Amidst the current challenging market conditions, the latest SME Sentiment Tracker report reveals that the Business Sentiment Index has remained steady at 100, consistent with the long-term average.
The report, conducted by business market research firm Fifth Quadrant in partnership with Ovation, highlights the fact that 28 per cent of SMEs have experienced an increase in monthly revenue compared to the same period last year. However, over one-third continue to witness declining revenues, with the hospitality, distribution, construction, and retail sectors remaining largely affected by the current market conditions.
On the other hand, profitability among these businesses remains relatively stable. Half of the surveyed SMEs report profits, while only 20 per cent are operating at a loss. This resilience suggests effective cost management and operational efficiencies, enabling many companies to maintain profitability despite revenue challenges.
Overall, the economic outlook among SMEs remains cautious, with prevailing pessimism regarding global and Australian conditions, particularly with rising costs and inflation. Nevertheless, a noticeable upturn in confidence was observed in December, underpinning a level of positivity for the coming year.
Short-term revenue projections for SMEs are also positive with one-third anticipating revenue increases in January. Furthermore, 37 per cent of SMEs are setting their sights on growth in 2024, with a decrease in the number of businesses (13 per cent) planning to downsize or exit. 18 per cent also project an increase in their workforce in the next quarter, with a third foreseeing higher wages though capital investment and marketing expenditures are in a modest decline.
The demand for finance also spiked in December, with 20 per cent of businesses indicating a need for additional funds to kickstart operations in 2024. However, while confidence in the ability to make loan payments has increased, loan stress remains a concern, particularly in the retail sector.
“Heading into 2024, the sentiment among SMEs appears cautiously optimistic despite challenging market conditions,” Fifth Quadrant, Managing Director, James Organ commented. “While revenue fluctuations persist, businesses continue to demonstrate resilience and effective cost management. Concerns over rising input costs and inflationary pressures remain, yet there’s a growing confidence in revenue growth and workforce expansion. In summary, many SMEs will be hoping for a brighter 2024, after another year of significant challenges.”
