The latest ASBFEO Small Business Pulse found that the business environment in February 2025 remains well below the long-term average, with the Pulse dropping 0.3 per cent in February 2025 – the tenth consecutive fall.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson explained that the decline was brought about by a prolonged period of tough conditions that are levelling out well below average.
“Conditions have been rough for many small businesses with the post-COVID business environment 25 per cent below the long-term average. If you believe as I do, that small and family businesses are the engine room of the economy, we have lost a cylinder in a 4-cylinder engine in the aftermath of COVID,” he said.
Payment times, tough terms an issue
“Small and family business owners are worried about being paid by their business customers as they face challenging business conditions that have seen high numbers of corporate insolvencies. Our office continues to observe elevated requests for help from distressed business owners who are fearful that another business who owes them money has become insolvent. Small-business owners are researching controls such as trade credit insurance and the Personal Property Securities Register,” Billson added.
Billson also noted that extended payment times and terms weigh heavily on small businesses. He said, “High business expenses continue to put pressure on margins and profitability. Enquiries about profit margins have increased, along with structured monitoring of performance metrics. The availability of suitable staff remains a constraint for small businesses.”
The strategies business owners are using to overcome tough times
However, Billson noted some bright spots on the horizon. The report noted that research into alternative options is increasing, including remote and flexible work arrangements and recruiting skilled migrants.
The lowered cash rate target was also cited, with Billson commenting, “The Reserve Bank’s decision to lower the cash rate target to 4.1 per cent will provide some relief to small and family businesses as rising input costs and frugal customers have continued to challenge margins, profitability and viability.”
He added that while high business expenses and difficulty finding suitable staff still weigh heavily on the small-business environment, enterprising small business people are meeting these pressures with ingenuity and optimism.
“The reduction in interest rates is likely to provide some modest welcome respite and may encourage investment appetite. Small-business owners are already researching financing for capital investment, including business vehicles and equipment. Personal interests and assets are interwoven with that of the business in the small and family business community. Small-business owners are also comparing costs of using personal loans to fund their business and using personal assets to secure finance,” Billson said.
Still, the ASBFEO stressed that more work needs to be done to improve the situation and the Government plays a critical role.
“Small-business needs to be front of mind for our policy makers and regulators. We need to do all we can to shift the mindset from minimising headwinds to maximising the ‘wind in the sails’ of our hard-working small and family businesses. That’s why we have proposed 14 Steps designed to give more support to the nation’s 2.5 million small businesses,” Billson said.
The Small Business Pulse is a health check of objective vital signs for small business while also taking into account the ‘animal spirits’ that drive decision making.
