Lack of customers, staff cause headache for business

By: Graham Gardiner

Australian small businesses are being hit in both directions, with supply and demand variables impacting operations, according to the March

Australian small businesses are being hit in both directions, with supply and demand variables impacting operations, according to the March Sensis Business Index released today.

Report author Christena Singh says small businesses are experiencing weak consumer demand, as well as difficulties finding staff and accessing credit.

"During the quarter, the landscape has generally deteriorated for Australian small businesses.

"However, the trading environment remains much more favourable than it was 12 months ago at the height of Australia’s economic downturn when business confidence was at a low," she says.

Weakening profitability, sales
Sensis data shows after rising over the last nine months, profitability has weakened slightly during the quarter, dropping from -4 percent to -3 percent.

However, profitability among small businesses is considerably higher than this time last year.

With less government stimulus in the marketplace, consumer demand also fell strongly during the quarter.

The sales indicator has been driven into negative territory for the first time in nine months (-2 percent), but also remains well above the lows experienced 12 months ago.

Employment slump
Employment by Australian small businesses fell sharply during the quarter from 0 percent to -7 percent, the lowest level recorded in the 17-year history of the survey.

"The reduction in employment can be attributed to sluggish demand. However, this is only part of the explanation, as small businesses are also experienced greater problems finding and keeping staff," Singh explains.

Almost one in 10 small businesses are now having issues finding and keeping staff.

The wages and salaries indicator dropped back 1 percent to 5 percent over the quarter.

Overall, the greatest problems experienced by small businesses are lack of sales, cash flow, the economic climate, and finding and keeping staff.

Continuing on the supply side, small businesses are experiencing some difficulties accessing credit to fund ongoing operations or expansion.

Overall, 35 percent of small businesses feel it is relatively difficult to access finance, compared with 20 percent indicating it is relatively easy.

During the quarter, one in five small businesses tried to access finance. Almost two-thirds of these were successful.

Drop in confidence
Not surprisingly, given the trading environment, business confidence has softened over the quarter.

Confidence dropped from 52 percent in the December quarter to 49 percent.

"After rising for three consecutive quarters, the business confidence indicator has fallen this quarter," Singh says.

Small business support for the Federal Government also fell this quarter, with the Federal Government’s approval rating now at the lowest level since November 2008.

Overall, 18 percent of small businesses believe the Federal Government’s policies support small business, while 31 percent believe the policies work against them, and 51 percent feel they make no difference.

Cash payments, tax cuts, the stimulus package and the tax investment incentive for small businesses are the main reasons for support.

Perceptions the government is only concerned with big business, and that there is too much bureaucracy and paperwork and no incentives are the key reasons for disapproval.

The Sensis quarterly survey began in 1993 and provides the latest snapshot of small and medium enterprise (up to 199 employees) business activity in Australia. It is based on a sample size of 1,800 from metropolitan and regional areas, interviewed February 1-16.

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