2 in 3 SMEs admit they have considered folding multiple times

New research has revealed that 62 per cent of SME business owners have been on the brink of folding their businesses in the past due to financial and other struggles, with just 56 per cent of owners admitting they would still have opened their business has they known the challenges they would go through.

The findings come from an independent survey of 261 Australian business owners (88 per cent of which are SMEs) commissioned by free online financial information platform Money.com.au.

The survey revealed that only 38 per cent of business owners have never considered business closure, while a concerning 32 per cent said they have occasionally been at this point, with 8 per cent answering "often", and 23 per cent "rarely".

Respondents were also asked to nominate the major challenge that motivated them to consider giving up the business. One in three (35 per cent) nominated financial issues as the number one challenge.

Cash flow problems were most common and shared by 16 per cent of respondents, inadequate revenue or profit followed with 11 per cent, while poor customer acquisition and retention stood at 8 per cent of all respondents.

Fourteen per cent of respondents said issues with people in the business had been the challenge that motivated them to consider closing. This includes employee issues (chosen by 10 per cent of respondents) and business partner or investor issues (4 per cent of respondents).

Personal issues and lack of work-life balance were the major challenges that prompted a further 14 per cent of business owners to consider closing.

Seeking to understand the impact of these challenges on the business owners themselves, Money.com.au asked respondents if they made significant sacrifices to start, operate and grow their businesses.

The results revealed that just 22 per cent of respondents did not make major sacrifices.

Some of the sacrifices that 78 per cent of business owners did make have altered their lives.

A significant 40 per cent admitted they spent less time with their family than they normally would, while 13 per cent delayed important life milestones such as having children or buying a house. Thirty per cent said that, for years, they paid themselves less than market rates.

Forty-one per cent sacrificed their social lives and time with friends, 28 per cent sacrificed personal leisure time by working many nights and weekends, and 14 per cent have not attended some important personal-life events such as family weddings.

Asked whether they would go through the business journey again if they knew the challenges they now know, a worrying 19 per cent said they would not have started their business at all, and a further 25 per cent were undecided.

“Understanding the fragility of Australian small businesses can help us gain insight into the potential devastating consequences the pandemic will have on the sector," said Money.com.au spokesperson and licensed financial advisor Helen Baker.

“It is important that our governments understand how vulnerable SMEs are to external influences, and yet how crucial the sector is to our economy.

"Small businesses deliver 35 per cent of Australia’s GPD and employ 44 per cent of our workforce. The government and public were shocked to see queues outside Centrelink offices right after business shutdowns were mandated, and today millions are on JobSeeker or JobKeeper."