After 28 years of prosperity, Australia is officially in a recession. If it makes you feel any better, we’re not alone — it’s actually a global recession. But what does this mean for Australia’s two million small businesses?
Global recession tip #1: Making massive spending cuts may be the worst thing you can do right now.
In fact, the common factors displayed by businesses that have survived past economic downturns include:
- Closely monitoring costs
- Actively promoting their products and services
Many businesses thrive during hard economic times by continuing to spend, albeit wisely. Let’s look at how they do it.
Are we in an economic downturn?
Everyday Australians can see the impact of the global recession. Recent reports revealed that the real GDP fell to a staggering 7% in the June quarter due to COVID-19 (coronavirus).
But most small business owners have felt the pressure building since 2019, when bushfires swept through and affected the most populated areas of the country.
During a recession:
- People reduce spending
- Businesses hold off hiring
- Unemployment rises
Everyone from youth workers to retired Australians typically feels the effect.
The unemployment rate here in Australia won’t be fully known until the government’s JobSeeker program ends, but we don’t need to wait for the numbers to know businesses and families are struggling.
Related: Managing cash flow once JobKeeper dries up
1. We need innovation now more than ever
International tourism will be hit hard, especially with predictions of borders remaining closed to international tourists until the end of 2021.
Alone, tourism contributed $60.8 billion in 2019 and employs 5.2% of the workforce. Some of these employees have transitioned into other customer service jobs where there’s a demand such as in aged care, while others are focusing on attracting travel within the country.
Savvy tourism businesses will take advantage of the current travel restrictions and encourage local travel.
Promoting hidden gems in regional areas, historic landmarks and cultural sites as we head into summer will help house-bound Australians fill their wanderlust without risking their health. At the same time, it will help the hard-hit tourism industry stay afloat during the global recession.
The art of the pivot
Adapting how your business operates is commonly called ‘pivoting’ and one way to stay afloat until the global recession eases. During COVID lockdowns, businesses were forced to adjust how they served their customers.
Restaurants and retail stores increased their online offerings and started delivering directly to their customers during months of self-isolation. Many of those businesses experienced increased sales and positive customer responses.
Adding delivery services wasn’t something many had considered before, but the positive impact on sales means they’ll likely continue offering delivery and pickup options on a permanent basis.
During difficult times, those businesses owners who think differently and are willing to adapt fare better than businesses who take an ultra-conservative approach.
2. This is no time to stop spending
If we look through history and what transpired after the Great Depression of the 1930s and the Global Financial Crisis (GFC) of 2008, there’s evidence of new businesses springing up during these downturns.
Over a decade ago, the GFC affected businesses across the world.
Although it wasn’t a full recession in Australia like it was elsewhere in the world, it hit Australian small businesses hard too.
Industries such as healthcare, food and basic transportation are more recession-proof than other industries, but they weren’t immune to hardship. Some of these businesses barely got by while others thrived during the economic crisis.
The good news? We’re resilient
Looking back, there’s evidence of regrowth and innovation accelerated during hard times. Employees who’d been stood down started new businesses. These new business owners, often referred to as ‘accidental entrepreneurs,’ weren’t intending to start a business during a crisis, but they did:
- Microsoft was founded during the 1970’s oil embargo recession
- Mailchimp began during the dot-com recession in 2001
- Uber and Airbnb were born during the GFC of 2008
Businesses that survived the GFC learned that flexibility was key. They changed their suppliers and channels of distribution to have options at the ready when needed.
3. You might want to review your supply chain
Supply shortages and disruption to the supply chain have caused problems for businesses already. Factories shuttered, employees sent home and shipments delayed or cancelled made sourcing materials and parts challenging during the global pandemic.
For Australian cyclists, the backlog of new bicycles coming from overseas is at an all-time high. The problem for the bike shops is two-fold. During the pandemic, more people bought bikes to stay active, but when it was time to order more stock, it was hard to get products delivered.
Some businesses cancelled orders during the first wave of COVID-19, only to realise there was an increased demand for their products. Computer stores such as JB Hi-Fi and Good Guys saw a 40% increase in sales in July.
Sporting goods retailers sold out of home gym equipment in the first week.
Customer buying behaviours are also changing. Coupled with supply shortages and increased global demand, companies may need to reevaluate what their customers want and consider new ways of managing their supply channels.
According to a McKinsey study, one-third of companies responding have moved towards digitising their supply chain and adopting automation, including Cloud-based platforms. It’s adopting new technologies that will allow companies to survive.
GoDaddy survey shows Australia is ready to get back to business
In August, GoDaddy conducted a Global Entrepreneurship Survey to see how COVID-19 has affected small businesses throughout the world. Australia was one of the 10 countries surveyed.
The results showed small businesses with 25-50 employees are struggling but are not defeated. Of those surveyed, six per cent said they were no longer able to sustain their businesses.
A large number of businesses (52%) reported that the pandemic impaired their business, but they can continue operating.
Over a third of the businesses surveyed expressed positive results for their business and were in a position to thrive.
With more and more people starting their search for goods and services online, having an online presence is key. If your business doesn’t have a website, now is the time to get one. Check out Websites + Marketing — it’s fast, easy and free.
Related: Is a business recovery in the cards? Aussie SMB owners think so
You can lessen the impact of the global recession
To strengthen your business and survive this recession, seek guidance from small business organisations such as Australian Small Business Advisory Services, who can help you develop a new business plan to meet today’s business environment.
The government’s six-step guide to continuing your business is full of tips and resources.
There’s no doubt that economic downturns, and this global recession especially, will test every business’s resilience. Still, we can be sure the global economy will recover as it has in the past. History has demonstrated time and again that a new group of businesses and improved ways of doing business is upon us when smart business owners look for available opportunities.
From how products are delivered to upgrading processes and systems or reaching a new market entirely, there are options for every business.
