Small businesses boost 2017 economic growth

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Two recent polls of small business sentiment are painting the Australian small business forecast for 2017 as a time for jobs and growth.

According to the Small Spark survey from Xero – which polled over 340 businesses across Australia and New Zealand – close to half (49 per cent) of Australian small business owners said they were ‘very’ or ‘extremely’ confident of growth in 2017.

The expression of confidence aligns with the current results of the Westpac-Melbourne Institute SME Index, which examines the economic health of Australian small and medium sized businesses. The Q4 index revealed a significant improvement in business confidence, shifting from 95.6 in Q3 2016 to 100.7 in Q4.

Exploring confidence and caution
I truly believe there has never been a better time to start a business. And these trends are a positive place to start from in 2017, but they lead me to ask – what about the other, less-confident, business owners? What does their caution toward 2017 tell us? And how can technology and bigger businesses better support their growth in the year ahead?

Nearly one in three Australian respondents in the Small Spark survey had a neutral outlook – believing their business will remain stagnant. One in five (20 per cent) had a negative outlook for 2017.

Out of this latter group, 15 per cent believe that it will be a ‘tough year ahead’ and 5 per cent say they will struggle to survive in 2017. While it can be hard to deconstruct the factors that help determine business confidence, global events like the US presidential election and Brexit many times play into local SME fears.

However, in this regard, I actually believe they should have nothing to fear. The broad nationalistic fervour sweeping around the world and its setbacks for globalisation should be positive for the small business economy. In the redistribution of economic activity, the ultimate in-country enterprise is local small business.

Using technology, small businesses can go in ‘guns blazing’ and really help drive the economy this year. Leveraging the plethora of technology out there, small business can position themselves so that they get paid faster, improve their financial transparency through bank feeds, and obtain access to capital.

Supporting the start-fast business
But what about the small businesses that haven’t yet started? How will they get underway in 2017? The Small Spark survey unearthed some telling statistics around the financial foundations and startup times of small businesses in Australia.

Only two in ten (21 per cent) of small business owners had any form of outside financial help in getting their business off the ground and seventy nine per cent chose to start up on their own – either relying on their own savings (46 per cent of self-starters) or starting on a shoestring (33 per cent).

In terms of planning time, more than one in five (21 per cent) respondents started their business within one month of their initial ‘spark’.

It’s clear that the entrepreneurial spirit burns bright in Australia. Technology can expedite the start of business, often minimising the need for significant initial outlay, and this is something to be encouraged. But technology can – and should – support growth beyond that initial spark of business birth. That’s the only way we can bring long-lasting results back to small businesses, and our economy at large. And it does happen.

Business goals for 2017
Commentary around the Westpac results agrees that self-starters need the right tools to help them stay the course.

“Most SMEs are still reporting lower profitability, even those with an active business strategy for the period ahead. This suggests the main problem now is how to generate more profit from the pick-up,” said Westpac Senior Economist, Matthew Hassan.

Julie Rynski, Westpac’s General Manager of SME Business Bank, has a clear insight of what that means on a practical level.

“The SME Index survey found the top three business goals for SMEs in 2017 are enhancing products and services, hiring new staff and improving accounting systems,” she said.

“It’s clear that businesses are reviewing the past 12 months and making meaningful changes for the year ahead.”

I’ve personally seen the power these type of changes have in transforming a struggling business into one that’s profitable and growing at an accelerated pace. I’m glad people are recognising these as important goals and we should see more excited and confident at the potential in the year ahead. 

Trent Innes
Trent is the Managing Director of Xero Australia, the leading cloud-based accounting platform for small business. Grounded by a strong people-focus, he develops the team to better help small businesses thrive in Australia.

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