Here’s the Latest Lowdown From Invoice2go to Support You During Challenging Economic Times
Has it been over 6 months since COVID-19 landed in Australia (remember the first case on January 25? It sure changed the world as we know it). Since then, the pandemic has turned everything on its head. It’s impacted the way we live our lives, from how we work, socialise, spend time at home, and take care of our health.
The ‘new normal’ isn’t entirely negative (we’ve enjoyed our fair share of home-cooked meals, home improvements and hobbies we never had time for). Still, there’s no denying that we’re living in difficult economic times, with small businesses being among those hit the hardest. If you’ve found your work has suffered during this period, it’s only natural to start questioning the future. What can you do to help your business survive these huge hurdles ahead?
During these uncertain times, we want to ensure you’re well-supported. This guide dives into the facts and figures to help you understand your situation and lays out your options for relief. We’ll get into the nitty-gritty of:
- The numbers and statistics related to COVID-19 and the way it has impacted small businesses
- The types of businesses that are struggling most vs the industries that are staying afloat, or even booming
- The resources and relief currently available to small business owners
There is value to be gained from the past, by looking back on what worked and what didn’t. We’ll also be analysing the last recession to help us understand what went wrong, and what you can do to help your business going forward.
Finally, we’ll end on a positive note. We share our best tips to keep your business going despite the current challenges you may be facing. Let’s dig in:
How has COVID-19 impacted small businesses in Australia?
To date, Australia has had over 18,000 confirmed coronavirus cases. Beyond the impact on the public’s health and the Australian Department of Health, COVID-19 has significant implications on business owners and the economy as a whole.
At the beginning of June, Australian Treasurer John Frydenberg announced Australia is in its first recession in almost 30 years after GDP for the March quarter shrunk by nearly 0.3%.
Small businesses are definitely feeling the economic squeeze, with 42% of companies accessing support measures including wage subsidies, deferring loan repayments or renegotiating lease arrangements.
One in ten businesses reported they would have no choice but to shut shop if support measures were no longer available.
The common issues small businesses face include:
- The need for crisis scenario planning and management
- Cash flow management and concern about defaulting on loans
- Managing their workforce and redeploying employees where they are most needed
- Ability to retain employees
There is some light at the end of the tunnel. Gross domestic product is forecast to recover and grow 2.5% in 2021 after falling 3.25% so far this year. The unwinding of containment measures in the June quarter led to a noticeable recovery in economic activity. Australian unemployment is expected to peak around 9.25% in the December quarter, with labour markets expected to strengthen in 2021 onwards.
Who is struggling the most?
COVID-19’s impact has been felt not just in Australia, but worldwide, as drastic, but necessary lockdown measures have forced a variety of industries to shut down. Because of this, the unemployment rate has reached a 19 year high, at 7.4%.
While no sector or region has been left untouched by the COVID-19 economic fallout, some have been hit worse than others. In particular, people in industries that have been prohibited from operating have been the hardest hit.
- Directly hit industries are those forced to halt operations as a result of public health measures. Sectors such as hospitality, air travel, tourism, creative arts, and entertainment are the industries impacted.
- Secondarily hit industries are those still able to operate but have experienced a considerable decline in business. These include retail, mechanics, accommodation, and tertiary education.
- According to the Australian Government Newsroom Survey, industries such as accommodation, food services, health care and social assistance were significantly impacted, with over 80% of businesses affected ‘a great deal’. In contrast, industries such as construction, manufacturing, professional, scientific and technical surfaces had less than 50% of its businesses affected ‘a great deal’.
Close to 3.5 million Australian workers (or 28% of all workers) are in these hard-hit industries. 17% of people aged 15 to 66 live in a household where the primary breadwinner is employed by one of these struggling industries.
There’s no denying we’ve experienced a radical shift in lifestyle, and this undoubtedly means some businesses have risen up the ranks in their popularity. For example, Zoom and House Party are now household names, even though many of us had never heard of them before going into lockdown.
The scientific, information technology and finance sectors are among the industries that have been minimally impacted by COVID-19. Additionally, the residential construction market has seen a small boost with HomeBuilder grants for new builds and renovations. This is estimated to support 140,000 direct jobs and 1,000,000 related jobs including sole-trader builders, contractors, designers and architects.
