More Australian small businesses are looking to tap into lucrative new international markets and offshore growth opportunities, a new study has found.
The latest Scottish Pacific SME Growth Index found export participation is a key focus for the SME segment, as online sales and digital payments continue to bring global markets closer to Australian suppliers.
More than half of the SMEs that are experiencing growth revenue have plans to expand interstate or overseas, the survey found. These growth SMEs have doubled their overseas expansion plans in three years from 5.6% to 11.6%.
And across the whole market, SMEs planning overseas expansion has grown from 3.7% to 5.9% since 2014.
The Index found only 48% of SMEs were predicting revenue to rise through to February 2018, and on average were forecasting 4% growth. Of those surveyed, 23% are expecting negative growth and 28% indicated they would be stable or consolidating.
The main barriers to small business growth are high or multiple taxes (75%), conditions of credit (69%) and availability of credit (64%).
The survey also found the number of SMEs turning to banks to fund their growth is falling, with non-bank lending on the rise. They are now more receptive to new or different types of funding, including non-bank sector institutions like Scottish Pacific and Efic, which are making the process easier for them.
With more than 60% of growth SMEs naming cash flow as an issue that hinders their efforts to grow, this is not surprising, says Scottish Pacific CEO Peter Langham.
Barriers to growth
“The number of SMEs funding growth via their main relationship bank continues to trend down (from 38% to 27%) while the popularity of non-banks has grown (from 10% up to 22%) since the Index started tracking sentiment in 2014,” Mr Langham said.
“With an almost 10% jump in the number of growth SMEs citing cash flow as a key barrier to business growth, and the increase in those planning to fund expansion plans via non-bank lending, the time is right for those who can step up and offer fast and effective growth funding for the SME sector.”
Small and medium businesses, employers of more than two-thirds of Australia’s workforce, also named staffing regulations and excessive red tape as their main productivity constraints.
Productivity was most impacted by employment regulations (29%), excessive red tape (23%) and leave provisions (11%).
Taking on employees is crucial to growth
“Since 2014, the average number of full-time employees of businesses in the SME Growth Index has fallen from 88 to 75,” Mr Langham said.
“Taking on employees is crucial to growth, and to the economy, yet there is a disconnect between SMEs and regulatory authorities if bringing on new employees, replacing staff or dealing with staff issues is having such an impact on the productivity of the sector.
“Prime Minister Malcolm Turnbull, in announcing his innovation agenda, rightly pinpointed that start-ups and small business would power Australia into the next 25 years of growth.
“To fulfil the PM’s vision, SME pain points around dealing with staff issues, and the red tape and reporting burden that comes with employing staff, must be addressed. Our leaders need to recognise that many business owners don’t have the resources to deal with difficult staff issues and this makes them hesitant to employ new staff.”
The twice-yearly Scottish Pacific SME Growth Index looks at growth expectations and key concerns of 1200 owners, CEOs or CFOs of Australian SMEs across a range of industries, with annual turnover of $1-20 million.