- December 30, 2024
- Comments: 0
- Posted by: user
As we start 2025, Australian small and medium-sized businesses (SMBs) are bracing for a range of challenges that could impact their operations and growth. Here are some of the key hurdles that are up ahead on what you can do about them.
1. Tighter Employee Laws
Recent industrial relations reforms, including a 5.2% increase in the national minimum wage and new regulations around wage theft, flexible working conditions, the “right to disconnect” and other measures are stretching small business resources. These changes are making it difficult for SMBs to adapt resources to growth and changing markets.
Recommendations:
- Compliance Training: Ensure that all management (including you!) and HR personnel are up-to-date with the latest regulations through regular training.
- Flexible Staffing Solutions: Consider hiring part-time or contract employees to manage workload fluctuations and reduce costs.
2. Resource Shortages
SMBs continue to struggle with resource shortages, which are exacerbated by reduced customer spending and ongoing inflation. This strain on limited resources makes it challenging for businesses to maintain operations and profitability.
Recommendations:
- Inventory Management: Use inventory management software to optimise stock levels and reduce waste.
- Supplier Diversification: Source materials and products from multiple suppliers to avoid dependency on a single source.
3. High Cost of Hiring Talent
43% of SMBs find the cost of hiring talent too high, and 47% consider the hiring process too lengthy. This makes it difficult for businesses to attract and retain skilled employees, impacting their ability to grow and innovate.
Recommendations:
- In-House Training Programs: Develop talent internally by providing training and development opportunities for existing employees.
- Keep People Happy: There is no point in training or hiring good people if you can’t retain them. Being satisfied with your employer is about more than just wages.
- Remote Work Options: Offer remote work opportunities to attract a wider talent pool, including those who might not be able to commute.
4. Keeping Up with Legislation and Compliance
40% of SMBs find it difficult to keep up with legislation and compliance obligations. The complexity of these requirements adds to the administrative burden and can divert resources away from core business activities. Getting things wrong can also affect cost your business money as well as time.
Recommendations:
- Legal Consultation: Engage with legal consultants, your accountant or advisers to stay updated on legislative changes.
- Industry Bodies: Most industries have organisations that can provide help and advise. There are also many government resources too.
- Compliance Software: Invest in compliance management software to automate and simplify compliance tracking and reporting.
5. Lack of Time and Capacity for New Technology
25% of SMBs indicate that a lack of time and capacity is the main reason they are unable to adapt new technology into their business. Despite this, many businesses are looking to AI tools to streamline operations and improve efficiency.
Recommendations:
- Technology Audits: Conduct regular technology audits to identify areas where new technology could improve efficiency.
- Read and think: Set aside time to look for and think about what’s out there that can help your business. Read about the latest developments (Artificial Intelligence is just one technology that is developing and changing on a weekly basis). Talk to friends and colleagues, industry bodies and look at what rivals are doing.
- Small Pilot Projects: Start with small pilot projects to test new technologies before full implementation.
6. Inadequate Government Support
94% of SMBs believe they need more government support to help them survive. Financial support to offset wage increases and other operational costs is crucial for many businesses to stay afloat.
Recommendations:
- Grant Applications: Stay informed about government grants and assistance programs that SMBs can apply for.
- Industry Associations: Join industry associations that can advocate for better support and provide resources.
7. Increased Competition
With more Australians considering starting small businesses or side hustles, SMBs are facing increased competition. This can make it harder for existing businesses to attract and retain customers. At the same time, people are watching every cent. So less cake and more competition for it.
Recommendations:
- Unique Value Proposition: Clearly define and communicate your unique value proposition to differentiate from competitors.
- Customer Loyalty Programs: Implement loyalty programs to retain existing customers and encourage repeat business.
- New ideas: This might be leveraging new technology or just very old ideas dressed up in a new and novel way.
8. Cybersecurity Threats
Cyberattacks are a growing concern, with 43% of cyberattacks targeting small businesses. SMBs need to invest in robust cybersecurity measures to protect their data and operations. Even if you are a sole trader (especially if you are a sole trader!) you need to protect yourself. A large proportion of Australian businesses that get hacked go out of business within six months.
Recommendations:
- Regular Security Audits: Conduct regular security audits to identify vulnerabilities. Even if this is just you sitting down with a checklist. There are many online and government resources to help with this.
- Employee Training: Institute rules and guidelines. Train employees on cyber security best practices to prevent breaches.
9. Cash Flow Issues
Late payments and cash flow challenges (as they always do) continue to affect SMBs, with three-quarters of businesses experiencing cash flow issues. This can hinder your ability to invest in growth and meet financial obligations.
Recommendations:
- Invoicing Practices: Implement strict invoicing practices to ensure timely payments from customers.
- Cash Flow Forecasting: Use cash flow forecasting tools to manage finances and plan for future expenses.
- Online Bookkeeping: Use cloud accounting resources as they not only save time and money have lots of resources and tools to help ensure timely payments.
10. Rising Operational Costs
Inflation and rising supply costs are putting pressure on SMBs, making it difficult to maintain profitability. Businesses need to find ways to control costs and improve efficiency to stay competitive.
Recommendations:
- Cost Management: Regularly review and renegotiate contracts with suppliers to secure better rates.
- Energy Efficiency: Invest in energy-efficient practices and technologies to reduce operational costs.
- Technology: Look at what new technologies can result in savings.
Finally, the most important resource you have for all of these challenges is your accountant. You run a business and can’t be expected to understand and meet all of these obstacles yourself. Your accountant, by training, inclination and with the experience of helping with every kind of business – large and small – is one of your best resources. So use them!