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Over 50% Aussie SMEs forecasting revenue growth in H2 2021: ScotPac

With border closures and lockdown restrictions changing on a regular basis, SME owners are looking beyond these limitations to see how their businesses can adapt and grow. 

According to a new poll by ScotPac, a non-bank lender, just over half of SMEs (50.1%) expect revenue growth in the second half of 2021. An increase of 4.8 percent in average revenue over the previous year is a positive sign (4.4 percent ). 

In addition, 727 (57.9%) of the 1255 businesses surveyed wanted to reinvest into their business. This represents a significant improvement from late 2020 when the rate had fallen to a four-year low of 51.9 percent.

ScotPac CEO Jon Sutton said polling also revealed a promising increase in the proportion of SMEs wanting to invest in their business through to the end of 2021.

“This brings investment intention almost back to pre-pandemic levels,” Mr Sutton said.

“It’s important to note the research took place over six weeks before and in the early days of the NSW Delta outbreak.

“Findings indicate that if we can get past lockdowns and border restrictions, a slim majority of the SME sector is backing its ability to achieve revenue growth.

However, Mr Sutton cautioned that loss-making SMEs in some locations and sectors are finding it more difficult to survive due to the tightening restrictions.

“At the other end of the spectrum, negative growth SMEs are finding it tougher than ever.

“The impact of Victoria’s 2020 extended lockdown is still being felt by the small business sector, something NSW should be mindful of as they look towards reopening.

“Small business winners and losers are increasingly separated by location and industry. The ongoing impact of Vic lockdown sends a warning for NSW.”

The SME Growth Index is Australia’s longest-running in-depth study of the prospects for small company growth. The September 2021 round, conducted by East & Partners, polled a representative sample of 1255 small business leaders from around the country. 

According to the findings, the impact of Victoria’s prolonged lockdown in 2020 is still being felt in the SME sector. 

Fewer than two in ten Victorian businesses foresee positive growth, with six in ten expecting revenue declines and a quarter expecting stagnation.

NSW, which is often positive on development expectations, was already cautious in the early days of its Delta outbreak. Four out of ten SMEs expected revenue increase, slightly more than a quarter expected revenue decline, and almost one-third expected revenue to remain stable. 

Queensland has the fewest small enterprises (just 2.2 percent) predicting revenue declines. About a fourth of the population is stable. Seven in ten (73.8 percent) expect growth. 

These findings hint at a select industry (such as tourism) being affected the hardest: of the two in 100 Queensland businesses projecting revenue declines, they are expecting the greatest decline of any state (-6.1 percent ).

Western Australia, South Australia, and the Northern Territory were the most positive about finishing 2021 with strong revenue. In each of these states and territories, more than eight in 10 businesses are forecasting growth and fewer than one in 10 expect revenue decline.

Restructuring and M&A trend to continue

According to Mr Sutton, the SME Growth Index recorded the greatest ever proportion of SMEs predicting revenue drop (26.1 percent), as well as the widest ever revenue range (from +9.6 percent growth to -15 percent decline).

“We also recorded the lowest ever proportion of SMEs reporting no change in revenue (23.7%), suggesting businesses are being forced off the fence and either scaling up for growth or bracing for troubled trading conditions,” he said.

Each round, business respondents are asked to identify their business’s stage as start-up, growth, stable, consolidating, or contracting (declining). 

Almost two-thirds of SMEs identify as being in a positive business phase – either in a growth phase (35.1 percent) or a stable phase (35.1 percent) (29.5 percent ). 

A further 10.8 percent classify themselves as start-ups. A growing number of businesses consider themselves to be in trouble. A record high (15.7 percent) is in outright decline; this figure has nearly doubled since the study began in 2014.

“Our past three research rounds have seen consecutive results with the highest number of contracting SMEs at any time since 2014,” Mr Sutton said.

“Given the optimistic growth prospects of half the sector, combined with the warning signs for the troubled end of the SME sector, the next 12 months are likely to see strong restructuring and M&A activity.

“This is yet another reason for small business owners to ensure they are getting professional advice to guide their enterprises and the right funding to fuel their business activities and allow them to survive and thrive.”

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