As businesses prepare for the annual holiday, Aussies are spending less. ABS data shows a slowdown in household spending. Coupled with economic factors like high interest rates, sticky inflation, and the RBA’s rigid cash rate, small businesses will have to be smart moving into the new year.
Nonetheless, November and December are still a time when Aussies open the purse strings. Here’s how you can take advantage of the holiday season and set yourself up for success going into the new year.
Consumer spending
This year, Aussies are projected to spend close to $70 billion during Black Friday and the lead-up to Christmas. This should give small businesses the lift needed to start 2025 strong.
With this in mind, small business owners still need a plan for the holiday season. It isn’t enough to hope the spending comes your way; businesses must always assess and review. As you get a closer look at your books, you’ll start to get an idea of your finances and how to focus on your business growth.
What is the cost of profit for small businesses?
As you prepare for the holidays, it is important to note that extra revenue can also come with extra costs. This is just basic supply and demand, so the holiday season is a balancing act of revenue and operating costs.
Here are some areas that small businesses should focus on when more money comes in:
Your business is affected by increased revenue in each of these areas. For instance, if you are selling more stock, you may need to increase your payroll headcount to adjust for the increase in sales. This can decrease your cash flow, as you have more money tied up in payroll and inventory.
Dedicated software will allow you to review your finances in detail. When more money is flowing into your business, you’ll begin to realise that you are spending more to get it. When this occurs, you may find that the cost of selling leaves you with less money to spend on keeping your business running. Plan ahead and you can prepared for any unexpected costs that arise associated with an increase in revenue.
Productivity
It is essential to run your business effectively by examining it, breaking it down into parts, and identifying what works and what doesn’t. By breaking things down into manageable chunks, you can measure your productivity and run your business effectively.
The idea of using productivity as a measurement tool is relatively easy. You take a look at one part of your business and apply it against another.
The formula for productivity is simple:
Imagine that a manufacturer produces 1,000 widgets, which requires 200 hours of labour. Using the formula, the manufacturer knows that their factory develops five widgets per hour of labour. Now, the manufacturer can make decisions about how to improve. What if they want to make more widgets faster? They can look deeper into how their workers operate or if their production assets, like machines, need to be updated.
Examining productivity is a great way to improve your business for the holidays. You make decisions on areas such as labour costs, assets, costs of materials, and overhead; there isn’t anything you can’t measure.
As a small business owner, you know when something isn’t working; you know what the numbers mean. Look a little deeper and find that cog in the machine that needs replacing.
Shutdown and recharge
Most businesses eventually need to close or shut down for a short time during the holidays. In Australia, we generally have a break at the end of December during Christmas and New Year’s. Take the opportunity to use your well-earned leave; this is the time to recharge and take stock of the year.
Small business owners can get anxious about the short shut-down period, and for good reason. Taking your attention away from operations is hard when your small business is your livelihood. However, the benefits of taking time off are well documented. Taking leave has been shown to increase productivity by up to 40% and reduce the chance of health issues and burnout.
Burnout costs the economy approximately $14 billion a year. Given this, it is helpful to take a step back, recharge, and remind yourself why you invest and work hard for your small business.
New year preparation
With the silly season in sight, it is time for the big push to finish the year strong. No year is the same; the ups and downs are part of running a business.
However, with a plan in place, you can ensure that you are ready for the new year and have a template for the future.