Key findings:
- New research commissioned by CommBank shows 89 per cent of small to medium enterprises (SMEs) have experienced an increase in business costs in the past 12 months.
- Utility bills, including phone, internet and electricity bills, are by far the greatest contributor to the increased costs (66 per cent), while nearly half (47 per cent) have seen supplier costs soar.
- These increases are followed by marketing (29 per cent), staff (26 per cent), and accounting software costs (25 per cent).
- On average, business costs have increased by 10 per cent, however 40 per cent of SMEs who have experienced a rise report increases of more than 10 per cent.
Hear from a small business owner
Justine Dalrymple, owner of Front Room Hair in Sydney's lower North Shore suburb of Crows Nest, prides herself on not only the high standard of service her salon offers to local customers, but the community she's been able to build around her business.
"What I love the most about being a small business owner is the opportunity to bring the community together. We are so blessed that we get to make friends with the locals and get to know them on such a personal level, that we create a space where they can really feel at home."
One of the challenges of running a small business, however, is continuing to invest in your business, such as updating booking systems and creating efficiencies, without passing on that cost to the consumer.
"The other challenge we see is the rising cost of running a business which uses high-quality products. We can't cut costs, and we can't pass rising costs on to the customer."
One way to address this challenge, according to Justine, is to look for savings elsewhere, and shop around for discounts where it makes sense to do so.
Front Room Hair, which opened its door for the first time 15 years ago, has since evolved into a business that offers a wide range of beauty services. Owner Justine remains optimistic for the year ahead despite current challenges of running a small business today.
"We're hoping that we can keep growing our business and diversifying but also bringing creative spaces together. We already have beauty, nails, hair and make-up services, and we're looking to keep evolving and branching into events and education," Justine added.
Broader implications
Small businesses are the engine of the Australian economy making up 97% of all Australian businesses and contributing to roughly one-third of the nation's Gross Domestic Product (GDP)^. According to CommBank Executive General Manager Small Business Banking, Rebecca Warren, the success of the small business sector is crucial to growing Australia's future economy.
Despite continued cost challenges, Ms Warren said small Aussie businesses remain incredibly resilient and cautiously optimistic.
"The recent reduction in interest rates has been welcomed with both arms by our small business customers, but running a business today continues to be tough as consumer spending recovery is taking longer than anticipated, and the macro-economic landscape continues to bring uncertainty.
"While there has been a slight decrease in sentiment from November 2024, our research shows the majority (63 per cent) of SME owners and senior managers feel optimistic about business performance over the next 12 months - down from 71 per cent last year.
"Additionally, plans to grow business remain strong with nearly two thirds of SMEs aiming for growth, down from 72 per cent in November 2024."
Navigating the challenges
CommBank's research shows Australian small businesses are very proactive when it comes to finding ways to reduce costs.
More than half of SME owners and senior managers (58 per cent) say they shop around for discounts on utilities at least once a year. Almost two in five (38 per cent) do so once a year, while one in five businesses (20 per cent) search for better deals every 6 months or more often.
According to Warren, shopping around for better offers and shifting to alternative suppliers is one of the best ways to reduce costs: "It can not only help cancel out the increase in costs a business has experienced that year, but also result in significant savings, especially given our research shows most SMEs are willing to look for a better deal."
Other ways SMEs can reduce costs, according to Warren, include investing in technology and automation to reduce manual tasks, outsourcing non-core activities, reviewing subscriptions, increasing energy efficiency, and reducing unused office space.
How CommBank provides support
The research comes as CommBank reaffirms its commitment to helping small businesses navigate some of the challenges they are facing, by increasing the offers of CommBank Yello for Business, a recognition program now available to more than 340,000 small businesses across Australia via the CommBank app.
- Recognising that accounting, phone, internet, and legal support costs are often essential to running your business, CommBank Yello for Business provides eligible small business customers with:
- Promotional discounts on accounting software for the first six months;
- Up to 3 free months with a LegalVision membership;
