Missing out on sales? You’re not alone

Most major economies have had tepid growth, at best, in recent quarters. But how are things on the ground? If you’re a small business owner and you’re thinking that things feel tougher than what national statistics seem to be saying about the broader economy, you’re not alone. The Xero Small Business Insights (XSBI) data shows a lot of small businesses aren’t growing as fast as the major economic indicators suggest. 

There’s a disconnect between small business sales and national economic performance

National statistics help us understand how our economies, populations and societies are doing, which is important, but because they’re high level, they can disguise the small business story. This means they sometimes paint a picture about the state of the economy that doesn’t line up with what small businesses are experiencing. This is where XSBI can step in to reveal how things are going for small business owners, using real small business data. So what is the small business story that the XSBI data is telling us, compared with the rest of the economy? 

We compared nominal GDP growth (y/y) with XSBI sales growth (y/y) for the March quarter in Australia, Canada, New Zealand, the UK and the US (scroll down to see a table with the comparisons). We know from other modelling we’ve done that XSBI sales correlate to movements in GDP. These figures tell us that, for the first quarter of 2024, small business sales growth lagged behind broader economic growth in all XSBI countries except Australia, where the XSBI sales growth rate was only just higher than GDP growth. 

These statistics tell us that in four of these countries people aren’t spending their money in small businesses to the same extent as they are in larger businesses. We know that cost of living pressures mean consumers don’t have much extra to spend once they’ve paid their essential household bills. The XSBI data shows that what little extra they do have isn’t making it to small businesses.

More recent XSBI data shows the situation has become even harder for small businesses in June. Sales actually fell in June in New Zealand (-8.3% y/y), Australia (-3.5% y/y) and the UK (-5.2% y/y).  

What are small businesses doing to manage these conditions?

Queensland couple Rejoice and Adam Thomson operate two suburban cafes in Brisbane, Australia, including Dovetail on Overend. They shared with us how they’re working hard to keep customers coming through the doors. 

After ten years of operations, Rejoice and Adam have just navigated the most challenging period they’ve experienced in business. Turnover was down 15% in the month of June compared to the same time last year, consistent with the June fall in sales seen in the XSBI data for all small businesses in Australia.

“On the ground, we could see customers visiting less frequently, and many of our customers were spending significantly less when visiting, so rather than order breakfast, drinks and a dessert, they might order a coffee and a donut. At the same time, all of our expenses increased significantly,” said Adam. 

“We feel the pain of increasing costs, especially wages. Increasingly, my wife and I take on more work to help keep our wage costs down; however it takes a big toll – we’re working way too many hours and are physically drained.”

Testing new sales channels, reviewing costs and training staff

To solve these challenges, Rejoice and Adam constantly review their financial position, and look for savings wherever possible. This includes finding ways to be more efficient and less wasteful (Dovetail on Overend has almost zero waste), regularly working with suppliers to find the best deal on ingredients and services, and constantly updating prices to help cover the ongoing cost increases.

Adam and Rejoice are also looking at other sales channels and training staff to make them more productive. “We’re really focused on training all our team members to make them as productive, quality- and customer-focused as possible. In addition, we’re constantly trying to increase our online sales through our website, and working towards attracting more regular delivery customers,” said Adam. 

To do this, they’ve started routinely using paid marketing on social media to bring more customers to the cafes, who will hopefully be attracted to purchase the more profitable products they promote. 

“We are seeing good returns on this investment, and have become quite good at reaching our target audience in this way,” concludes Adam.

It’s a tough time, but you’re not alone

If you’re a small business owner, Rejoice and Adam’s story of constantly finding ways to work through the current economic environment may seem familiar. And when this lived experience doesn’t align with stories of national economic growth, you may be left wondering what’s going on and if you’re on your own.

To help you get a sense of how other small businesses are faring, check the XSBI data and reports to see what’s happening in the sector. We provide regular small business data across each country, including some regions and industries, covering metrics like sales volumes, wage increases, time taken to be paid, and jobs growth. If you’re interested in reading more about small business sector performance across Australia, Canada, New Zealand, the UK and the US, check out the XSBI website.

Table: XSBI sales versus GDP growth (y/y% change)

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Source: Xero Blog