SME Revenue Outlook for 2021 is Cautiously Optimistic
(21 April 2021 - Australia) But one in four predict revenue decline, impacted by lockdown challenges in Victoria and issues in hard hit sectors.
Cautious optimism in the six-month revenue forecasts of Australia’s small business sector highlights SME resilience - although the recovery is still uneven and varies significantly by state and sector.
ScotPac’s SME Growth Index is Australia’s longest-running in-depth research on small business growth prospects.
The Index results for the first half of 2021 show almost half the 1253 business owners polled (48%) anticipate positive revenue growth for the next six months, growing on average by 4.1%.
However the proportion of SMEs expecting revenue to decline hit a new high at a critical moment on the road to long-term COVID recovery – one in four small businesses have forecast a revenue drop, on average by -5.5%.
Victorian SMEs are still reeling from the impact of lockdowns – only 10.5% are forecasting growth (but those that are expect a bullish 11.1% growth). A full 63% believe their revenues will decline, by -6% on average. (see below for State and Industry revenue forecasts)
ScotPac CEO Jon Sutton said revenue uncertainty is more marked at the smaller end of the SME sector, with $1-5 million revenue SMEs feeling the brunt more so than their $5m-$20m revenue counterparts.
“Overall the small business sector has rebounded well considering the depth of the challenge the pandemic created,” Mr Sutton said.
“But many SMEs are not out of the woods yet. There’s much uncertainty about the long-term pandemic recovery path for those SMEs weaning off government stimulus or coping with sector-specific challenges, in particular tourism, accommodation, retail and restaurants.
“For the businesses facing uncertainty, and needing reliable cashflow, it’s crucial to focus on getting expert advice and putting in place sufficient funding to support recovery and growth,” he said.
The latest SME Growth Index marked a record broad distribution range of positive revenue forecasts (from +1.1% to +9.1%) highlighting that states and industries are rebounding at different rates.
State revenue forecasts and intention to close/sell
WA most bullish – 84.5% predict positive growth by an average +6%. Only four in every 100 expect revenue to decline (which corresponds with the percentage of WA SMEs who say they will close the business if outlook doesn’t significantly improve; 15.5% are considering selling).
In NSW 54% of SMEs expect revenue growth, by an average +2.7%; almost a quarter (23%) expect revenue to decline, by on average -1.1%. Almost one in 10 NSW businesses say they’d close if current conditions continue, while one in five would consider sell.
Outside of tourism hotspots, Queensland SMEs have been relatively unscathed. Only two in every 100 expect revenue to decline, by an average -5.8%. Almost half (48.5%) expect a modest revenue increase (+1.3%). 15 in every 100 SMEs are looking at closure, while 20 in every 100 may sell.
SMEs in South Australia and Northern Territory are bullish, with 73% expecting growth (by 3.2% on average) and 9% bracing for decline (by -2.3%). Fewer than one in five businesses in SA and NT believe they will have to close (13%) or sell (5%) if trading conditions don’t significantly improve.
Almost two-thirds (63%) of Victoria’s SMEs believe their revenues will decline over the next six months, by -6% on average. Only 10.5% are forecasting growth. More than half say without significantly improvement they will have to take drastic action, either to close (31%) or sell (27%).
Industry variations in revenue and business stability
Mining 90% expect revenue growth (by 8.5% on average), 5.6% forecast a decline
Manufacturing 36% forecast growth (by 1.1%), 33% say they’ll decline (-3.9% average)
Wholesale 37.5% expect growth (by 2.1%), with 29% forecasting revenue decline (-2.2%)
Retail 32% say they’ll grow (by 1.8%), but 39% expect to decline (by -5.3%)
Transport 59% forecast a revenue uptick (by 3.6%), with 10% expecting to decline (by -2%)
Business services 57% expect to grow (by 5.5%), 9% to decline (by less than a percent)
More than one in three retailers (36%) say they’ll close without conditions significantly improving, while one in three (33%) say they’ll sell.
Fewer than one in 10 retailers are confident enough that they will not have to close or sell. Manufacturers also show uncertainty, with 19% looking at closing, 27% selling and 17% unsure.
For transport, business services and mining, the vast majority felt they could ride out tough conditions without having to consider closing or selling.
Looking to the positive
One positive in this round of the SME Growth Index is that the average revenue growth forecast has increased eight points from H2 2020, reflecting a strong “bounce back” in confidence for many small business owners.
Market-wide, the extremes for the SME revenue forecasts ranged from -10% to +9.1%, for a modest overall average revenue increase of 0.9% for the small business sector in the next six months.
SME Growth Index: Twice a year since 2014 market analysts East & Partners conduct this research, Australia’s longest-running in-depth research on small business growth prospects. In Jan-Feb 2021, a representative national sample of 1253 $1-20m revenue businesses were surveyed and interviewed.
ScotPac is Australia and New Zealand’s largest non-bank business lender, providing funding to small, medium and large businesses from start-ups to enterprises exceeding $1 billion revenues. For more than 30 years ScotPac has helped thousands of business owners succeed, by unlocking the value from their business assets. Whether it is purchasing stock, investing in vehicles and equipment, improving cash flow or accessing additional working capital, ScotPac can help.
For more information contact:
Kathryn Britt
Director, Cicero Communications
kathryn@cicero.net.au
0414 661 616
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