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SMB profitability slides, but social media use rises

Small business profitability slid to a record low during the last quarter, with many expecting to see more falls over the next year. Despite this less than positive news, many reported they’d be boosting their online and social media presence in the coming months.

According to the Sensis Business Index, half of small businesses experienced a decrease in profitability during the quarter, with just 20 percent enjoying an increase.

Report Author Christena Singh said the profitability indicator is now strongly negative, and this is the weakest result in the report’s 18-year history.

“While there are marked differences across the nation, all states and territories recorded negative profitability indicators this quarter. Some sectors have performed better than others, but profitability has generally been weak across all industries,”

Rather unsurprisingly, the retail sector experienced the weakest profitability during the quarter, and it’s expected to be lowest in manufacturing, building and construction industries in the coming quarter.

Along with profitability, the report found all performance measures deteriorated during the quarter. The indicators for sales, profitability and capital expenditure are now strongly negative, though wages and prices remain positive, and employment is flat.

The last quarter also saw an increase in small businesses looking to close or sell their business.

SMBs fight back online

According to the report, small business perceptions about the economy have also become more pessimistic, “however, Australian small businesses are resilient and very nimble, with many taking proactive measures to counteract the changing conditions experienced during the last six months,” Singh said.

In response to these difficult conditions, 42 percent of SMBs plan to introduce new products and services this financial year, whilst 38 percent expect to increase their digital presence and 35 percent will increase their sales force.

“In the face of rapid technological and economic change, there has been an upswing in businesses looking to increase their digital presence and social media activity over the last six months.”

Other key findings in the report include:

  • Business confidence fell from 28 to 15 percent, the third lowest result in the report’s history
  • Perceptions about the current state of the economy fell from negative seven percent to negative 35 percent
  • Profitability weakened amongst the small business sector, with the indicator down 13 percentage points to negative 27 percent
  • The sales indicator fell strongly, down eight percentage points to negative 22 percent
  • Overall employment by small businesses fell one percentage point during the quarter, taking the indicator to zero
  • Support for the Federal Government’s policies fell seven percentage points during the quarter, taking the indicator to negative 48 percent.
    • The key reasons small businesses gave for not supporting the Federal Government’s policies include the proposed carbon tax, a view policies were affecting consumer confidence, no incentives for small businesses and too much bureaucracy.