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Strain on Small Businesses - Australian Investment Education

For months on end we have heard about inflation and how the economy might suffer. Sadly, we are now starting to see some cracks form for small business owners in Australia and around the world. Join us this week as we dive into some of the indicators and what we might see start to happen:

Rising Rental Costs

The cost of living has skyrocketed in the last 6 months and has not shown any convincing signs of slowing. Host Andrew Baxter points out that over the last 6 months, rental costs have increased by 10% on average. For small business owners, rent is usually one of the largest costs to consider so with this particular cost increasing so rapidly, it is bound to hurt small business. In the last month in the US, a recent survey showed more than 30% of small businesses failed to pay their rent. The inability to pay rent is twofold, firstly it is clear the business itself is under strain, but it complicates things for the owner of the commercial property as they need a tenant but can’t charge so little to keep the tenant where their yield is hurting the property’s value. 

Wages

Wage growth has been a growing concern of many over the years, particularly with many finding themselves incapable of breaking into the property market with the imbalance of growth. The Australian government recently announced intentions to look into allowing collective bargaining power for employees to fight for higher wage growth but Host Andrew Baxter notes some problems with this approach. In the case of his own business, Andrew looks to pay in a way that is not only a win for the employee but is fair in the context of the business and the value-add provided by each individual. Having governments dictate what employers must pay is a slippery slope and indicative of someone not familiar with running a business. Right now, there are squeezes on margins so in a time when businesses are trying to cut costs, increasing them can lead to closures and therefore – job losses.

The Employee’s Perspective

Small businesses struggling doesn’t only impact owners, but can also have negative effects on employees. Host Andrew Baxter recently had an interaction with someone who’s boss failed to pay the super component of their wages. This can be an easy oversight for many who don’t necessarily keep track of their superannuation so ensure that as an employee you’re mindful of whether you are being paid what you’re owed by your employer. If you were owed a sizeable amount of money from someone else, you’d likely chase it up so your super should be no different. Going back to being a business owner on this topic, the tax office will regularly look to make sure workers are being paid super while also keeping an eye on GST which is required. 

Getting a Raise

The fact of the matter is that everyone would like to be earning more money. When you approach your employer however, Host Andrew Baxter strongly suggests being realistic with your aims. Any member of staff heavily involved in business activities will know when things are slowing down. So if you find yourself in a position wanting more money, you may only have the chance of getting a small raise in times where the business is earning less. In the current environment with businesses earning less and inflation running wild, a raise in line with inflation is likely as good as it is going to get. Make no mistake, if you are a good performer and a valued member of your team at work, your boss likely wants to retain you and may be flexible to try to keep you on. As we see interest rates continue to rise and likely see consumer spending decreasing, there may be some storms that need to be weathered as a team, but if you make it out the other side and start to see some more traffic, it may be a great chance to negotiate a pay rise.

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