Three ways your business can navigate tough times

With tough economic conditions making Australians more cautious about spending, it’s no surprise that small business owners are giving serious thought to simply staying afloat, writes Alison O’Brien, PayPal Head of SMB.

Whether it’s the impact of drought, recent bush fires, the coronavirus or the global financial crisis, given small businesses account for 98 per cent of all Australian businesses and 35 per cent of Australia’s GDP[1], it’s vital small business owners have the right resources, tools and advice not only to survive, but to thrive during tough times.

When economic conditions start to tighten, small businesses are typically impacted by the loss of access to capital, cashflow issues, budget constraints, and the inability to hire, all of which can lead to contraction or potentially collapse. It’s not just small businesses that are feeling the effects, we’ve seen several local retailers either collapse or go into administration as a result of tough market conditions during recent years.

In 2019, big names in retail including Bardot, Harris Scarfe and Napolean Perdis bowed under the weight of international competition and the discount-driven buying behaviour of Australian consumers. And in January this year, Jeanswest joined this long list, appointing KPMG administrators and committing to a company restructure, to help “better respond to the challenging Australian retail market”.

Below are three areas that Australian small business owners should explore to help mitigate business disruption in tough economic times:

Cashflow is king – manage it like a hawk!

During challenging market conditions, small business owners need to closely monitor and manage cash flow to ensure they have the freedom to make strategic decisions based on top priorities, rather than short term decisions to generate income to survive. Tools and solutions to help manage invoices include PayPal Invoicing, Intuit QuickBooks and Invoice2go. These kinds of solutions create seamless invoice management for small businesses, allowing for peace of mind as processes are handled automatically, with little effort from the business owner. This is not a case of ‘set and forget’ – as with any product, these tools can run into operational issues – but they are often referred to as a ‘behind the scenes’ machine that operates with minimal management.

If you’re going to borrow, borrow smart

As business owners consider potential lines of credit – particularly in times of market volatility – it’s important they understand the short and long-term impact of borrowing. This includes weighing the ROI against any fees incurred and ensuring repayment conditions (amounts, time frames and penalties) are crystal clear. Alternative funding solutions – such as PayPal Working Capital – mean businesses can access capital quickly and pay off loans as sales are made, offering transparency, flexibility and clarity for business owners. Whichever solution you choose, make sure you are confident of its suitability for your business and clear on terms.

Create positive, seamless experiences for customers

Regardless of economic volatility, creating seamless, convenient experiences is table stakes to attract and retain customers. It’s also an important component of business competitiveness in today’s evolving small business landscape – particularly in periods of economic uncertainty. Small businesses should consider offering a variety of payment options and digital wallets, which can also drive a consumer’s willingness to buy, and provide a solution to shopping cart abandonment. Research from IPSOS, commissioned by PayPal, found 44 % of people are more likely to shop on an eCommerce site if they know up-front that their preferred payment method is accepted so they can pay the way they want. What’s more, poor mobile payment experiences can have a detrimental impact on businesses, with the research finding that 27 % of Australian consumers have abandoned a purchase on a mobile device because their preferred payment option wasn’t available.

Regardless of the state of the economy, small business owners are eager to understand how to best protect and grow their business. One way small businesses can do this is to work with partners and providers with a track-record of supporting small businesses and who have products developed specifically for the SMB space.

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[1] Small Business Counts: Small business in the Australian economy, July 2019