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6 out of 10 Australian SMEs report losses up to 75 per cent

Business Australia reported that 6 out of 10 Australian SMEs reported sales losses up to 75 per cent this year. Only 18 per cent reported consistent revenue and a mere 9 per cent experienced a growth in sales during the pandemic.

Richard Spencer, Chief Customer Experience Officer at Business Australia, offers a list of suggestions on how companies can cut costs but retain customer engagement. We investigated these cost-cutting measures further and look at how businesses can position themselves to thrive during and beyond the pandemic.

What are your top suggestions for cost-cutting?

  • Go paper less
  • Compare utility prices
  • Negotiate with suppliers and landlord (for example, ask for extended payment terms, rate reductions, or debt forgiveness)
  • Shift operations to the cloud
  • Start selling online
  • Use cost-effective marketing
  • Review and cancel unnecessary subscriptions

Are most businesses focusing on cutting down on the cost side of business or trying to increase sales?

The smarter businesses are doing both. Clearly in some situations those organisations are not able to repair damage to revenue (for example, international tourism). But that doesn’t prevent every business from having a laser focus on costs right now to see where they can tighten up savings and costs, particularly on those that have less impact on the primary activities of the organisation. For example, cutting down utility prices and gas and electricity bills, streamlining subscriptions and working more digitally.

You found that on average businesses saved $800 in energy costs when they negotiated utility prices. How did you arrive at this figure?

We [Business Australia] work with the Federal Government on the Business Energy Advice Program. We work with small businesses, with up to 20 employees, to understand how to be more efficient with energy and where they can save costs by simply checking the market and comparing prices.

$800 dollars is the average saving we found going through that program. It can be higher depending on the nature of the organisation and how much electricity or gas they use.

Energy is one of those examples of a lazy cost … you need it to operate but you don’t think about it day-to-day, so costs roll through an organisation. Particularly now, businesses should be focusing on every element from a cost perspective that they might be able to tighten up.

Businesses can get advice through us on all things energy and sustainability and how they can save on costs in the short term.

There are a range of things to do. First look to the markets, see if there is a cheaper deal. Then we have the ability to provide remote and/or face to face consultations to those organisations to understand what else they can do. For instance, if they update bulbs and lights, that can significantly reduce energy. Our specialist consultants work in all options and can very quickly determine the opportunities an organisation might have

Have businesses been successful in negotiating with suppliers and landlords?

Very much so.

One of the phrases that gets used a lot is ‘we’re all in this together’. Businesses have tried to take that view. Suppliers and major landlords understand that if we’re going to come out as strong as possible, we need to think about how to help organisations get there.

We hear examples of competing organisations sharing oversupply to organisations with undersupply. There’s a genuine sense of collaboration in this crisis.

If you’re not thinking about who to talk to early in your supply chain, you’re missing opportunities to look for help in the community.

We’ve advised lots of organisations to look at core competencies and maximise them in their current environment. Look at supply chain, customers and demand, alternative markets. Look at the whole value chain of the organisation to see what you can maximise in revenue and what to minimise in costs.

What are some examples of unnecessary subscriptions?

This might be research based information you’re receiving now.

We’ve cancelled a lot of newspaper subscriptions because people are working from home and so you don’t need newspapers delivered to the office. Every little bit helps.

Another thing is how can you look to different ways of building capabilities without building cost. For example, repairing revenues, shifting the business operations online and to cloud storage rather than the physical.

This is also an opportunity to sell products online. A not-for-profit called ‘Spend With Us’ helps any Australian businesses affected by COVID-19 get their products and services online. The organisation started as a response to the bushfires and to get regional businesses online for free. She’s now expanded to any business affected by COVID-19.

Related: Why all businesses need to pay attention to data literacy

The other thing that’s important to think about is how to survive through the economic crisis but also how the organisation is most likely to succeed as we come out of this economic crisis.

We’ve got a lot of data which talks about how organisations which think about what’s next tend to do better than day to day organisations. It’s a hard thing to do when they’re seeing massive drops in revenue and it’s hard to see the light at the end of the tunnel, but businesses that do take the opportunity are in a strong position to thrive when the economy returns to normal.

Could future costs crop up with the shift to cloud storage and online sales?

It’s possible. Organisations across Australia need to think about cyber security particularly in the context of remote working. It is a concern from a cost perspective, but it is like any other decision businesses make when they need to weigh up the pros and cons.

If online sales pick up and there’s the opportunity to take on more people, that’s a business as usual decision that the business should be making. There are cost effective solutions on how to do that now.

What are some examples of cost-effective marketing?

One of the things businesses need to think about in particular is how they connect to existing customers. People think advertising is about how to get new customers, but how you communicate to repeat customers is more important than looking for new ones.

You can communicate with existing customers through SMS, email, social media … and I think that those channels can be incredibly cost effective particularly if people have more time on their hands.

What are some long-term cost-cutting measures that businesses should be keeping in mind?

The most important message is that we are never going back to what business looked like six months ago. One of the things we can be sure of is that when we arrive at a new normal it will not be same as six months ago.

Any small business owner waiting to get back to business needs to take a view of what the new normal looks like.

Organisations that are planning to be as agile as possible will be in the best position when economy fires up again. Very few organisations have been able to plan their way into the crisis but every business has the opportunity to plan their way out of the crisis.

Richard Spencer

Richard Spencer is the Chief Customer Experience Officer at Business Australia.

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Ann Wen

Ann Wen

Ann is a journalist at Dynamic Business.

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