Economic challenges hamper business growth: MYOB reports

- June 30, 2024 3 MIN READ
business issues

Small and medium-sized businesses are feeling the strain of the current economic climate, with more than two-thirds (68 per cent) reporting that their productivity is being hamstrung.

The finding comes from MYOB’s latest Business Monitor, which surveys Australian small business owners to gauge the impact of external economic factors on their businesses.

Businesses battling external pressures

The report highlights several key pressures facing small business:

  • Fuel Pricing: 41 per cent of respondents cite this as a significant burden.
  • Cost of Utilities: 38 per cent are struggling with rising utility costs.
  • Interest Rates: 30 per cent feel the squeeze from higher interest rates.
  • Price and Margin Profitability: 27 per cent are concerned about maintaining profitability amidst these challenges.

Currently, business owners rate their productivity at an average of 6.2 out of 10, indicating a need for improvement as they navigate these economic pressures.

Need for skills and training

Emma Fawcett, General Manager SME at MYOB, highlight the importance of enhancing productivity in the face of a tightening economy.

“The nation’s 2.5+ million SMEs have shown resilience throughout the last few years, and with further difficulties anticipated as the economy stabilises, it will be important to review their business productivity to ensure they are setting themselves up for security and growth,” she said.

According to the survey, 34 per cent of small business owners believe that improving skills and training programs would significantly boost their productivity. Additionally, 31 per cent see value in government grants aimed at enhancing skills and training, while 29 per cent advocate for grants to improve access to and use of technology.

Embracing digital transformation

A significant number of businesses are turning to digital solutions to enhance productivity. The report reveals that 21 per cent of respondents have digitized more of their operations over the past year. Among those, 39 per cent have seen an increase in productivity, and 34 per cent report that digital tools have facilitated remote work and collaboration.

“Digital capabilities are closely linked to productivity, helping SMEs save time, money, and improve accuracy in their business operations, as well as drive economic growth in uncertain times,” said Fawcett.

Despite these benefits, cost remains a significant barrier, with only 11 per cent of respondents planning to increase their investment in IT systems and processes in the coming year.

Investment priorities

The report also outlines the top investment priorities for small business owners:

Adjusting Prices and Margins: 30 per cent of businesses plan to increase prices and margins on their products and services.

Employee Compensation: 24 per cent are looking to raise the amount they pay their employees.

However, the survey indicates that most small businesses plan to maintain their current workforce levels, with 78 per cent not anticipating changes to the number of full-time employees and 72 per cent keeping the same number of part-time or casual employees.

Limited growth prospects

Despite these efforts, the report points to limited growth for businesses in the near future. About a quarter of respondents reported revenue (22 per cent) and profitability (26 per cent) growth over the past year. Looking ahead, 27 per cent expect an increase in revenue, and 28 per cent anticipate higher profitability in the coming year. Nonetheless, 45 per cent foresee economic decline over the next 12 months.

Fawcett stressed the importance of productivity improvements to facilitate better outcomes for businesses.

“This challenging period is not yet over for the nation’s SMEs, so any emphasis they can put on driving productivity and boosting their performance will hold them in good stead. As contributors to 99 per cent of the nation’s GDP, it will also help build a stronger economic outlook.”

While Aussie businesses clearly face significant economic challenges, the report suggests that focusing on skills development, digital transformation, and strategic investments can help them navigate this tough period to emerge stronger.

This post first appeared on Kochie’s Business Builders. You can read it here

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