Australia could face an avalanche of business failures in 100 days when the JobKeeper stimulus ends, new analysis has found.
Prime Minister Scott Morrison issued a bleak forecast on Monday, stating that not all businesses will make it to the other side of coronavirus after the stimulus package ends on 27 September.
“Without these [JobKeeper] measures businesses would have simply fallen over, never to open again. This still may ultimately be the experience for some. But for many more, these measures will have provided the bridge they needed,” Morrison said.
“That is why these supports are only temporary. Left in place for too long they will dull the dynamism of the economy and prevent the adjustments that must necessarily take place to enable new jobs to be created and our economy to move forward.”
Now, fresh analysis from Money.com.au has found as many as two-in-three businesses are on thin ice.
A survey of Australian business owners found 62 per cent of small business owners have been on the brink of failure in the past, while 78 per cent of owners have had to make major sacrifices to ensure their business survived.
“Understanding the fragility of Australian small businesses can help us gain insight into the potential devastating consequences the pandemic will have on the sector,” financial adviser and Money.com.au spokesperson Helen Baker said.
“It is important that our governments understand how vulnerable small businesses are to external influences, and yet how crucial the sector is to our economy. Small businesses deliver 35 per cent of Australia’s Gross Domestic Product and employ 44 per cent of our workforce.”
The survey respondents listed financial issues as the largest challenge that led them to consider shutting up shop, while issues with people in the business including employees and partner concerns also ranked highly.
“With cash flow and low income bringing major ongoing challenges, there is no way all small businesses can absorb losses from enforced closures,” Baker said.
“The government should continue to prioritise small business in its support measures throughout the coming months, closely monitoring how the sector is responding to those measures, as well as the shutdowns, along the way.”
Around 844,000 businesses have accessed JobKeeper, subsidising or replacing the wages of 3.5 million Australian workers.
What can businesses do to prepare for the end of JobKeeper?
Nearly three quarters (72 per cent) of businesses have suffered a revenue hit due to coronavirus and 73 per cent have accessed support measures in the form of JobKeeper, deferred loan repayments or negotiated rent, according to the Australian Bureau of Statistics.
According to insolvency solutions firm Jirsch Sutherland, that’s why now is the time for businesses to consider their post-JobKeeper plan and question how they will stand without the support.
“As a business owner, you know your strengths and abilities well, but you should also know when to call on the expertise of others,” Jirsch Sutherland partner Andrew Spring said.
“We’re experiencing an economic event that’s both macro and micro in nature and company directors need to be proactive about assessing the impact on their business and the changes required to get back on the right course. That includes getting your accounts in order, meeting taxation and superannuation obligations and, if necessary, seeking professional help from a qualified adviser.”
Spring said owners should calculate their current and projected cash-flow and assess staffing needs and other costs.
The next step is to communicate with staff, suppliers, creditors and customers and consider renegotiating rental terms or loan repayments. Then, reinvent, restructure or put your hand up.
Spring said it’s critical to monitor whether your mental health is taking a battering and address that.
Are you a struggling small business? Join us on Thursday 18 June to find out how to get through this period.