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Aussie SMEs optimistic, but barriers remain

Cindy Batchelor
05 June 2017 3 minute readShare
Smiling businessman breaking through the wall

Australian SMEs are feeling hugely confident and optimistic about the future of their businesses and their prospects of running a business in Australia, according to recent research released by NAB. But not everything is looking rosy.

NAB’s new Moments that Matter – understanding Australian SMEs whitepaper explores what matters most to Australian SMEs and how they’re approaching business in 2017.

The first chapter found that despite intense workloads and dealing with bureaucracy, many SME business owners are waking up every day energised by their customers and optimistic about the future.

It’s encouraging to see an overwhelming majority of Australian SMEs (73 per cent) are feeling successful in business, which appears to be strongly correlated with their broader outlook on life – 86 per cent of those who feel successful in business also feel successful in life.

Australia is a prosperous nation to do business in, and our SMEs are thriving with strong business conditions.

We know business owners believe Australia is a great place to have a business (71 per cent), with another 65 per cent believing that Australia will be a great place to run a business in the future.

Growth and expansion are firmly on the horizon

In a sign of increasing confidence, we found that SMEs are also more likely to be focused on growth and technology. Almost half (45 per cent) intend to expand their business in the next three years, while one in 10 are in a constant state of expansion.

It’s uplifting to see SMEs are thriving with strong business conditions – with many SMEs expecting both revenue (68 per cent) and profitability (65 per cent) to grow over the next three years.

The triggers for expansion are largely self-driven and have a lot to do with an enterprising mindset including identifying opportunities, the thrill of the challenge and entrepreneurial spirit.

As we operate in a digital age, it’s important that SMEs are making time to keep up with new technology, with many considering it to be an important area to aid future development and business growth.

So it’s assuring to see 68 per cent of Australian SMEs are now making time to keep up with new technology because they believe it is important to their business.

Digital can no longer be an option for businesses, but needs to be a default mode as businesses work to meet increasing customer expectations.

Yet while SMEs are optimistic and want to expand, there are barriers to expansion

While confidence is strong, SMEs are also feeling the pressures as competition is fierce in the sector. Competition was listed a key barrier to competition, with one in three SMEs indicating they wanted to expand but didn’t, indicating too much competition as a key reason holding them back.

It’s clear that competition is emerging as a key challenge for Australian SMEs, with half (52 per cent) believing that it is hard to stand out among others in their sector.

Furthermore, competition is also impacting profits, with 54 per cent of owners believing that stiff competition in their sector has put significant pressure on profit margins.

Alongside increasing pressures from a competitive marketplace, SMEs are also facing challenges such as rising costs, economic uncertainty and pressure on profit margins and the complexities of running a business.

Millennial SME owners are a world apart

The SME sector in Australia is dynamic: small and medium businesses are distinctly agile and focused on innovation and growth.

Millennial SMEs are all of these things too, but dialed up, and they’re confident in conducting business in the digital environment.

Millennials adopt more of an entrepreneurial mindset and are more optimistic about the future of the economy compared to other owners. More than 75 per cent expect revenue to grow of the next three years, compared to the 68 per cent of everyone else.

They’ve grown up in a period of economic prosperity and relative stability, and are accustomed to a relatively strong business economy, which has helped to contribute to their high optimism toward the future.

They’re also more optimistic about the future, with only 14 per cent of citing the economy as a future challenge, significantly less when compared to 25 per cent of overall SME owners.

Additionally, they are also 21 per cent more likely to expand their business in the next three years than anyone else – with many looking to digital as the pillar of growth.

They know that digital is the backbone of their businesses – yet it also provides many opportunities for other entrepreneurs to compete at this level, leading to increased concerns about stiff competition.

Competition in the SME sector has always been intense, and we know that millennials are feeling it the most.

Interestingly, however, those millennial SMEs who have undergone at least one phase of expansion during the life of their business are much more likely to cite competitive pressures as a trigger (23 per cent compared to just 14 per cent of everyone else). This indicates competition can have a positive effect by driving growth.

Australian SMEs are the backbone of the Australian economy, creating more than 7 million jobs, so it’s exciting to see they’re optimistic about the future and looking toward growth and expansion.

We know Australian SMEs are distinctly agile, and in an age of disruption and constant change, this puts them in a prime position to adopt new technologies and grow.

SME owners are our most innovative business people, they’re nimble enough to be ahead of the curve, and have the skills to understand how to manage the risk of the new and unknown.

Cindy Batchelor is the executive general manager of NAB Business.

Aussie SMEs optimistic, but barriers remain
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Cindy Batchelor

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