Some retailers have even seen a tremendous spike in sales, such as bicycles, exercise gear, home and garden appliances and electrical goods. Switching to convenient, contactless online sales systems have helped many retailers and small businesses stay afloat amidst the pandemic.
Where can you get help?
Various types of relief are available to support small business owners during this time, as well as many resources you can use to find help. If you’re feeling overwhelmed and concerned for your business, have a read through the following links so that you know what your options are, and where you can seek help if needed.
Start with these official resources to find up-to-date information as well as government advice:
- The Australian Department of Health has provided a Coronavirus (COVID-19) action plan which can help you manage risk.
- The official Coronavirus Resources page from the Australian Government is an excellent starting point for information on the virus and staying healthy.
- The World Health Organisation contains advice for the public as well as up to date news and figures.
Then move on to business support:
- The Australian Government are supplying information and support for your business during COVID-19
- Each state and territory have their own support page set up:
What is a recession?
Australia, alongside much of the world, is now in a recession. While this may sound scary, remember that we have been through recessions before, and we have always come out on the other side.
It can be helpful and reassuring to look back on past economic hardships and see what can be learned from our history. There are often patterns that repeat themselves. You can use these to predict how things may work out, and ultimately, what you can do to minimise the impact in your own life.
Let’s understand what a recession is. A recession is defined as a period of temporary economic decline, during which trade and industrial activity are reduced.
We generally expect a country’s economy to grow as its citizens build wealth through the increase in the value of the goods and services it produces. These goods and services are referred to as Gross Domestic Product (GDP). When GDP starts to decline, and continues to decline for two three-month periods in a row, it becomes known as a recession.
Due to the sudden GDP drop due to COVID-19, the current recession could be the worst the world has experienced in the past hundred years. However, many are hopeful there will be a sharp recovery, as the steep decline was, in part, due to many businesses being forced to shut down.
What can we learn from the last recession?
The ‘Great Recession’ in 2008 took a lot of people by surprise. It began after the global credit crunch which, in essence, left global banking systems short of funds. It resulted in a prolonged period of low or no growth and a rise in unemployment, leaving many people in a dire financial situation across the globe.
Insight from the past can be used as fuel for the future.
Here are the steps that you can take to minimise the impact of the current recession:
- Diversify your skills. “Don’t put all your eggs in one basket”, as they say. Those that are willing to be adaptable, pivot, and hone different skills will always have an advantage during a recession. In a downturn, the needs of the community changes, and your business needs to be able to shift to suit those needs. Case in point: small businesses making face masks.
- Don’t get too comfortable. You may have thought your business was booming, and that it can only go up from here. However, history has shown us that we never really know what’s around the corner, so we should always prepare for the worst. That doesn’t mean you should be a pessimist. Instead, find comfort in the fact that your business is ready for whatever challenges come your way. Organise your business systems to keep your cash flow healthy.
- Cut down unnecessary spending. Protecting your cash flow is vital right now. Whenever we face an economic crisis, we get a reality check on our finances. Now is the time to think about your previous spending habits, reel it in and not make significant financial decisions until things are a little more stable. Now would also be an excellent time to review your inventory costs and make cuts where possible. Here are some useful tips to help you improve cash flow.
- Stay relevant. Contrary to popular belief, you do not want to be cutting back on marketing at this time. Now is not the time to go quiet. Instead, think about what you can be doing at this time to win new customers and retain old ones. Use this time to stand out against the competition and build brand awareness. Monitor your market carefully, be where your customers are hanging out (online) and make sure that you are staying ahead of the curve. Take a look at our marketing masterclass to learn how to make a more effective plan for your business.
- Be patient. The last recession lasted only two years, and the financial sector had mostly recovered by mid-2009. While sacrifices may be necessary right now, just know that this does not mean the changes are here to stay. One day, this will all be a distant memory.
We are living in unprecedented times, and it is entirely reasonable to feel anxious and overwhelmed by the uncertainty surrounding your own business and the economy as a whole. But, remember: knowledge is power. Arm yourself with information. By reading and learning about the resources and services available to you, you can make sure you’re getting all the help that your business needs.
Finally, remember you are not alone and that many small business owners and contractors are all in the same boat. We will all get through this together.
To connect with other business owners like you, and learn and share more valuable tips and tricks, consider joining our Facebook group.