Small business check a year into disruptionBY SMALL BUSINESS DEVELOPMENT CORPORATIONSmall businesses play a major role in economic recovery in WA!Since the rapid onset of the COVID-19 pandemic in March last year, businesses of every type around Western Australia (WA) have bounced from lockdowns and restrictions, to labour shortages and in some cases, surges in demand.The top challenges businesses identified14.4% attracting new customers12.7% dealing with a reduction in sales/revenue9.5% coping with government legislationIt has certainly been a time of unparalleled disruption, which has required constant adaption by businesses.One positive to come out of the past year is an increased focus on small businesses and a recognition that they play a major role in economic recovery in WA and throughout Australia.As a result, some important research has been undertaken to track the sentiment and challenges among business owners in the new environment.The outlook in the new yearAt the start of each year, the Small Business Development Corporation (SBDC), the WA Government’s dedicated agency for small business support, conducts its business expectations survey to assess how business owners are feeling about the year ahead.They were surveyed about different focus areas for their business, with responses tracked against the January 2020 survey, which reflected the pre-COVID environment.1 Impact of the economyRespondents were asked whether they believed the economy would have a positive, negative or neutral impact on their businesses in 2021.The level of negative sentiment rose significantly in 2021, with 56.6 per cent of businesses expecting a negative impact — more than 20 per cent higher than in 2020. Interestingly, nearly as many businesses (36.3 per cent) were anticipating a positive economic impact, only four points lower than 2020 40.6 per cent result.2 Overall sales/revenueAlmost a third of respondents (32.7 per cent) indicated they expected an increase in the overall sales/revenue of their business over the year ahead, down from 57.4 per cent last year. Just under half (47.8 per cent) expected their sales/revenue to decrease in the next 12 months, a jump of 16.5 per cent from the previous year.3 Cost of materialsOver half of respondents (58.4 per cent) indicated that they expected the unit cost of materials and supplies to increase this year, unchanged from 2020. Just under a third are expecting costs to remain stable, while only 7.1 per cent anticipate a decrease, similar to 2020 expectations.4 Selling price and profitSelling prices are expected to remain stable over the next 12 months for nearly half (48.7 per cent) of respondents, a decrease of around 12 per cent. Almost two in five (38.1 per cent) expected to increase in their selling price, while 13.3 per cent expected it to decrease.Just over half (51.3 per cent) of respondents expected profitability to decrease in 2021, a significant jump from 22.6 per cent in 2020. However, more than a quarter of respondents (26.5 per cent) anticipated an increase in profitability for the year ahead. This may be attributed to the different impacts of the pandemic across industries, with some sectors booming while others struggled.5 StaffingThis year sees close to two thirds of respondents (64 per cent) expecting the cost of employing staff to increase in 2021, up from 57 per cent in 2020.Thirty-one per cent expect staff costs to remain stable. However, the ability to find and retain suitable staff is a more pressing concern for small businesses across WA in 2021.Three quarters of respondents (75.3 per cent) indicated they are expecting it to be more challenging to find suitable staff this year.This result points to a tightening of the labour market throughout the state and is backed by the most recent Australian Bureau of Statistics data from March 2021, showing that total employment in WA has now recovered beyond pre-COVID levels.WA’s unemployment rate in March fell to 4.8 per cent — the lowest of all states and second only to the ACT nationally when also comparing states and territories.If employment recovery continues throughout 2021 while overseas migration remains on hold and border restrictions hamper interstate workers from travelling into WA, the pressure of filling staff needs could translate into higher wage demands in WA.6 Adaption and challengesRespondents were asked whether they had planned to make any changes to their business during 2021.The most common change reported for 2021 (in line with previous years) was to increase their customer base (21 per cent), followed by exploring new markets (16.5 per cent) and employing more staff (13 per cent).The number of businesses that indicated that they are considering closing or restructuring doubled to 8.5 per cent from 2020.The top challenges identified by businesses were attracting new customers (14.4 per cent), dealing with a reduction in sales/revenue (12.7 per cent) and coping with government legislation (9.5 per cent).How to manage business challenges in 2021If you are expecting challenges to continue or increase for your business throughout this year, it’s important to know that you are not alone.The SBDC will continue to provide practical, accessible support to WA business owners, no matter what arises.MORE INFORMATIONYou can turn to the SBDC and its local providers in regional WA for free business advice, practical skills development, a range of online resources, dispute management and more. Visit or call 133 140 for more information.