Cashflow concerns have increased from 22% to 26%, up from fourth place on the list to the number one pressure point for SMEs.
The latest MYOB Business Monitor survey has revealed most SMEs surveyed still feel pessimistic about the Australian economy, with almost half expecting it to decline in the year ahead.
The bi-annual national survey of over 1000 SME business owners has found that 42% of SMEs surveyed believe the economy will decline over the next 12 months, and only 24% are optimistic about the country’s economic future.
While business conditions have been steady for Australian SMEs since the last survey in October 2015, most SME operators still feel the economic outlook is bleak despite federal election promises of greater support for the sector.
Bleak outlook continues
The pessimistic SME sentiment should be a wake-up call for all politicians who care about this vital sector as we approach the federal election. It reinforces the need for policies that will stimulate the economy and lead to growth.
Despite a range of election initiatives promised to help businesses get ahead, business owners still don’t feel confident that the economy has turned the corner.
We had been looking for signs of improvement, but the gloomy sentiment has now been consistent over the past three MYOB Business Monitor surveys. Uncertainty about the Federal election may be contributing to this unease.
While two in five operators – 41% – expect their revenue to remain the same over the next 12 months, the proportion of operators expecting their revenue to increase was similar to the last survey, at 31%.
In October last year, 38% of operators said they had more work or sales in the pipeline, but this number has now fallen to 34%.
Additionally, nearly one in four operators – 24% – felt they had less business in the pipeline compared to 19% in the previous survey.
On the upside
On a more positive note, start-ups – 49%, new businesses – 41%, and franchisors – 47% – were more likely to expect their revenue to increase over the next 12 months. This sentiment was echoed by Gen Y operators – 46% – and metropolitan based operators – 38%.
SMEs with a social media presence – 38% – or a business website – 36% – also expect their revenue to increase over the next 12 months, with these operators also reporting more work or sales in their pipeline over the next three months.
Concerns about interest rates on the rise
SMEs continue to face the same stresses from year to year, with the top five business pressures remaining consistent, even though the order of severity has changed.
When asked about their biggest business pressure points for the next 12 months, cashflow concerns have increased from 22% to 26%, up from fourth place on the list to the number one pressure point for SMEs.
The other issues putting pressure on SMEs are competitive activity and fuel prices – both down from equal second place, attracting new customers – down from first place, and profitability and price margins – equal fifth place in the last survey.
It is particularly interesting that interest rates have jumped from tenth place to equal fifth place on the list of business pressures.
SMEs, particularly franchisors, are considering the possibility of interest rate rises over the next 12 months, which they feel could have a negative impact on their returns. This is interesting because it is out of line with most economists.
Tim Reed, CEO, MYOB