SMEs are sitting on the fence

Business owners need to get out there, create their own opportunities and not wait for business to come to them.

That’s the advice from Mark Cleaver, managing director, Australia and New Zealand, of small business finance specialist Bibby Financial Services. Cleaver made his remarks in response to the findings of a new survey which suggests that many small and medium-sized enterprises (SMEs) are sitting on cash and primed for growth.

They are ready, but they are looking for signs that give them the confidence to put their money where their mouths are, he says.

“But the more shoe leather you burn, the more opportunities will come your way.”

The latest SME survey from Bibby Financial Services and research firm CoreData was conducted in the first half of February and included responses from 859 SMEs across Australia.

It reveals that seven in 10 Australian SMEs are confident or very confident about their overall prospects in the coming 12 months.

However, Andrew Inwood, founder and principal of CoreData, says: “Despite high levels of business confidence, almost half the respondents (49 per cent) think the Australian economy will stagnate this year.”

One in three (33 per cent) expect the domestic economy will contract, while just 18 per cent think it will expand. South Australians (37.5 per cent) are the most likely to be more concerned about the global economy than they were 12 months ago.

Victorians are most positive about their own businesses with 73 per cent saying they are somewhat or very confident. They are closely followed by New South Wales (70 per cent), South Australia (69 per cent), Queensland (66 per cent) and Western Australia (64 per cent).

But Inwood adds: “Businesses don’t expect a huge shot of growth from the Australian economy this year. Most expect the economy to just chug along which is why perhaps only 22.5 per cent of SMEs plan to invest more to grow their businesses in the next 12 months.”

Indeed, 38.3 per cent intend to maintain their current level of investment in their businesses and 32.8 per cent did not list their intentions for the coming 12 months.

Cleaver says: “At the moment there isn’t enough to encourage people to invest back into their businesses. It is all about confidence. We haven’t seen that bit of magic in the economy which creates a subtle mind shift in the potential spender, be it the business owner or consumer – and boosts confidence in the future.”

This choppiness in economic sentiment among SMEs is also highlighted in the latest Sensis Business Index (SBI), which polled around 1,800 SMEs across Australia. The SBI March quarter recorded a nine percentage point decrease in SME confidence levels.  This comes off the back of a record 21 percentage point increase recorded after the federal election.

SBI report author Christena Singh says while SME views on the current state of the economy have moderated from last quarter, overall they still represent an upward trend in the operating environment for SMEs.

However, she adds that SMEs are expecting weaker results in sales, employment, wages, profitability and capital expenditure for the year ahead. 

value investors large