2019’s biggest challenges for SMEs
The results of SmartCompany’s recent survey are in. This is the definitive list of challenges facing small and medium sized businesses across the country.
According to the SmartCompany Survey results, the biggest challenges facing Australia’s SMEs are: Keeping up with digital transformation, finding and retaining talent, balancing the cheque book and positioning for growth.
“No surprises really,” says Michael Mekhitarian of ATB Partners. “But the larger problem for small business is that there is no wider government support of any real practical nature on any of these issues, either.
We’re heading into an election in which both parties have contributed policies that are instilling uncertainty, and this lack of leadership is woeful for business confidence. What’s disappointing for all of us in this arena is that SMEs are the backbone of the Australian economy; the leaders should be paving the way for SMEs to thrive. That said, SMEs to a large degree are used to just ‘getting on with it’, and these particular problems, while they span all industries, do have solutions,” he says.
1. Keeping up with digital transformation
In a nutshell, the main concerns in this category are the rapid pace of technological advancement and the concerns around the sheer ability to keep up, as well as the costs, and the opportunity cost lost, if businesses don’t remain as tech savvy as their competitors.
“There is no doubt that technology is unrivalled in its ability to drive efficiencies across all areas of business, but the threat of adequate cyber security and decisions around ‘what, when, how much? Cost to benefit ratios … compatibility … training staff, what’s the use-by date?’ are the questions keeping small business owners up at night,” says Michael.
“It can be overwhelming. But business owners need to pare all of the information back to basics. One simple principle should drive the thinking and the decision-making – and it’s not technology – it’s knowing what’s right for the business. When you make significant strategic and operational decisions on this basis, you can cut through the clutter and get to the clarity.”
2. Finding and retaining talent
“While SMEs don’t have the capacity to pay the big buck salaries that corporates do, they have the opportunity to provide other, more attractive benefits,” says Michael. “And these should not be under-estimated.”
Michael says SMEs need to embrace what they can offer: conditions and intangible benefits that employees find very appealing, like flexible working hours, the opportunity for people to ‘step outside the job description’ and contribute to the company in a wider capacity.
Offices in areas outside of the capital cities, closer to where people live, better work/life balance, smaller teams, the ability to really collaborate. Friendlier, happier-non-competitive workplace cultures, even casual dress.
“Money isn’t everything,” says Michael. “Job satisfaction counts for a lot. But if it comes down to it, yes by all means consider share options and bonuses and other financial incentives … just make sure you can afford it and you get the right employment contracts and structures in place.
Also remember, recruiting takes time, so be prepared for the fact that you won’t find the right person straight away,” he says.
“It’s imperative for small businesses to find not only the right skills, but the right ‘fit’. Staff turnover is a hassle and it’s costly, so be clear about what you want, and put solid recruitment processes in place so you get it. And don’t forget that many roles can be filled by contractors and freelancers, who might cost you a little more on a project or hourly rate basis, but don’t depend on holiday and sick pay and in many cases are set up to pay their own taxes. This can be a good solution over hiring full-time employees.”
3. Balancing the cheque book
“Cash flow is the never-ending challenge and the very thing that can upend a business if it’s not managed wisely,” says Michael. “But, often, cash-flow headaches can be pre-empted and planned for, and SMEs really need to embrace the fundamentals of this.”
Some solutions are: creating a ‘buffer’ fund, understanding the seasonal cycles, implementing customer payment structures that work for the business, such as getting regular clients on regular payments plans, rather than at project-end. Insisting invoices are part-paid up front if there’s a significant outlay for materials. Implementing late fees or ‘early payment discounts.’ Conducting ‘credit checks’ before taking on new clients. Reducing overheads where possible, better utilising staff in quiet periods and negotiating with your own suppliers to make sure your outgoings synch up with periods of income to avoid lag of money going out and coming in.
“There are options here. The trick to managing cash-flow wisely is to work with the particular and unique rhythm of your own business,” says Michael.
Managing growth
While the survey results showed that many SMEs remain positive about their ability to grow, they do have concerns about digital disruption, a lack of access to funding, increased competition and more complexity in the business environment.
“These are all natural concerns,” says Michael. “But businesses must grow – and successful growth is managed growth, and the key to this is planning. We encourage clients to have a roadmap. It doesn’t mean they can’t consider a short-cut or the more scenic ‘coastal road’, but it does require knowing the destination and what’s required to get there. The strategy should be clear, with measurable KPIs, and then this will provide a solid framework that you can be flexible within, if opportunities come your way.
Growth is not just about expanding though,” says Michael. “Just as importantly, it’s about ensuring that your business has solid roots to support it.”
So what do the survey results show overall?
“Well, ultimately that being in business is not getting any easier,” says Michael. “But what we see year after year with our own clients is that regardless of all the worries and stresses, business owners are still finding ways to thrive. Ultimately, that comes down to passion. And if your passion is driving you, any business challenge can be overcome.”
Read More Blogs