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Australian SMEs are driving through very challenging economic terrain. Banjo’s SME Compass 2024 findings reveal some changing attitudes to business funding as they look to stay the course.
Being an Aussie SME owner at the moment is almost like being a rally driver. They need to be able to steer their business through some pretty rough terrain, flip between control and occasional chaos, and keep a tight focus on the road ahead.
The 2024 Banjo SME Compass, a comprehensive survey of over 1000 Australian SMEs has found that the country’s business owners are strategically navigating their way through some tough times with grit and determination.
One in two SMEs surveyed said that the economic climate has hurt their business, and four in 10 don’t expect 2024 to be a big year for them. Interest rate increases have also been a major pothole in the business track.
Despite these challenges, the good news is that 62% either met or exceeded their revenue targets in the last year. Most attributed this to effectively staying in their lane, and the following three tactics were the most popular:
- developing existing products
- acquiring technologies
- purchasing new assets or equipment.
These tactics, in a different order, also form the basis of most SMEs’ strategy for 2024.
With revenue not apparently badly impacted, the main casualty of the economic downturn has been growth. Many SMEs believe inflation has stifled their growth, and the drop in consumer spending and confidence is also a significant contributing factor.
It appears that the economy may also have dampened plans to innovate or expand businesses. Two out of three are concerned that inflation will be a barrier to growth in the coming year.
Legendary rally driver Colin McRae could have been talking about SMEs when he said, “In rallying you have to be prepared for anything. Adaptability is the key to success.”
And adapt they have. While the most popular manoeuvre last year to combat inflationary pressure was to increase their prices, many SMEs recognise that customer price tolerance has peaked. The chief tactic for 2024 is to cut costs instead.
Half of SMEs plan to leverage outside funding this year to drive growth, with Victorian businesses most keen (62%). SME Compass 2024 also reveals a significant uptick in the use of non-bank alternative lenders for business funding, with a corresponding dip in use of traditional banks. Frustrations with the major bank lending processes are dominant, and in part explain this shift.
With 1 in 3 SMEs also stating they’re open to borrowing from non-bank lenders in future, there’s real potential for alternative lenders to support SMEs in their growth plans.
Despite the drop in confidence for the short-to-medium term, most SMEs still feel positive about the future 12 months and beyond. In a testament to their resilience, and faith in their own abilities, almost 90% of SMEs surveyed expect to meet or exceed their revenue targets in 2024.
In rallying, it’s said that the only consistency is the inconsistency of the road surface. Australia’s SMEs can no doubt relate. Nevertheless, they’re primed and ready to keep their businesses on track to 2025.
For more insights into what SMEs have to say, download the Banjo SME Compass Report 2024 here
To read more, visit the Banjo Broker Hub here
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