Small business growth has rebounded to pre-pandemic levels despite significant issues such as labour shortages, according to the findings from the latest Quarterly Small and Micro Business Index.

The index, compiled by the Council of Small Business Organisations Australia (COSBOA) and payment platform Square, shows a promising outlook for the business landscape despite the current economic climate.

Drawing on real-time data from Square, the report shows the remarkable resilience and agility of the nation’s small and micro businesses, which have explored new revenue streams and creative options to maintain growth during a challenging period.

Key points

• Growth rates at Australian businesses have returned to pre-pandemic levels,
• Labour strain is a significant challenge for small businesses, with industries like arts and recreation, as well as accommodation and food services, facing the highest job vacancy rates.
• Despite an increase in business exits, the Australian Bureau of Statistics shows an increase in new businesses being started in the last quarter.

The real state of small and micro business growth

“The scale of Square’s platform, used across the country for both in-person and online commerce, gives us an accurate picture of the business landscape and is a key barometer of the health of businesses in Australia,” said Luke Achterstraat, CEO of COSBOA.

“Our aim is to present a realistic picture of what small businesses are experiencing, as macroeconomic data doesn’t always tell the whole story. This report fills in the gaps, bringing further context and clarity to small businesses, industry, and decision-makers, aiding evidence-based decision-making.”

The report’s findings reveal that growth rates among Australian businesses have rebounded to pre-pandemic levels after experiencing a pullback in spending during the height of the pandemic. Interestingly, growth rates are now similar across all business sizes, with small and medium-sized businesses growing faster than micro and mid-market businesses over the past two years.

“While the data shows growth rates are back on track, many businesses are preparing for a potential consumer spending pullback,” said Marco Lamantia, Executive Director for Square in Australia.

“However, instead of adopting a defensive stance, we’re witnessing proactive businesses that are creating new revenue streams and embracing software to automate operations and build resilience.”

Labour shortages continue to challenge

In the face of labour shortages and increasing costs, small businesses in certain industries are facing challenges.

According to the report, arts and recreation, as well as accommodation and food services, have the highest job vacancy rates compared to other industries, at 227.8 per cent and 188.3 per cent of pre-pandemic levels, respectively. These high vacancy numbers have significantly increased employment costs for small businesses.

“In many cases, people are handing back their ABNs and ceasing trading due to the mounting costs across the board,” said Achterstraat.

“It is vital that the Federal Government continues to provide support and fit-for-purpose policy settings to aid small businesses during these challenging times.”

AI to the rescue

Nevertheless, businesses are seeking innovative solutions to optimise their operations amidst the labour strain. Lamantia explained that many are turning to technology and artificial intelligence to reduce labour stresses and streamline processes.

“Generative AI tools are being used to craft more effective marketing campaigns and customer loyalty propositions, while automation tools are helping to alleviate administrative burdens, giving employees more time to focus on growth and customer experience. The right software can make businesses feel like they have an extra employee.”

The report also observes broader macroeconomic factors, such as business entries and exits and job vacancies, that are shaping the small business landscape. Despite an increase in business exits, the Australian Bureau of Statistics data indicates a net positive in new businesses started in the last quarter, with 11,349 new businesses registered in Australia from March to June.

“This economic downturn can be an opportunity for businesses to innovate,” Lamantia added. “We’ve seen businesses diversify how they generate income and expand their brand presence through creative approaches.”

Yet despite challenges such as labour shortages and potential spending pullbacks, business owners are forging ahead with creativity and technology to unlock growth and build resilience in the face of an ever-changing economic landscape.

You can read the full report here

Want more? Get our newsletter delivered straight to your inbox! Follow Kochie’s Business Builders on Facebook, Twitter, Instagram, and LinkedIn.