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How are SMEs travelling?

We are nearing the end of interviewing for the 22nd wave of our ‘SMEs Through Time’ study with small and mid-market business owners across Australia.

The general consensus from SMEs is that economic conditions are reasonable – not great but not terrible either.   Conditions are probably marginally better than they were a year or two ago, although in fairness, this may have more to do with better management of their businesses than a broader improvement in the economy per se. Most business owners report having to run hard to stay in the same spot – a comment that we have been hearing for many years (ie ever since the GFC).  Curiously, when discussing how their business is travelling, many business owners speak in a ‘surprised’ tone when indicating that it is going reasonably well.  This is reflective of a very real disconnect – they ‘feel’ that business is very tough, yet when they look at the figures/finances, they are doing better than they ‘feel’ they are.  This performance/sentiment disconnect has been evident for quite a few years.  Looking forward, expectations are for ‘more of the same’ – SMEs cannot really see any catalyst for economic improvement in the short-medium term.

Economic conditions are reasonable – not great but not terrible.  SMEs themselves are unclear if any improvement they are seeing is attributable to the economy at large or the fact that they are managing their business better than before…
“I’m spending $1 million a year in development on a new area for the business… so we’re expanding there but at the same time I’m tightening up on people picking from my pocket … Like with our mobiles, I tracked down everyone in the business who has a mobile that I’m paying for.  I shouldn’t be paying for them, virtually no-one needs them for business – so I cut that expense down from $1,500 a month to $600 a month – there it is, $10,000 a year … We’ve been spending something like $20,000 a year on chocolate – to keep people happy – $20,000 a year.  That can stop too.” (Intranet/Web site hosting/development, 95 FTEs).

“Business is very good, we’re very busy.  We’re spending a fair bit of time trying to support particular retailers who are doing it tough – there’s always certain retailers across Europe and America that are doing it tough so that is a constant and our agents tend to be quite hands-off when it comes to supporting them when it’s difficult!” (Import/Export swimwear, 15 FTEs).

“We’re growing solidly, not major but just enough.  We’ve got a good crew of people together, a couple new BDMs on the road who have settled in well, and we’ve streamlined a couple of processes – before we had sales guys doing too much of the admin, so we’ve addressed that now.” (Home Loan Provider, 13 FTEs).

“Last year was a shocker so we cut costs hard – a couple of years ago it cost $160,000 a month to run the business, now it’s $40,000.  Some of my team now work from home, I still have some people overseas, and we’re really streamlining things … And because of the lower $A, we’re getting a lot of business in Australia and NZ and so we’re probably more profitable than ever before … It means that I have to work a lot harder, and in fact I’m going to have to go to the US for two months soon and that’s taking me away from my family but I think it’s just what you have to do when you run it lean.” (Travel guide publishing, 8 FTEs).

“Our market is extremely competitive but we’re growing year on year but just not as much as we’d like … We’re bolstering the business by putting on good quality staff at a time when most companies are putting them off, but we’ve always done that – invest ahead of growth.” (Insurance broker, 70 FTEs).

“It’s been not bad.  I’d say I’m ‘cautiously optimistic’.  In 2015-16 our new patient numbers were up 13% but we had a slight fall in ‘returns’ – so our existing patients went from 4.5 visits to 4.3 and overall that means that our growth was only 8% - so only a small reduction in number of visits per client has a big impact on the numbers … The (growth in) new patients is all about me getting out and marketing the practice to be honest.  Just hitting the ground and meeting GPs.” (Specialised Physio, 27 employees [some PT]).
But they don’t ‘feel’ that business is reasonable – there is a disconnect
“It feels tough, it feels like everything is a challenge, but I know that we’ve just finished the (financial) year and it was actually pretty good.  But I never feel that way, I always feel like it’s a struggle.” (Retail, 25 FTEs) 

“I think it will be okay – hard work, nothing comes easy – but there’s work out there, you just have to work for it.” (Storage 45 FTEs)

“I think it still feels very fragile out there.  Maybe it’s the impact of political uncertainty – which is now the norm – which leads to discouraging a long-term perspective on things I think.” (Entrepreneur, 6 FTEs).
The future – they expect more of the same
“I think it will be fairly flat, I can’t really see anything changing.  I don’t think the election has done anything positive, put it that way.” (Physio, 40 FTEs) 

“I’m not convinced things are on the improve – everyone’s living on 120% of their income as it is.” (Car servicing, 5 FTEs)

“I think it’s going to be pretty sheite, quite tough – and there’s very little that the Government can do to change perceptions – we’re exposed to the ebbs and flows of the world … I think it’s getting harder and harder to make a buck.”  (Intranet/Web site hosting/development, 95 FTEs) 

“Things are pretty good in Australia, it’s always hard to predict what conditions will be like in the future but we think things are okay, NSW in particular is doing well because there’s investment in infrastructure.” (Property Development/Investing 80 FTEs).

Business conditions are okay – nothing to get particularly excited about, but generally they are acceptable.  Business owners continue to manage their business tightly and therefore many see improvement in their performance.  But more broadly speaking they see nothing in the general economy to generate much in the way of excitement.  Hence, most SME Operators continue to run their business in a very incremental, hands-on way.

Next month: Feedback on ‘issues of the day’ – namely the election result, Brexit, Trump.
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