Small business recovery will be mixed, latest research reveals

In the wake of the Covid-19 pandemic, research shows an uneven situation regarding the rate of recovery among small businesses.

According to the most recent edition of the biannual research of East & Partners on behalf of non-bank SME funder ScotPac, of the 1252 small businesses surveyed, only 47 per cent are expecting revenue growth through to April 2021, with a quarter forecasting that their revenue will decline.

“In the midst of Australia’s first recession in 30 years, a record low number of SMEs have positive revenue growth aspirations,” ScotPac CEO Jon Sutton said.

Highlighting the difference in the rate of economic recovery from state to state, Western Australia is expecting an 80.7 per cent positive growth while Victoria, which has gone through longer lockdown periods, expects growth of only 4.6 per cent.

Although the expectations are very low in Victoria, Sutton is optimistic about its future growth prospects.

“Despite seven out of 10 Victorian SMEs forecasting revenue to decline, we would expect the growth prospects of Victorian business owners may quickly improve now restrictions are easing,” he said.

“Revenue forecasts for the small-business sector are less ‘doom and gloom’ than might be expected after such a challenging 2020, and highlight the resilience of the SME sector,” Sutton added.

The research also supports the premise that targeted government stimulus measures such as JobKeeper served as “scaffolding” for SMEs who were already facing the greatest financial difficulty. On the other hand, high growth SMEs were the ones most affected as their revenue expectations were reined in by the pandemic.

“Those expecting revenue to grow are forecasting an +3.3 per cent average result, with the widest ever range reported (+1.0 per cent to +8.8 per cent),” Sutton said. “Those expecting their revenue to fall are forecasting an average -6.2 per cent revenue decrease.”

The pandemic has also been seen to affect SMEs’ perception of their own business phase. For the first time, the research noted that there are more SMEs self-identifying as being in a stable business phase (33.6 per cent) compared to those in an outright growth phase (32.2 per cent).

“It will be interesting to see whether revenue forecasts were kept artificially high because Federal Government’s stimulus measures were still in place, allowing many SMEs to ‘keep the lights on’ without having to commit to investing significantly in their businesses,” Sutton said.

“Those small businesses who have confirmed a clear strategy and who have secured appropriate funding will put themselves in the strongest position to face what 2021 has in store,” he concluded.

This article was first published on Inside Small Business, a sibling website to Inside Franchise Business Executive.