A cracking year predicted as SMEs feel optimistic about 2017

By Geoff Scofield, Westlawn Finance MD & CEO
23 January 2017

What does 2017 hold for small business? Judging by the latest round of SME surveys, it appears many small businesses are feeling more optimistic about the year ahead. Strong retail sales during December have even prompted the CEO of eftpos provider, Tyro Payments to predict a “cracking year” as consumers embrace a new era of “personalised hospitality”. 

And in another positive sign, consumer confidence lifted in the first survey of 2017. 

Risks remain, however, particularly on the global stage as a new US President is sworn in and elections in France, Germany, Hungary and Holland this year could produce further unexpected results. But with this latest round of SME surveys, there is a growing case for cautious optimism for the year ahead.

Latest SME Index sees improvement in sentiment

The Westpac-Melbourne Institute SME Index examines the economic health of Australian small and medium-sized businesses each quarter based on responses to questions on “general business conditions over the last 3 months” and “expectations for business conditions in 3 months’ time”.

For the final quarter of 2016, the SME Index revealed a significant improvement in business confidence, shifting from 95.6 in Q3 2016 to 100.7 in Q4 2016.

The fourth quarter survey was the first time in 2016 that the index passed the 100 neutral mark, indicating positive sentiment among Australian SMEs.

Improvements in sentiment were recorded across most states with an 11.2% rise in New South Wales to 110.4, a 14.4% increase in Queensland to 100.2 and an increase of 37.1% in South Australia to 87.6.

Speaking about the results of this latest survey, Westpac Senior Economist, Matthew Hassan said the positive shift in sentiment was attributed to improvements in business activity.

“The overall lift in confidence over the last quarter is mostly coming from an improvement in current conditions – activity and sales are both up on a year ago.

“However, most SMEs are still reporting lower profitability, even those with an active business strategy for the period ahead. This suggests the main problem now is how to generate more profit from the pick-up.”

Small business most confident, says CBA

The Commonwealth Bank Small Business Study surveyed 851 business decision makers across small (under $1m), medium ($1m – $50m) and large ($50m+) business in October 2016.

The study found almost one in four small businesses are expecting double-digit growth over the next six months. More than half of small business owners believe they are well positioned for growth and are more likely to place greater emphasis on growth initiatives.

This confidence may reflect positive spending trends across the Australian economy. In September, the Commonwealth Bank Business Sales Indicator (BSI), which measures economy-wide spending, recorded its strongest gain in 17 months.

In October, the BSI lifted by 0.4%, matching the gain in September. This was the largest back-to-back increase in spending in nine months.

On the results of the survey, CBA’s General Manager Small Business, Karen Last, said:

“It’s encouraging to hear that small businesses are well positioned for growth but it’s important they prepare for that uncertainty to ensure they can handle economic or business challenges.”

“Our findings indicate the majority of small business owners have a good handle on cost management, which would contribute to their overall sense of confidence about the potential for business growth over the next six months. It is equally important to have a clear business strategy and healthy levels of debt so they can be confident when assessing growth opportunities.”

Aussie retailers to have cracker 2017

A cracker 2017. That’s the prediction of Australia’s leading independent eftpos provider, Tyro.

In a press release dated 2 January 2017, Tyro stated that spending on restaurants, holidays and entertainment is expected to dramatically jump by up to 10% this year, as consumers embrace a new era of ‘personalised hospitality’.

Tyro CEO, Gerd Schenkel, said pre-Christmas hospitality sales showed that Australian consumers were increasingly turning to small and medium sized venues with personality and charm, and that this should continue into 2017.

“In December alone, Australia’s 62,000 small and medium sized hospitality
businesses, employing up to 200 staff each, saw sales increase a staggering 10% to $8 billion.”

“Based upon the detailed sales results of thousands of our customers, we
estimate SME sized hospitality sales will reach $80 billion this financial year
compared to only $24 billion for larger hospitality businesses.”

Tyro believes Australia’s 78,000 small and medium sized retailers can expect a bullish 2017 with December 2016 sales climbing 3% over the same period the previous year.

Strong showing for rural businesses in MYOB Business Monitor

The latest MYOB bi-annual business monitor of 1,000 small business owners reveals that 59% expect the economy to improve or remain the same over the coming year.

Australian start-ups recorded a strong showing with some 42% reporting revenue increases, compared to 35% of established businesses. Rural businesses also “returned a strong showing,” according to MYOB, with 37% achieving revenue growth.

Consumer confidence also on the rise

In more good news for Australian small business, consumer confidence is back on the rise according to the latest ANZ-Roy Morgan Australian Consumer Confidence index.

The index increased by 5.9% in the week ending 8 January, reversing a decline recorded in the previous survey conducted in mid-December.

Householder views of economic conditions over the next 12 months rose by 11.2%. While views towards their finances rose by 3% over a year ago. This is the highest level since the end of September 2016 when the index reached a post-GFC high.

Contact us

Feeling confident about 2017? If you’re looking to invest in your business this year, speak to a Westlawn Business Finance Specialist today by calling us on 1300 WESTLAWN (1300 937 852).

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