SMEs hit hard by inflation: It’s time to rethink processes

The vast majority of SMEs in Australia are concerned about rising inflation and its impact on businesses.

The state of the economy is weighing hard on businesses and employees alike, with 81.3 per cent of SMEs concerned about the possibility of Australia falling into recession. This totals around 1.7 million businesses, according to Localsearch’s 2023 Small Business Report.

Organisations appear to be getting hit from all sides, as 23.3 per cent are still suffering from labour shortages. The economy is playing a key factor in business struggles, with 37.4 per cent attributing challenges to “adverse economic conditions, including inflation, interest rates, and reduced consumer spending.”

The situation is so dire that COVID-19, the worldwide disruptor of business, is seen as the most significant challenge for just 19.9 per cent of SMEs in recent years. There are certainly far more pressing challenges, according to business leaders.

Cyber security is one of these issues, with 21.5 per cent of Australian SMEs falling victim to fraud or scams. This has resulted in 22.4 per cent to invest in cyber security software.

Expanding digitally has become a top priority for many businesses, with 24.5 per cent increasing their online presence in the hopes of boosting their audience. Meanwhile, 14.7 per cent have diversified their offerings to reach a bigger audience. These solutions have been implemented to assist in getting businesses through tricky times.

Daniel Stoten, executive chairman of Localsearch, commented: “We’re genuinely excited that small businesses are increasingly investing in marketing to help their business through the tough times we’re currently facing. From our internal data, we know that marketing practices have a three to one return on investment, so these are encouraging findings.”

One such company that has had to rethink its strategy is Balance Mobility. Terence Watson, co-owner, noted that investing in development, and boosting online presence, has been a game changer for his organisation.

“The State of Small Business report reflects the challenging landscape we’re navigating as business owners. We’ve found that investing in our employees’ growth and development has been more crucial than ever,” Mr Watson said.

“We’ve prioritised proactive business planning and adaptability, ensuring our online presence remains robust, and our business model is flexible enough to respond to any challenge. Over the last few years, we’ve heavily invested in marketing, from a website to Google Ads, we’ve taken every opportunity we can to cement our online presence to future-proof our business.”

Gordon Jenkins, founder and manager at Gordy’s Furniture, agreed that times have been tough, and employers must be proactive about managing challenges.

“We have been navigating tough times for a long time now ... I’ve found it harder than ever to find staff that strike the right combination of loyalty to the job, having the right skill set, and have reasonable pay expectations. Most of the time, I end up hiring people who charge a huge hourly rate to deliver an average job. I often end up deciding that I’m better off pocketing the extra cash and delivering the work myself, ensuring that the customer receives the best service possible. I can’t keep working at this high level forever, though; something’s got to give,” Mr Jenkins explained.