Navigating the Changing Landscape for Small Businesses in NSW: Key Insights and Strategic Advice

As the backbone of our economy, small businesses in New South Wales contribute significantly to employment and economic growth. However, the challenges they face today are vast, ranging from post-pandemic recovery to navigating a highly inflationary environment. At Quest Accountants, we understand these pressures go far beyond annual tax statements and BAS reporting. We’re here to offer strategic advice that helps your business not only survive but thrive.

Here are the key takeaways from Chris Lamont, the Small Business Commissioner, presented during NSW Small Business Month 2024. These insights highlight the current state of play for small businesses and offer a roadmap to help you navigate this tough economic terrain.

State of Small Businesses in New South Wales

In good news:

• 📊 Stats at September 2024 show that NSW is home to 850,000 Small Businesses and this number is growing
• The is actually 90,000 more than before the COVID pandemic, and this growth offers hope, despite the fact that many businesses, particularly in retail and hospitality, have had to shut shop.
• Small businesses continue to employ 1.7 million people and contribute a staggering $465 billion to the state economy.

Of some concern, Chris' insights also reveal

• 72% of business owners are over 40, and nearly half (47%) are over 50. This raises concerns about the future of small business leadership, as there is a notable lack of young entrepreneurs stepping into the small business landscape. If you're thinking about selling or transitioning your business in the future, now is the time to start planning strategically.

Small Business Composition and the Challenges Ahead

The current economic climate is testing small businesses across industries.

• While 60% of businesses are single-operator enterprises, 40% employ staff, contributing to the diversity of the sector.
• The construction industry remains the largest small business sector, followed by business services and real estate.

And the economy isn't making it easy:

• Over the past five years, small businesses in NSW have faced numerous external pressures, including bushfires, floods, the global pandemic, and now rising inflation.
• Many businesses are struggling with the increasing costs of inputs, cash flow concerns, and regulatory compliance.
• Confidence levels have dropped to their lowest since the COVID lockdowns, and business owners are feeling the strain.

Economic Realities: Declining Revenue and Insolvencies

One of the most alarming statistics we noted was the mention of a 16% decline in revenue for many businesses this year. The retail and hospitality sectors, in particular, have been hardest hit by the economic downturn.

Even more concerning, insolvency rates are now higher than they were during the 2008–2009 financial crisis, putting immense pressure on business owners to adapt quickly or risk closure. Now more than ever, businesses need to make strategic decisions about controlling costs, adjusting pricing, and focusing on customer retention.

Regulatory Involvement: Why It Matters for Small Businesses

Despite the growing challenges, Chris noted that

• 90% of small businesses in NSW do not participate in government consultations on policy and regulatory matters.
• 61% of business owners feel they don’t have effective industry representation. The reasons for this non-participation include a lack of awareness, time constraints, and skepticism about the impact of their involvement.

With strong encouragement to be engaged with regulatory processes, Chris stated that it is vital to that small business interests are represented in regulatory and government consultations. Whether it’s providing feedback on policy proposals or raising concerns about burdensome regulations, small businesses must get involved to shape their future.

Strategic Advice for Businesses

The New South Wales Small Business Commission is a valuable resource, offering support, guidance, and the opportunity to engage with community and government initiatives. But it’s also essential to engage with your financial and business advisers when pressures start to mount.

Take action: How we can help you

Feeling the pinch in relation to the current state of business in NSW? At Quest Accountants, we believe in being more than just your tax compliance partner. We’re here to offer strategic advice to help you manage your business through difficult times. The current economic environment is tough, but you don’t have to face it alone. If you’re feeling the financial pressure, now is the time to reach out for professional advice. Our services extend far beyond tax returns and BAS lodgments:

• Strategic Financial Planning: Helping you navigate current market conditions and make informed decisions.
• Cash Flow Management: Ensuring your business has the working capital it needs to thrive.
• Small businesses are at the heart of what we do. We understand your challenges, and we’re here to provide the support and strategic advice you need to ensure long-term success.

Reach out to your Quest Accountant today; we're here to help!