30-Year Cafe Owner Wouldn't Start Over as Small Business Costs Bite

Why Don Adan Coffee's Owner Wouldn't Start Over Today

After 30 years running Don Adan Coffee in Australia, Gerardo Barrios says he would not open the business today if he were starting out. Barrios, who migrated from Ecuador three decades ago and now runs two cafes, says wage, utility, insurance and supply costs are hitting margins harder than at any point in his career.

His warning comes alongside the inaugural AMP Bank GO small business cost pressure index, which found prices for small businesses have climbed almost 25% since 2020, with wages making up about half of that rise. AMP Bank GO director John Arnott says costs are expected to keep climbing into 2027 and that small businesses are caught between rising bills and customers watching every dollar.

Barrios also points to Australia's July 1 minimum wage increase to $26.44 an hour, or $1,004.90 a week, and to the legacy of Covid-era borrowing. He says staff received JobKeeper while business owners took on loans, and that 16 interest rate rises since then have made repayments far heavier. Rather than simply raising prices, he is trying to negotiate volume-based discounts with suppliers.

The Cost Stack and Debt Hangover Squeezing Australian Cafes

The Wage Share Is the Red Flag

Barrios says wages have moved from about a third of his total costs to more than 45%, a shift that turns every award change into a direct margin squeeze. Cafes are labour-intensive, so the July 1 minimum wage increase and new payday superannuation arrangements ripple through cash flow almost immediately. That explains why Barrios says an economist's argument that higher wages boost spending does not comfort a business that must pay those wages weeks before customers return the money.

The JobKeeper Debt Overhang

Barrios says his staff got JobKeeper during the pandemic, while the business took on hundreds of thousands of dollars in loans to stay open. Government reviews have previously shown 38% of the first $70 billion in JobKeeper payments went to businesses that did not experience a fall in sales, but the owners who borrowed were left with repayments just as the Reserve Bank began lifting rates. Barrios calls the result a 'business loan cliff' that receives less attention than the household mortgage cliff.

Why Prices May Rise Anyway

The AMP index's 25% cost increase has so far been absorbed by many small businesses, but Arnott says there is a limit. With wages driving about half of the index, and costs still expected to rise into 2027, passing the increase to customers is the only option for many operators. Barrios is trying a different route for his cafes: keeping volumes high so he can ask suppliers for discounts of around 5% rather than raising prices. That strategy protects sales, but it depends on the loyalty of customers who are themselves feeling the pinch.

What Small Business Owners Can Do With Costs at Record Highs

For cafe owners and other small business operators facing the same conditions, the figures in this story point to some concrete steps:

• Track wages as a share of total costs monthly. Barrios saw his wage share climb from about one-third to more than 45%, and measuring that ratio makes it possible to adjust staffing levels or prices before margins disappear.
• Update cash-flow forecasts for the current minimum wage rate of $26.44 an hour, or $1,004.90 a week, and for payday superannuation timing, which adds to the cost of every pay run.
• Negotiate with suppliers on volume. Barrios maintains high volumes and then asks suppliers for discounts of around 5%, using his coffee counts as leverage.
• Stress-test business loan repayments. With 16 rate rises since Covid-era borrowing, owners with pandemic loans should map repayments against cash flow rather than wait for a 'business loan cliff' to hit.
• Follow the AMP Bank GO cost pressure index each quarter, since wages account for about half of the 25% rise in small business costs since 2020 and further increases are expected into 2027.