After a challenging 2024, the latest SME Sentiment Tracker by business market research firm Fifth Quadrant in partnership with Ovation has painted a more optimistic outlook among SMEs this 2025.
The report noted that 38 per cent of SMEs are prioritising growth in the coming year, aligning with levels seen last December and surpassing other months in 2024. This optimism is attributed to improved revenue and profitability trends, with 28 per cent of SMEs reporting higher revenues compared to 12 months ago and 58 per cent achieving positive earnings.
On the other hand, confidence in the Australian and global economies for the next three months remains subdued, which the report notes as continued caution amidst economic uncertainty. And while cost pressures remain a significant challenge, SMEs are responding by streamlining product offerings, discontinuing unprofitable services, and refreshing their customer value propositions.
Financial challenges for SMEs slightly eased in December, the report added, with many key issues affecting financial health declining compared to the previous month. Debt management has improved, with the proportion of SMEs carrying no outstanding debt rising from 30 per cent in August to 37 per cent in December. However, the share of SMEs unable to meet debt obligations in the next six months has also increased to 12 per cent.
Demand for finance has also shifted, with funding for growth in new markets, trade finance, and M&A activities declining, while domestic growth remains a priority.
Fifth Quadrant, Managing Director, James Organ commented, “After navigating a challenging year, SMEs are entering 2025 with renewed optimism and determination with rising revenues, profit and growth expectations boosting confidence. While obstacles and economic uncertainty remain, SMEs are well-positioned to enjoy a more prosperous year ahead.”
