Black Friday can boost small businesses, but only if planned right. Xero’s Angad Soin shows how knowing your cash flow turns pressured discounts into smart moves.
What’s happening: Black Friday has overtaken Boxing Day as Australia’s biggest sales event, with 58% of small businesses acknowledging the shift. Yet participation has dropped sharply, with only 39% committing to take part in 2025, down 22% from last year.
Why this matters: Black Friday offers genuine opportunities for customer acquisition and loyalty building, but only when approached strategically rather than reactively.
Black Friday offers opportunity, but only if approached strategically. For Australian small businesses facing mounting pressure to participate in the retail event that’s now eclipsed Boxing Day, success hinges on making calculated decisions rather than reacting to competitive pressure.
New research from Xero surveying 500 Australian small businesses reveals a stark reality: whilst Black Friday’s dominance grows, participation is declining. Just 39% of small businesses plan to definitely take part in 2025, down 22% since 2024, as affordability concerns and margin pressures force owners to reconsider their involvement.
The question isn’t simply whether to participate, but whether participation aligns with your business’s financial capacity and strategic goals.
Know your breaking point
Before committing to Black Friday, small business owners must understand their exact financial position. Nearly a third (30%) of businesses report they can’t afford to offer discounts, whilst 40% worry about the impact on profit margins.
“Black Friday forces a tough decision. Small business owners have to gamble the opportunity of increased sales against the real-world pressures of higher costs and tighter margins, all while protecting their day-to-day cash flow,” said Angad Soin, Global Chief Strategy Officer and Managing Director AU/NZ at Xero.
The starting point is clarity: What are your current margins? How much cash flow buffer do you have? Can you absorb a temporary revenue dip if discounts don’t deliver expected sales volumes? Without answers to these questions, participation becomes speculation rather than strategy.
Almost two-thirds (64%) of small businesses feel pressured to compete with big brands during Black Friday, up 4% year-on-year. But feeling pressure doesn’t mean you must participate. A quarter (25%) of businesses believe their customers will support them regardless, suggesting that opting out remains a viable strategic choice for businesses with strong customer relationships.
Choose your participation level
For those with healthy cash flow and clear capacity to discount, Black Friday presents measurable opportunities. More than half (57%) of participating businesses anticipate a sales lift, averaging an 18% increase compared to previous years.
The motivations driving participation have shifted. Among those taking part in 2025, 59% cite attracting new customers as their primary goal, up from 48% in 2024. Meanwhile, 45% focus on building customer loyalty, indicating that Black Friday serves purposes beyond immediate revenue.
These objectives should shape participation decisions. If your goal is customer acquisition, can you afford the customer acquisition cost embedded in your discounts? If building loyalty, will your existing customers expect discounts, or would they prefer consistent pricing and service quality?
“Black Friday isn’t just a big business event anymore. It offers real opportunities for small businesses to connect with new customers and strengthen loyalty,” Soin said.
However, one in 10 businesses brace for a potential drop in sales, highlighting that participation carries genuine risk, particularly when competing against major retailers with substantial promotional budgets.
Make discounting strategic
For businesses choosing to participate, the approach matters as much as the decision itself. Blanket discounting across your entire product range differs significantly from selective, strategic price reductions on specific items.
Consider these tactical approaches:
- Selective product discounting: Rather than reducing prices across the board, identify products with healthy margins that can absorb discounts without damaging overall profitability. This protects your bottom line whilst still offering promotional value.
- Volume-based incentives: Bundle products or offer discounts on minimum purchase amounts. This increases average transaction value whilst limiting the percentage discount on individual items.
- New customer acquisition focus: If 59% of participating businesses aim to attract new customers, consider offering first-time customer discounts rather than broad promotions. This targets your strategic objective whilst preserving margins on existing customer purchases.
- Loyalty rewards over blanket cuts: For the 45% focused on customer loyalty, exclusive offers for existing customers can strengthen relationships without the margin erosion of public promotions.
“To discount or not to discount must be a strategic decision, not reacting to short-term pressure and instead building a healthy business all year round. This is where digital tools are critical. Knowing your exact cash flow turns a reactive ‘pressured discount’ into a calculated, strategic move that you know you can afford,” Soin said.
Real-time financial insights allow businesses to model different discount scenarios before committing. Understanding how a 20% discount versus a 30% discount affects your cash flow over the following month transforms speculation into data-driven decision-making.
Inventory management also plays a crucial role. Businesses can identify slow-moving stock suitable for aggressive discounting whilst protecting margins on faster-moving, profitable items. This strategic stock management prevents across-the-board margin erosion whilst still participating in the promotional period.
Beyond the sales event
The broader challenge facing small businesses extends beyond Black Friday itself. With major retailers dominating promotional periods and economic pressures mounting, sustainable participation requires year-round financial health and strategic planning.
For businesses that determine Black Friday doesn’t align with their current financial position, opting out represents a strategic choice rather than a failure. Maintaining consistent pricing, protecting margins, and focusing on customer relationships throughout the year can prove more valuable than short-term promotional participation.
“Small businesses are the heart of our communities and the backbone of our economy, and I strongly believe in supporting local. I encourage all Australians to get behind their favourite small businesses where they can, not just during Black Friday, but throughout the year,” Soin said.
The decision framework is clear: assess your cash flow capacity, define your strategic objectives, calculate realistic returns against genuine costs, and choose participation levels that protect long-term viability. Black Friday offers opportunity, but only when approached with clarity, preparation, and strategic intent rather than competitive pressure.
For small businesses with the financial capacity and clear objectives, strategic participation can deliver customer acquisition and loyalty gains. For those without sufficient margin or cash flow buffer, sitting out protects the business’s long-term sustainability. Both choices are valid when made with full understanding of your financial position and strategic goals.
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