of 261 Australian business owners through financial information platform Money.com.au found 62 per cent of SMEs have been on the brink of folding at some time, and 78 per cent say they have made major sacrifices for the survival of the business.
Financial issues was specified as the top challenge behind the struggles, nominated by 35 per cent of respondents, incorporating cashflow problems (16 per cent), inadequate revenue or profit (11 per cent), and poor customer acquisition and retention (8 per cent).
Close to a third of those surveyed said they had paid themselves less than market rates, often for years, and over 40 per cent admitted to sacrificing social lives, or personal leisure. Almost half (44 per cent) said if they had known the challenges they would go through they would not have gone into the business.
There has already been speculation around the number of possible ‘zombie’ businesses being kept artificially alive by the Federal Government’s subsidies, which end 27 September, and Money.com.au spokesperson Helen Baker says understanding the fragility of SMEs is critical to Australia’s economy.
“It is important that our governments understand how vulnerable SMEs are to external influences, and yet how crucial the sector is to our economy.
“Small businesses deliver 35 per cent of Australia’s GPD and employ 44 per cent of our workforce.”
A licensed financial advisor, Baker has been observing how sectors such as hospitality have responded to the crisis.
“Businesses also need to adapt to survive in the long term, which we’ve seen with many pubs, bars and restaurants adopting new takeaway options and delivery models.”
She suggests prudent management is essential, particularly for businesses with funding provision, which will need to manage their accumulated debt.
“They will need to consider aspects including what debt commitments they have and what interest rates they’re paying, whether they deferred payments and if that should continue, and what amount of financial support they would need to make it work.
“A financial planner or business coach can be a great point of call to help develop a plan for economic recovery, particularly for ‘zombie businesses’ that may have already been on the brink of folding before the pandemic.”