Have conditions changed for SMEs in the past month?
Last month we talked about the booming economy. Since then, half of the country has gone into lockdown, NSW building sites have ceased to function meaningfully and the Sydney lockdown has been extended for 4 weeks. Given that, we thought it would be worthwhile touching base with SMEs who just last month were so buoyant. In other words, not focus on those that were struggling or treading water – but those SMEs that 4-6 weeks ago were calling out the fabulous economic conditions. What are they finding now?
The experiences of these SMEs have been far from uniform. Some haven’t seen much of a change whereas others definitely have. Indeed, some are locked-down and given the nature of their job, can barely function. Many of them expressed worry, some discussed the mental health challenges of operating a business in a stop-start, uncertain environment … and a number raised questions as to how the federal government is going to assist SMEs, and whether they will quality for support. None are reporting much in the way of love from their landlords, and they remember that in previous lockdowns the support of landlords was at times quite mixed. But ALL of them are watching developments VERY closely.
A cross section of comments is as follows. To put the comment into perspective, we compare what the business owner said a month ago to what they’ve told us this week ...
Sydney-based manufacturer/retailer of steel/metal, 55 employees
A month ago …
“For us in the building industry, it’s very positive when you look at what the government is doing in trying to keep everything going. When you hear they’re spending money on infrastructure, that’s music to our ears. There’s a lot of building going on in Sydney which is great for us … The way the government’s going with their infrastructure spending, I think we’ve got 12 months’ worth of good times left but who knows, it could be even more.”
Now …
“We’re still trucking along – we have changed gears though.Apart from being more worried than ever, all is OK. We are still seeing our revenue holding up, although, the past week especially, the place has got very quiet and customer numbers are down 40% or so in the metro area. This is the first big down-shift we have seen – but shutting construction was always going to have an effect. These effects are temporary – I am hoping. The customers I talk to will be OK with the 2-week shutdown for construction, but if NSW extends this there could be some big impacts.”
Regional Victoria-based designer/manufacturer/installer of curtains/drapes, 5 employees
A month ago …
“We’ve had 35% growth this financial year compared to last year. It’s been incredibly busy – although I will say that once there’s a lockdown announced, the phones go completely dead. But our backlog is incredible … 12 months ago the wait time for drapes was 4-6 weeks and now it’s 10-12 weeks … People sure are spending money and there’s just so much building going on up here (Bendigo). It’s unbelievable. But I just don’t think it’s sustainable, it’s not ‘normal’. How long can people spend so much money for?”
Now …
“Business is tricky at the moment. What we are finding is that due to the bigger workload that we have on the books, completion of the work in a timely manner has been slow and therefore the cash flow gap is widening and therefore funds aren’t as lavish as what they should be. We’re working on it though and we’re making ground. Having a quiet month this month has helped in this way … That being said, sales are down this month quite considerably to this time last year – $158k worth of sales last year compared to only $55k this month. Pre Covid generally monthly sales at $80k was comfortable for us … My overall mental health has been challenging. It’s hard to find the motivation. Whilst our business is not in a bad situation, the yo-yo effect of being at home for home-schooling prior to term 2 school holidays, then juggling the kids over the school holidays, then having the kids back at school for a week, then back into lock-down and home-schooling now, I’m struggling to find consistency in my work life and therefore feel that I’m achieving very little!”
Sydney-based vintage photography studio, one employee
A month ago …
“It’s really good. REALLY good. We’re fully booked until January of next year. That’s 3 or 4 shoots a week booked for the next 7 or 8 months … I think it’s because people can’t travel and they had us on their bucket list.”
Now …
“What a mess. We have closed up for (camera) shoots, and we’re using our time to improve our systems and catch up on other tasks – so yeah, a MAJOR shift. We are supposed to be shooting 6 people a week at the moment – which translates on average to $10K a week – and instead we have nothing. Incomings have dropped by 83%, I’m just hoping that the federal government offer more help for small business. I’ve applied for the NSW government relief plans, and I’m sure my application will be approved. I’ve asked my real-estate for a rent reduction but they haven’t replied. We’ll see how that goes.”
Sydney-based importer/wholesaler/retailer with national customer-base, 90 employees
A month ago …
“We’ve been very positive. People are buying online and we’ve kept our supply line full which has helped because some of our competitors haven’t been able to supply. We’ve worked hard on our customer service like introducing live chat and a quicker turnaround on orders … And we’ve continued to promote, we haven’t stopped that. So it has been business-as-usual in our approach and sales have been very good.”
