Small-medium business are tightening their belts and putting pen to paper to plan their way through a number of challenges facing the economy, according to the findings of the latest Westpac Business Growth Monitor.
The biggest drop in confidence came from medium size businesses with 10+ employees, where expectations of growing the business have plummeted nearly 20% from the last quarter (49% vs. 68%).
Plans to grow, hire, and fund
In the quarter to 31 March, the Westpac Business Growth Monitor measured the confidence of more than 500 SMEs (with less than $5m turnover) on the economy, their plans to grow, intentions to create jobs, and need for funding.
Westpac’s Head of Specialists Commercial, Steve Atkinson said businesses are hunkering down and pausing for a breath as they plan their future carefully over the next year or so.
“There are a lot of factors now in play that businesses don’t have control over – the Chinese economy, uncertainty in Europe, the US elections, and closer to home the dairy downturn.
“Businesses are starting to put the dots together and trace these uncertainties back to their own businesses and their own future”.
A cautious approach to funding
While the intention to hire staff has increased (13% vs 8% in Q1), Atkinson noted that fewer businesses are looking to commit to large loans and it appears business are looking at ways to self-fund more.
The monitor showed that overall, businesses are increasingly cautious. Of those looking to borrow in the next 6 months, only 31% are looking for loans of over $50,000, compared to 45% in the previous quarter.
“This is hardly surprising in an economy linked so heavily to the primary sector," Atkinson says, "but overall we’re being kept on a relatively even keel by buoyed confidence in construction, trade, transport and tourism, where businesses are hiring more.
“While only 35% of primary sector businesses expected to grow in the next 6 months, trade, transport and tourism businesses were showing more optimism, with 17% reporting increased employment over the last three months.
“In the last quarter we’ve seen a 6% increase in the number of businesses who have a business plan in place to achieve their growth goal (67% vs 61%).”
Exit plans on the rise
Steve Atkinson said that SME business owners have not traditionally been great succession planners, but we’re seeing stronger considerations around retirement.
“The latest survey shows there are even more owners looking to exit their business over the next 2 years (up from 10% to 12%).
“This all comes back to the importance of planning. SME’s can be extremely vulnerable to wider economic factors, so businesses should always plan to prosper throughout the economic cycles and be thinking about their retirement from the get-go.
"It’s about being prepared for all economic conditions and all stages in life.”