Small businesses are growing in 2023

Amidst economic uncertainty and concerns about a possible recession, small and medium-sized enterprises (SMEs) in Australia are defying the odds, expressing a positive outlook for their future growth and profitability.

According to the report, a staggering 70 percent of small businesses are optimistic about their revenue prospects for the coming year 2023.

Fintech SME lender Banjo Loans’ annual SME Compass report highlights the resilience and adaptability of Australian SMEs that have overcome the challenges of the current economic environment.

Small businesses are growing in 2023

Despite continued pressures and uncertainties, small businesses across the country are showing remarkable determination and resilience, with the report showing a steady trend in revenue growth.

Health and wellness spending is driving optimism

The report also highlights an interesting trend for small businesses in the fitness, retail and services, and healthcare industries.

These businesses are reported to be the most confident and optimistic about their prospects, and the report attributes this to continued consumer spending on health, wellness and home products and services.

As more people spend time at home due to the pandemic, demand for health and wellness products and services has increased.

This has increased the demand for fitness equipment, online training programs and other related services. Likewise, as people spend more time at home, demand for home-related services such as plumbing, electrical repair, and home maintenance has also increased.

The healthcare sector has also seen an increase in demand due to the pandemic as people have become more concerned about their health and well-being. This has led to an increase in demand for healthcare services such as telemedicine, mental health services and other related services.

Concerns about inflation continue

Small businesses are growing in 2023

Despite the overall positive outlook, the report also highlights some significant concerns among Australian small businesses, particularly around inflation.

The report shows that two-thirds of Australian business owners are worried that the current level of inflation will hamper their growth prospects. This is a significant increase of 12 percent compared to the previous year.

According to the report, the worst affected by inflation are small businesses in the fitness, hospitality and tourism, beauty and wellness sectors.

These businesses rely heavily on consumer spending, and rising prices can lead to reduced demand, which will significantly impact their revenues and profitability.

Furthermore, inflation concerns are higher for businesses operating in metros, which may be due to the higher cost of living in these areas. These businesses face higher operating costs, and rising prices can make it even more difficult for them to remain competitive and profitable.

Banjo Loans chief executive Guy Callaghan said it was great to see optimism about the future so high, regardless of regional or city location, but there was a clear gap between consumer sentiment and business sentiment.

“Australian SMEs face significant challenges this year with inflation, rising supply costs and rising interest rates. Despite all this, they show great resilience and use strategies to continue to ride these waves and thrive,” he said.

“In a further indication of positivity and confidence, more than a third of SMEs said they planned to merge with a competitor or acquire another business in 2023. This is an encouraging sign that they see a positive future for their business on the horizon. “.

“Fortunately, SMEs do not sit and wait. we see that almost everyone has already developed a strategy to manage inflation; 49 percent had to increase prices and 40 percent cut costs. They take intuitive and positive steps, making plans and overcoming these obstacles to the best of their ability.”

The report shows that 76 percent of hospitality businesses have had to raise their prices in response to inflation. In contrast, workers in the banking and financial services and trade sectors have had to cut costs to cope with economic pressures.

Small businesses are growing in 2023

The report also mentions another worrying trend, where a fifth of SMEs have accumulated tax debt. This is particularly prevalent in the accounting sector, where 42 per cent of businesses have accumulated tax debt, followed by the fitness sector at 31 per cent and the trade and services sector at 30 per cent.

However, the report shows that more than half of those who owe tax have taken proactive steps to set up a payment plan with the Australian Taxation Office (ATO).

Amid a tight labor market, the report shows that there is significant demand for new hires this year, with 62 percent of SMEs planning to increase their headcount. On average, the surveyed SMEs seek to increase their staff by six new employees.

“Probably, as expected, healthcare, hospitality and manufacturing lead this demand for staff. These sectors have been particularly under the pump since COVID, with immigration slowly picking up again. SMEs tell us that recruitment is a challenge. A third cite difficulties in finding staff, and two in five are concerned about labor shortages.”

Raise wages amid labor shortages

SMEs are increasingly turning to higher wages to attract and retain talent in the labor market. In an attempt to lure skilled workers away from their competitors, many SMEs have increased their salary packages, and reports suggest that this trend is increasing.

Half of SMEs in Australia plan to use funding to drive growth this year. Businesses in the metro area in particular are expected to take advantage of the available financing options to expand their operations.

The report also highlights that business loans are the most preferred source of financing among business owners, with those in the construction, real estate and healthcare industries most likely to seek this type of financing.

“As economic conditions become increasingly difficult, SMEs are seeking expert advice and increasingly turning to accountants and financial brokers to help them secure the funding they need to grow. Many people find value in using finance brokers to help them get affordable interest rates and make the overall borrowing process much easier.”

“However, we hear that for half of SMEs it is not easy to get external financing, partly because of rising interest rates. Many also find that it takes too long for banks to make a decision when small businesses prefer a faster process.

“This inability to get financing is a barrier to growth for one-fifth of small businesses.”

Banjo Loans works with thousands of SMEs providing unsecured loans to finance their growth, with its fintech model enabling lending decisions within 48 hours.

“While inflation is a certain cloud on the 2023 horizon, SME confidence and earnings are high. It’s great to see them actively planning to acquire, grow and hire.”

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