The latest annual SME Compass Report by fintech SME lender Banjo Loans reveals that 70 per cent of small businesses believe they will attain revenue growth this 2023 despite the pressures of the current economic climate and fears of recession.
In particular, those in fitness, trades and services and healthcare are the most upbeat, which the report noted was a reflection of continued consumer spending on health, wellness and the home.
“Australian SMEs are facing significant challenges this year with inflation, rising supply costs and increasing interest rates,” Banjo Loans CEO Guy Callaghan said. “Despite all of this, they are showing great resilience and using strategies to continue to ride those waves and thrive.
“In a further testament to positivity and confidence, more than a third of SMEs have said they are planning to merge with a competitor or acquire another business in 2023,” Callaghan added. “This is an encouraging sign that they’re seeing a positive future for their business on the horizon.”
Despite the optimism, however, the research shows that inflation concerns still weigh heavily on many SMEs. Two-thirds of Australian business owners fear that the current inflation rate will be a barrier to growth, with fitness, hospitality & tourism, and beauty & well-being expected to be the worst impacted.
In addressing inflation concerns, the hospitality sector is more likely to increase their prices (76 per cent), while those in banking & financial services and trades will be more likely to reduce their costs.
“Thankfully, SMEs aren’t sitting about and waiting, we’re seeing that almost all of them have already developed strategies to manage inflation – 49 per cent have had to apply price increases and 40 per cent have reduced their costs,” Callaghan said. “They are taking intuitive and positive steps, by making plans and tackling those hurdles to the best of their ability.”
Tax debt has also become more prevalent among SMEs, especially in the accounting sector (42 per cent), fitness (31 per cent) and trades & services (30 per cent). But being proactive, over half of those have set up a payment plan with the ATO. On a positive note, 62 per cent of SMEs intend to increase their headcount. On average, the SMEs surveyed are looking to grow by six new staff, so to attract talent, SMEs are offering increased pay. Half of SMEs intend to leverage funding this year to drive growth, especially metro-based businesses. Business loans are the preferred funding source for business owners – particularly for construction, real estate and healthcare.
“Perhaps as expected, this staffing demand is led by healthcare, hospitality and manufacturing,” Callaghan said. “These sectors have been particularly under the pump since COVID, with immigration slow to resume. SMEs tell us that recruitment is a challenge. One-third are reporting difficulties in finding staff and two in five have concerns about labour shortages.”
“While economic conditions are becoming increasingly harder to navigate, SMEs are seeking expert advice and turning more towards accountants and finance brokers to help them secure the funding they need to grow,” Callaghan added. “However, what we’re hearing is that accessing external funding isn’t easy for half of SMEs due in part to increased interest rates. Many are also finding that it takes far too long for banks to reach a decision, when small business would prefer a nimbler process. While inflation is a definite cloud on the 2023 horizon, SMEss’ confidence and revenue are high. It’s heartening to see they’re actively planning to acquire, grow, and hire,” he concluded.
