A staggering one in three SME operators are fearful of falling into insolvency in the near future, amid suggestions that many small businesses are failing to support each other.
Launching its annual Shop Small campaign promoting the value of supporting small business, American Express released new research that suggested one-third of business operators fear going to the wall within the next three to five years.
The research incorporated 20-minute surveys with 1,019 Australian adult consumers and 864 small businesses nationwide and was published in a report titled The economy of shopping small: Back your backyard.
It found that shoppers are splashing their cash less often with small businesses than they did just two years ago.
Just 70 per cent of shoppers polled said they spend money in a local SME at least once a week. In 2016, that figure stood at 82 per cent.
That is causing businesses to be increasingly pessimistic about their ability to survive longer term, with three in five reporting either flat or falling revenue growth.
A major cause of the problem, according to American Express, is that 59 per cent of consumers don’t see their shopping habits as having any material impact on the success or failure of local businesses.
It is a particularly troublesome finding, given that a similar number of people (58 per cent) had previously worked for a small business.
“This research is a timely reminder that none of us can take small businesses for granted and that every dollar spent with a small business counts. Each and every one of us can make a difference by ensuring ‘shopping small’ is part of our regular shopping routine,” the company’s Lisa Belcher said.
Last year’s Shop Small research found that consumers had good intentions of supporting local businesses, but the vast majority admitted these businesses do not supply all of the products or services they need. Higher prices and limited trading hours were also a turnoff for would-be customers.
Business leaders satisfied with their lot
While such figures may give the perception that things are gloomy for business owners, the Shop Small research found business leaders are actually getting happier.
“There has been a 10 per cent year-on-year increase in the number of small business owners who say they’re happy running a small business (59 per cent in 2018) and almost two-thirds (63 per cent) would go into small business if they had their time over again,” the report said.
“However, it’s clear that small business owners need more support. Two in five (39 per cent) say it’s difficult to make a financial success and over two-thirds (68 per cent) wish customers knew just how hard it is to run a small business.”
SMEs failing to support one another
One of the most staggering findings, however, is that small businesses are often failing to support one another.
When asked to rank who demonstrates excellent support for their business, SMEs ranked consumers and family members equally (37 per cent) as the most reliable source of support.
That was followed a distant second by large business customers (28 per cent).
Languishing in equal last (on 26 per cent) was friends and small business customers, suggesting that most small businesses fail to rate their peers as a source of meaningful support.
That is despite 42 per cent of SME owners stating they already actively collaborate with five or more other businesses.
“People who are new in business often make the mistake of seeing other businesses as the enemy or rivals,” Peter Strong, head of the Council of Small Business Organisations of Australia (COSBOA) was quoted by the report as saying.
“After a time, they discover the value of conversations with these other business people, particularly those in the same industry and the same community. We do compete, but we also share and support each other when needed.”
Government assistance failing to reach its destination
Assistance offered to SMEs by governments of all levels appear to be missing the mark.
According to the report, most leaders suggest the government could be doing more to support them.
However, just 15 per cent admit they are very knowledgeable about assistance available from the federal government. Even less – just 8 per cent – have directly accessed this support over the past year.
“[This highlights] a considerable opportunity for increased government education within the small business sector and more proactive research by small business owners about the opportunities available,” it said.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.