Drought is a common occurrence in regional Australia and one that is predicted to increase in frequency and severity under climate change (IPCC 2007). While many regard drought as an integral part of doing business in rural and regional areas very little research has been done on the impact of drought on the SME or how this affects the sustainability of these businesses and the communities in which they support. In most small rural communities it is the SME’s that underpin the regional economies. Hence their viability is often regarded as a prerequisite to the future vitality of many rural areas. This study evaluates the strategies adopted by non-farm small and medium enterprises (SMEs) in regional Queensland to (a) mitigate the effects of drought and (b) how such businesses can better prepare for future droughts and the effects of climate change. Regional business owners (SME’s) in Queensland’s were randomly selected and face to face interviews with the business owners conducted. These interviews were designed to collect data on the effectiveness of strategies used by business from eleven detailed case studies. Perspectives, views and downstream impacts as well as additional case histories and data were sourced from the local chapters of the Chambers of Commerce, State and Regional Economic Development bodies and local Councils.While the main impact of drought is reflected in the decline in sales to their farm customers, SME’s face many issues. The businesses experience cash flow problems, increased prices, and the need to reduce staffing, cost cutting, reducing stock and reduced spending. The problems were compounded by a lack of entrepreneurial and managerial skills, declining populations, skills shortages, business discontinuance, lack of infrastructure and apparent lack of access to government assistance or incentives. The issues, impacts and implications are discussed and pathways to reduce or mitigate these issues and risks. The strengths and weaknesses of the strategies used are also explored.