Now …
“The physical store is well down but the online, call centre and sales reps are making back most of that loss and a little more, so we’re tracking up on last year same month … This lockdown seems much more difficult this time around though. We are walking on egg-shells, balancing between keeping staff safe from Covid and mentally on their game, keeping the business running and supporting our customers so they can make a little money. There’s too many obstacles though – our main carrier has had a Covid case in their depot – about 400 staff on per shift! … But we have no choice – head down and tails up and lead from the front to give our staff the confidence to keep turning up … Sydney will be locked down for another month, but I see it continuing until the end of September. The approach of governments seems to be changing – from funds to businesses to survive, to just giving welfare directly to the worker. In NSW, you get $600+ per week if your casual hours have been reduced – so it’s better to stay at home than come to work. So I’m having difficulties getting people to work. There’s no talk of rental support, JobKeeper and so on. Maybe the government want to see the stress and strain on the economy before they put their hand in their pocket – survival of the fittest.”
Melbourne-based business services organisation, 300 employees
A month ago …
“We’ve had an incredibly strong period and it’s getting stronger and stronger.”
Now …
“We are still strong – but we see mental fatigue in SO MANY small businesses (outside of hospitality and tourism). There’s genuine disillusionment in government authority, and the lack of empathy and understanding of the realities of business. Small businesses are giving up!! I feel I am becoming an emotional mentor and financial provider for what normally are solid opportunities. These stop-start lockdowns will cause serious unintended consequences to confidence. Can you believe the lack of federal and state leadership to offer financial assistance to businesses that a year ago they threw the kitchen sink at ensuring they kept employing?”
Sydney-based builder, sole trader
A month ago …
“From what I see the economy is booming. Just BOOMING. I guess it just shows how overwhelming cycles are, regardless of what comes along – like Covid. I think this is a continuation of the cycle after the 2007/08 downturn … Like there’s MANIA in residential property and bitcoin and certain sectors of the ASX … I’m surprised that policy people like the RBA aren’t concerned.”
Now …
“I've been doing bits and pieces but mainly doing work at home. Restoring an old table, gardening, restoring a bike, riding and watching the Olympics. Busy as always but we are in lockdown for some time I think. I’m just rolling with it … So there’s little money coming in.”
“The covid-induced focus on the home has been helping our business big-time. The trading conditions – for self-storage – are as good as I can recall … If you need renos, or if you’re moving, or if you are working from home and so you want to declutter – well they are all positives for our industry. It’s a real purple patch.”
Now …
“Not much change at this stage but I’m pretty concerned that demand is nudging south and it won’t be long before revenue follows suit. Watching it daily as we speak.”
Brisbane mechanic, 7 employees
A month ago …
“It’s going pretty well although not as well as it did when there was a lot of stimulus money around. So pre-covid our Gross Profit would have been $80K a month … at the height of the pandemic and the stimulus it was about $110 – now we’re back to $95 so it’s not as good as it was but better than a couple of years ago.”
Now …
“It’s been an odd couple of months, although June ended up being fairly strong with a good finish to the end of financial year with a $108K GP month! And now we’ve come into July, we’ve had a hard lockdown for 3 days early on in the month, been wearing masks for the last few weeks, I’ve scanned more QR barcodes than one wants to, government knows everything of my daily life! – and we’re looking at a record month of $130K GP! Go figure. I don't know, do I put it down to Covid or we are in that sweet spot of being in business for 5 years and things are just coming together with the base we have built to get to this part of the journey? I don't get the feeling that people are holding back on what they are buying. There’s no money handouts, so maybe people are just due to get the work done. I will say it does make me very nervous if this will stop and there’ll be a massive hold on everything in the future. But while it’s the way it is I’ll just keep pushing forward.”
“We’ve had a very strong bounce-back – it’s gone nuts in terms of demand. Once everyone adapted to this pandemic, we’ve had consistent hiring which got quite strong towards the end of last year and it’s remained strong … I’m feeling very confident. The strong consistent demand we’ve been getting will continue throughout the year.”
Now …
“For us down here (Melbourne) it really is busy as usual. Our lockdowns – whilst still frustrating and fatiguing – are much like auto-pilot. We just get on with it and business continues. Demand is still high in our market and we haven’t seen that reduce with the year end. Long may it continue. Now if we could just organise a holiday we would all be happy!”
Conclusion
Overall, business owners haven’t lost the plot in the past month … but they are on edge (again). Even those that have noticed no change are taking nothing for granted and watching their business closely. They are mindful of their mental health – and that of staff – and looking at the federal government (more so than state governments) wondering what help will be forthcoming and whether they will qualify. They seem to be getting virtually no support from landlords, and are mindful that in previous lockdowns some landlords abided by the law and, quite frankly, others didn't. But remember, the comments in this newsletter are all from business owners who just 4-6 weeks ago were discussing how strong the economy is. The bottom line is that they still appear positive – but they are watching developments VERY closely
