Long-term small business confidence continues to decline, as cost of living pressures, high interest rates and high inflation show no end in sight, according to new research from small business lender, Prospa.
The survey found that small businesses in the hospitality and construction sector were disproportionately affected by extreme levels of stress and burnout in the current economic climate.
Twoin five (41%) businesses say they are confident about the future of their business in 12 months. However, only one-third (32%) are confident about the next five years and 29% about the next decade.
Over one-third (36%) of small businesses said they expect business revenue to increase in the next 12 months, while 38% expect it to remain the same and 23% are expecting revenues to decline in the next 12 months.
Businesses with $2 million+ revenue are most likely to increase their amount of debt owed, with one-third (34%) saying they’ll keep debt the same or increase the amount of debt, compared to small businesses with $500,000 to $2 million (27%), $100,000 to $500,000 (21%) and less than $100,000 in revenue (13%). In fact, 66% of small businesses with less than $100,000 in revenue said they have no current debt or plans to take on debt.
Prospa co-founder and chief revenue officer, Beau Bertoli said, “While short-term small business confidence saw a modest uptick in June, long-term confidence continues to decline. Two in five (41%) of small businesses say they are confident about their business over the next 12 months and this falls to 32% when thinking about the next five years. Only 29% are confident about the future of their business in the next 10 years.
“While some businesses, particularly those with high turnover, are managing to find growth opportunities, the overall environment of rising costs, subdued consumer demand and economic uncertainty continues to weigh on small business confidence and sentiment. This data underscores the need for targeted support and policy measures that boost the resilience and sustainability of small businesses, particularly in the most affected industries.
“High inflation and interest rates have strained household budgets and weakened consumer spending, while operating expenses continued to erode profit margins. This impact is being felt disproportionately among small businesses depending on size and turnover.
“Two in three small businesses reported experiencing elevated levels of stress and burnout, with cost-of-living challenges and lack of consistent cash flow cited as the most common causes. Certain industries, particularly hospitality and construction, are bearing the brunt of these stressors. Over a third of small businesses in construction (36%) and hospitality (35%) report that they are experiencing extreme levels of stress and burnout.
“Australia’s hospitality sector has seen a 41% increase in insolvencies as reported by Equifax, reflecting the severe financial pressures and low discretionary spending affecting these businesses. Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat. The data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small business resilience.”