Small business is the most optimistic business segment in Australia, despite the majority of small operators forecasting challenging conditions in the next six months, new Commonwealth Bank research reveals.
Almost one in four small businesses are expecting double-digit growth over the next six months – the most positive response among all business segments. This is despite 64 per cent of small businesses expecting conditions to plateau or decline over the same time period.
The research survey is a comparative analysis of the current outlook of small (under $1m in turnover), medium ($1m-$50m), and large ($50m+) businesses on economic factors, growth prospects and business development priorities.
It found more than half of Australian small business owners believe they are well positioned for growth and are more likely to place greater emphasis on growth initiatives, while large businesses are focusing their efforts on cost management initiatives.
The research also found sales and marketing activities are the top priority for small business owners, while medium-sized businesses ranked customer experience/service as their main focus, and large businesses said tech-driven productivity was paramount.
This confidence may reflect positive spending trends across the Australian economy. In September, the Commonwealth Bank Business Sales Indicator – a measure of economy-wide spending – recorded its strongest gain in 17 months in trend terms. In October, the BSI lifted by 0.4 per cent in trend terms, matching the gain in September. It was the biggest back-to-back increase in spending in nine months.
Karen Last, General Manager Small Business, Commonwealth Bank, said: “What is clear is that these different business sectors have varying priorities and their response to expected market conditions isn’t consistent. It’s encouraging to hear that small businesses are well positioned for growth but it’s important they prepare for that uncertainty to ensure they can handle economic or business challenges.”
Economic conditions of lesser concern
Large businesses are more prepared for economic change than their small business counterparts, with 91 per cent agreeing their business has a good understanding of market conditions and competitive threats, compared with 73 per cent of small businesses.
Interestingly, only a third of large businesses express concern about economic conditions affecting their business performance. Furthermore, small business owners are less likely to think they will be able to use global economic conditions to lift their profits in the next six months (16 per cent of small businesses, 20 per cent of medium and 35 per cent of large).
Small operators better on costs but less confident about business basics
The smaller the business, the more likely they are to agree that their cost management is well controlled. However, small businesses are least likely to agree that they have healthy levels of debt and a well-defined business strategy.
“Our findings indicate the majority of small business owners have a good handle on cost management, which would contribute to their overall sense of confidence about the potential for business growth over the next six months. It is equally important to have a clear business strategy and healthy levels of debt so they can be confident when assessing growth opportunities,” said Ms Last.
Work-life balance varies between business sizes
The findings also show a significant difference in a typical working week between small and medium businesses. While small and medium businesses claimed they work too many hours, the research found that it is actually big business decision makers who are working more than 40 hours per week compared with only half of small business owners.
At the same time, research from the Commonwealth Bank earlier this year found 44 per cent of small businesses think they do not spend enough time on personal wellbeing and development.
About the Small Business Study
The Commonwealth Bank Small Business Study was an online survey of 851 business decision makers across small (under $1m), medium ($1m-$50m) and large ($50m+) business undertaken by ACA Research in October 2016.