What steps are Australian
SMEs taking to combat
their biggest challenges in
FY23?

About the Study

Small Business Loans Australia commissioned a survey of 253 Australian small-to- medium business owners and decision makers to gauge their biggest concerns for the financial year ahead. Respondents were asked what they think will be their business’s biggest challenge in FY23 and to specify the actions they will take to help their business through a tough year.

Small Business Loans Australia surveyed businesses across different organisational sizes: micro (1-10 employees), small (11-50 employees) and medium (51-200 employees).

What are the biggest challenges SMEs believe they will face in FY23?

The biggest challenges SMEs believe they will face in FY23. A State by State comparison.

Across the States, a higher proportion of WA businesses expect reduce consumer or client spending due to inflation and rate rises to be their biggest challenge, at 69 per cent. This compared with 47 per cent of SA businesses, 38 per cent in Victoria and 33 per cent in Queensland.

WA SMEs are also more likely to be concerned by higher wages due to the minimum wage increase: 38 per cent said this was their biggest challenge, compared with 24 per cent of NSW businesses, 18 per cent in Victoria and 15 per cent in Queensland.

In contrast, fast-rising inflation was identified as a significant challenge by Victorian SMEs for FY23 – chosen by 47 per cent of respondents in Victoria. This compares with 38 per cent in NSW and Western Australia, and 37 per cent in Queensland.

The biggest challenges SMEs believe they will face in FY23. By business size.

Larger SMEs were more likely to identify significant challenges for FY23. Fifty-one (51) per cent of medium-sized businesses (51-200 employees) indicated that fast-rising inflation was their biggest challenge, compared with 41 per cent of small businesses (11- 50 employees) and 40 per cent of micro-businesses (1-10 employees).

Paying higher wages on the back of the minimum wage increase was also identified as a major challenge for medium-sized businesses, at 46 per cent. In contrast, 35 per cent of small businesses and just 13 per cent of micro-businesses said the same. This is likely due to the fact that medium businesses have a higher head count, compared with micro- businesses that operate with just a few staff. Larger businesses also navigate higher overheads and other costs that are likely steadily increasing in price due to inflation.

Forty (40) per cent of medium-sized businesses also identified fast-rising interest rates as a significant challenge, compared with 37 per cent of small businesses and 23 per cent of micro-businesses.

What changes will SMEs make to get through
challenging periods?

SME owners were also asked to identify the actions they would take to get through the challenges they specified, should things get tough. Respondents could select from a list of six actions, and could choose more than one. Nearly nine in 10 (85 per cent) would take at least one action.

An equal 40 per cent of SMEs owners said they will pay themselves less or postpone any planned investment in the business, to see them through a challenging period. Thirty-nine (39) per cent indicated that they would cut costs, such as switching to cheaper suppliers or cutting discretional business spending.

Other actions businesses would take to get through a challenging period included letting go of some employees (chosen by 11 per cent of respondents), refinancing or paying off business debts faster (chosen by 10 per cent), and seeking financing to help the business through tough times (8 per cent).

What changes will SMEs make to get through a challenging period?

Across the States, more SMEs in Queensland and South Australia (an equal 54 per cent) said they would cut costs to get through a challenging period. This compares with 33 per cent of Victorian businesses and an equal 31 per cent of those in NSW and Western Australia.

A higher proportion of WA business owners said they would pay themselves less, at 50 per cent, compared with 39 per cent of respondents in NSW, 38 per cent in Victoria and 35 per cent in Queensland.

An equal 46 per cent of SMEs in NSW and Queensland said they would postpone planned investment in the business to cope through a challenging period. In contrast, 38 per cent of WA SMEs and 21 per cent in South Australia said the same.

Will you do any of the following in FY23 to get through a challenging period, if things get tough?