It’s been an extremely tough few years for small businesses as local and global economies staged only spluttering revivals from the confidence crippling Global Financial Crisis.
We’ve been in a very privileged position in Australia as unemployment has stayed around trend and our robust banking system weathered rough credit markets, and most importantly, maintained solvency. But that’s not to say it’s been easy for operators Down Under.
One barometer we’ve been watching for the broader fortunes of small operators across the country is the MYOB business monitor, a regular survey of a nationally representative sample of over 1,000 small and medium business owners and managers.
As we approach the end of the year, MYOB has done some retrospective research into three years of small business sentiment and provided an outlook for the year ahead.
“As memories of the GFC have faded, our MYOB Business Monitor surveys have shown that Australian SMEs’ uncertainty about the economy is continuing to rise while business performance has declined,” CEO Tim Reed says of the results.
“Conditions remained tough last financial year. Twice as many operators saw their revenue fall than rise, and the majority, around two thirds, estimated economic improvement was more than 12 months away.”
“We also found the highest levels of SME dissatisfaction with the Federal Government in the history of the research.”
And there is some concern about the Reserve Bank’s ability to whet consumer appetites too, as interest rate cuts have proved largely ineffectual.
“Despite three cash rate cuts between May and October this year, consumers didn’t spend any more in October than in May. And the Australian dollar remains high, with indications it will remain so for some time,” Reed says.
“However, there is a sense of determination and optimism prevalent throughout the SME sector.”
Taking a look back at the track since 2010, here are the key trend changes and what we can expect going forward...
Stable or Rising Revenue
The proportion of SMEs expecting the economy to improve within 12 months has considerably declined since the October 2010 report, from 47% to 19% in July 2012. Yet 29% are anticipating a rise in revenue in the next year, with 43% expecting revenue to be stable and 22% expecting a fall.
“We’re starting to see signs of the tide turning on overall business outlook, particularly for those who have embraced innovations such as cloud computing and other activities that save time and increase productivity,” Reed says.
“Our research indicates the small and medium business sector has reached a turning point, with economic confidence and revenue expectations steady over the second half of the previous financial year.”
Fuel Prices the Big Worry
In the October 2010, the top pressure point for SMEs was interest rates. However since March, fuel prices have shot to the top of SME worries and have stayed there since, with cash flow second, then price margin and profitability and interest rates.
“With fuel prices continuing to reach record highs and expected to remain so over the short term at least, this is likely to again rank as the number one pressure point in 2013. The pressure is felt by many SMEs, but most of all by those in transport, postal and warehousing ... 49% of respondents in this sector experienced a drop in revenue last financial year,” says Reed.
Customer Retention a Continued Focus
Looking at SMEs intended investment of time and money for the following year, the areas are relatively consistent as over the past three years. The top three areas of attention are customer retention strategies, customer acquisition strategies and the number or variety of products/services sold.
“A strong correlation exists between the ongoing strong investment in customer-focused growth strategies and top business pressures such as cash flow and price margins. The trend we’ve seen over the past two years – where the customer reigns supreme over all other considerations – will likely carry through to 2013,” says Reed.
Online Uptake Wavering
Despite Australia’s internet audience reaching 15.7 million in September 2012, 60% of SMEs are still without a website. MYOB also found that while social media usage rose temporarily from 18% to 24% from October 2010 to October 2011, it started to decline from then, reaching 21% in March 2012 and 16% in the July 2012 report.
“I hope to see a faster rate of adoption of business websites as operators realise they are handing customers to their competitors by not being online. In addition, I hope the decline in social media usage doesn’t continue. Australian SMEs need to become better connected and more visible online,” Reed says.
“The continued roll out of the NBN should increase the appeal to SMEs of cloud-enabled and cloud-based products and services for faster upload and download speeds and a more stable internet connection.”
What does 2013 have in store for you? Come share your small business predictions on the KBB Facebook Forum!