The annual thinkBIG survey has found that 69 percent of SME owners expect business growth over the next 12 months, up one percent on last year’s results.
Conducted by RSM Australia, thinkBIG benchmarks business growth, business planning, exit planning, superannuation and the impact and uptake of technology. This year, over 350 business owners took part in the survey.
Forty-nine percent of SME owners reported actual growth over the last 12 months, in line with the 2015 figure and up three percent on 2014. Twenty percent reported a decline in revenue, up from 16 percent last year and in line with 2014.
A strong sales pipeline is the biggest contributing factor to optimism with 46 percent of businesses reporting an increase in their pipeline.
Andrew Graham, national head of business advisory, RSM Australia, said “The survey results demonstrate that, while many companies can forecast growth, only those with strong business fundamentals in place can actually deliver that growth. In 2015, 68 percent of respondents predicted growth over the next 12 months but, a year on, we can see that only 49 percent actually achieved it.
“Overall, these growth predictions from SMEs are more bullish than expected. This is probably being driven by the low yield, low interest rate environments globally, which mean that businesses can borrow to expand with a very low cost of servicing the debt.”
The survey found that 77 percent of SME operators plan to fund their business through cash flow. Bank debt has increased, with 29 percent funding operations through debt this year compared with 22 percent in 2015. Slightly fewer businesses choose to reinvest profits to fund the business.
Andrew Graham said, “In some sectors trading banks are winding back their lending for the moment, often demanding property as collateral. This is inhibiting expansion for businesses that don’t have strong fundamentals, and 17 percent of SMEs expressed concern about access to capital.
“Additionally, the skills gap continues to be a barrier to growth for 35 percent of businesses, followed by management time (33 percent) and lack of market opportunity (25 percent).”
Despite the challenges, SMEs remain optimistic about their prospects for growth and 84 percent say they agree or strongly agree that their business is successful.