Australia’s small businesses are doing it tough, but I believe they have a bright future because I see great innovation, entrepreneurship and resilience from many of the 550,000 customers I serve.
For some time now the economic climate has been challenging for the small business community who have barely registered a positive quarter since the GFC. Move 10 years on and small businesses are still struggling with economic uncertainty and instability.
This is reflected in the latest Westpac-Melbourne Institute SME Index, which examines the economic health of Australian SMEs. The Index revealed small business confidence in Australia has fallen to the lowest level in two years, and 40 per cent of small businesses reported a decline in profits over the past 12 months. Pressure is expected to continue with many forecasting revenue to be unchanged over the next year.
Despite these challenges, the sector is doing well and remains upbeat about the future. In the next year, more than a quarter of small businesses are planning to expand their operations including enhancing their products and services and breaking into new markets. This is good news because when small business prospers, Australia prospers.
In another positive sign, specific sectors – including those that have been facing declines – are seeing an increase in activity and sales. Small manufacturers and the health services are the outperforming sectors with approximately 45 per cent expecting revenue to improve in the year ahead. A growing number of SMEs in the manufacturing industry reported an increase in the volume of activity and sales in the past 12 months.
Furthermore, the manufacturing sector is moving away from big production lines towards other activities in the value chain such as designing, recycling and packaging. In fact, 90 per cent of this sector is looking to enhance or create new products and services. This is a great example of how small businesses can discover new sources of growth and reinvent themselves to continue to be successful. I call this their Second Act. It’s a revival of their business through product or service innovation; access to new markets; or simply the ability to adapt.
At Westpac, over half of our customers have taken steps to future-proof their business, with many investing in strategy and planning, implementing operational efficiencies to boost productivity, and training up staff.
While it’s encouraging to see small businesses invest in their future, I believe more support from government, industry and big businesses will go a long way to help the ambitions and confidence of small business owners. With the right support, many more small businesses can invest in their future to better adapt and thrive.
For businesses looking to take steps now, here are five tips to help future-proof your business irrespective of size, industry or turnover:
- Utilise automation
Adopting automation technology will help make processes more cost-efficient and streamlined, while helping to save time.
- Get into the cloud
The cloud gives you access to a huge range of technologies that integrate with your financial software so you can manage everything from stock and online payments through to point of sale transactions and payroll. And you get the convenience of managing your finances anywhere, anytime, from any mobile device.
- Embrace your agility
Small businesses are uniquely positioned to compete with much larger competitors because of their ability to be agile. If you quickly respond to changing customer needs and wants, this may help improve profit margins.
- Diversify and access new markets
Service businesses have a real opportunity to expand by exploring overseas markets and suppliers for potential growth. In China, AsiaLink reports that Australian service businesses could support up to one million jobs.
- Be prepared for disruption
Plan for possible disruptions by staying informed. Knowing what’s happening within your business, in your local community, the region and within your industry will help you consider whether new products and services or entering new markets are viable options to grow your business.
Ganesh Chandrasekkar, General Manager, Westpac Small Business Banking.