The survey by Small Business Loans Australia found that 42 per cent of SMEs said fast-rising inflation would be their biggest challenge, while reduced consumer or client spending due to inflation and RBA rate rises were a top concern for 41 per cent.
According to the survey other challenges SMEs expect to face in the financial year 2023 included fast-rising interest rates (28 per cent); having to pay higher wages on the back of the minimum wage increase and employee wage expectations (22 per cent); the inability to fill roles in the business due to candidate shortages (19 per cent); and accessing financing or servicing loans and other debts (11 per cent).
Overall, nine in 10 respondents reported that they expect their business to face challenges, with just 10 per cent stating they would not experience any challenges through FY23.
The survey found that larger SMEs were more likely to identify significant challenges for FY23. Fifty-one 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 microbusinesses (one to 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 microbusinesses said the same.
This is likely due to the fact that medium businesses have a higher headcount, compared with microbusinesses 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 microbusinesses.
SME owners were also asked to identify the actions they would take to get through the challenges they specified, should things get tough. 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 (11 per cent), refinancing or paying off business debts faster (10 per cent), and seeking financing to help the business through tough times (8 per cent).
