Six key trends affecting Australian SMEs

By Harry Allan

Since September 2014, Australia’s Scottish Pacific has engaged specialist research firm East & Partners to conduct six monthly polls of 1200 small to medium enterprise leaders across all states and key industries.  

Together they have produced the SME Growth Index which has been released today. Scottish Pacific CEO Mr Peter Langham said the latest results show that SME confidence has taken a hit despite the resilience of the sector, which according to ABS statistics employs almost half of the 10.7 million Australians in the workforce.

Here are six key trends affecting Australian SMEs 

1. SMEs predicting positive growth now in minority

For the first time since the Index began, SMEs forecasting positive growth (48.4 percent) are outnumbered by SMEs forecasting negative growth or no change (51.6 percent). 24.2 percent forecast negative growth, compared with 16.8 percent last year.

“The current environment is clearly placing pressure on Australia’s small to medium business community,” Langham said.

2. Cash flow named as top small business concern

“SMEs nominated cash flow as the most stressful element of business. They cited credit conditions as a key barrier to growth," Langham said.

"With the Index highlighting that cash flow keeps 72.5 percent of respondents awake at night, it’s crucial for these leaders to find the right funding to support their business.

3. Small businesses increasingly looking to non-banks for funding

“Businesses are increasingly looking beyond the banks to fund growth and to help ease cash flow concerns. From this time last year, there has been a 30 percent increase in SME owners planning to fund their growth using a specialist non-bank lender, with one in five now indicating their intention to do so,” Langham said.

He said SME Growth Index surveying took place in July and August, in the aftermath of the Federal Election and UK Brexit referendum. While uncertainty around these events may have influenced some responses, the results were a timely reminder to governments, industry bodies and financial institutions of the importance of having the right regulatory and funding systems in place to stimulate and support the nation’s vital SME sector.

4. SME owners putting in long hours

A 50-plus hour week is standard for most SMEs (88.8 percent). Almost half of SME owners and senior managers (43.7 percent) are spending 60 to 80 hours a week working on their business, which equates to 12+ hour days, six days a week.

5. Double edged sword of technology

Almost half of SMEs (44.6 percent) believe mobile and digital technology has had a negative impact on their work/life balance. Only 15.7 percent of small businesses believe it has led to better work hours or flexible working conditions.

New products and services plans on hold – Almost half (48.9 percent) of SMEs report no plans to introduce new products and services during the second half of 2016, up from 33.7 percent a year ago. This may have been influenced by uncertainty following the Federal Election.

6. Entrepreneurs still positive

Australians are still keen to start their own business, despite barriers and tough conditions. The Index shows one in 10 SMEs are in start-up phase, a consistent figure since data was first collected in September 2014.

Business Review Australia & Asia's September issue is live. 

Follow @BizReviewAU and @MrNLon on Twitter. 

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