Speaking Sensis

The latest Sensis® Business Index recorded the third successive quarter of growth in confidence amongst Australia’s small and medium businesses.  Report author Christena Singh takes us through the key results and some of the challenges facing SMEs and the economy going forward.

It was really encouraging to see the Sensis® Business Index record the third successive quarter of growth in confidence amongst Australian small businesses.  SME confidence has now risen by some 40 percentage points in the past three quarters, to a net balance of 52 per cent.

And while the continued increase in confidence and performance is good news, it is important to realise that we are still only partly down the path of economic recovery.  If you look at the indicators compared to their long term averages, you can see that while confidence is now four percentage points above its long term average, all performance indicators are still tracking below their long term average levels.

For example, as you can see in the attached chart, the sales performance indicator is some four percentage points lower, profitability five percentage points lower and capital expenditure nine percentage points lower.  The indicator that is closest to its long term average is employment, which is only one percentage point lower.

And all of these indicators with the exception of capital expenditure have risen in the past quarter.  So Australian SMEs have made good progress on the path to economic recovery but there is still some way to go.

And this is perhaps emphasised by the fact that SMEs are expecting conditions to moderate over the next quarter to some extent, with more thinking that the Australian economy will be weaker in a year’s time.  While many SMEs are still facing challenges such as reduced demand and cash flow, others are already facing the “problems” of economic growth, including difficulties finding staff.

Six months ago the Australian economy had to face the challenges of economic downturn.  We have seen the Australian economy and Australia’s small and medium business meet this challenge.  But in many ways the challenges of economic recovery will be more complex, with the need to tackle both the problems of growth and decline at the same time.  This will be the challenge the Australian economy will face for the year ahead.

So you think office workers sit at their computers writing Word docs all day? Forget that. According to the latest Sensis® eBusiness Report, we’re all going shopping!

There’s something distinctly Escher-like about the Sensis® eBusiness Report.

Okay, so comparing the mind-bending explorations of the impossible created by Dutch artist Maurits Cornelius Escher with an Internet survey might sound a stretch (although the cover of the Sensis® eBusiness Report does have a freaky picture on it).

But, there is method in my madness.

The thing is, the longer you look at the Sensis® eBusiness Report, the more interesting little tidbits pop out at you.

Just like Escher, eh?

Every year around August, the Sensis® eBusiness Report comes out and gets its fair share of headlines – usually focussing on one or two key observations.

This year was no different. The main focus of reporting was on the uptake of mobile data services by Australian consumers.

But some other really interesting findings hit me as I stared at the report recently. They relate to the way eBusiness has evolved in Australia.

The rise and rise of eBusiness
First up, it’s clear that eBusiness has had a real growth spurt over the last two years.

There’s four distinct activities related to eBusiness measured by the Sensis® eBusiness Report: two (research and buy) sit on the ‘buy side’, while two (sell and promote) sit on the ‘sell side’.

And, as the table below shows, all of these activities have really packed on the muscle over the last two years: albeit at different rates. In fact, researching potential purchases has reached the point of near-ubiquity in Australia, with the buying and selling activities not far behind them.

Businesses placing almost a third of their orders online
The second observation is that the SMEs who have cottoned onto online ordering are using the web for an average almost a third (31%) of their orders.

Ponder that for a moment. 78% of Australia’s SMEs are placing, on average, almost a third of their orders online.

That’s staggering and it underpins just how far eBusiness has come in this country.

Having said that, it does look like online’s share of orders may have hit a bit of a ceiling. While the number of SMEs placing orders online has grown rapidly since 2007, the average percentage of orders they’re placing (31%) has remained static.

Around the world? Nup… around the corner
One final observation. Back when the web was a toddler, the talk was of globalisation. If I recall, the thinking went something like ‘anyone could sell anywhere so everyone will sell everywhere’.

And while the web certainly has given birth to a new generation of multinationals, it pans out (perhaps not surprisingly) that the overwhelming bulk of businesses remain focussed on their neighbourhoods.

In fact, it turns out that two thirds of SMEs mainly sell to local customers – in the same city or town. 11% mainly sell elsewhere in the state, 12% interstate and 4% overseas.

So there you have it. A growth spurt in the uptake of eBusiness; a high (although static) share of purchases being placed online and a real focus on the customers just around the corner.

The Internet may not have changed the face of business in the way we once believed, but it sure has changed the way we do business.

Anyway, enough said. I’m off shopping (click, click, click).

Australia’s small and medium businesses have recorded another record quarter of surging business confidence – author of the Sensis® Business Index Christena Singh tells us where exactly we are on the path to economic recovery.

It was great to see another surge in business confidence amongst Australia’s small and medium businesses this quarter. In the September 2009 Sensis® Business Index we saw confidence up 20 percentage points to a net balance result of 50 per cent.

But it is important to look at the path we have trodden over the past few years.  This result has come from a record low of 12 per cent just two quarters ago.  Overall, the highest result we have every measured for SME net confidence was 67 per cent back in August 2004, so a result of 50 per cent, coming from a record low two quarters ago is strong by any measure.

If we take another step back, it is almost two years since Australia’s small and medium businesses told us their confidence was slipping – we measured the largest single quarter drop in SME confidence in November 2007, with confidence falling almost every quarter between then and June this year. So to see two successive records set in growth in the confidence indicator is great news.

While the results this quarter are very positive, it is important to look at the detailed analysis as well, and this shows that the growth in confidence and expectations is much stronger than the growth in performance. The September 2009 results saw sales improve strongly, but it was to a zero per cent net balance – this means that the proportion of SMEs that increased their sales in the past quarter was exactly balanced by the proportion that recorded a fall.

Likewise, profitability improved, but remains net negative. Employment fell back to net negative five per cent, and while the capital expenditure performance was strong, it has continued to outstrip expectations, with SMEs still hesitant about investing in their businesses.

So while the signs for recovery are good, there are still downside risks, and it will be important to see the performance indicators move into positive territory before we can really say that we have a sustainable recovery in place – but at least now the signs are positive and heading in the right direction!

There’s a lot of support for small and medium enterprises (SMEs) coming through from Sensis at the moment. We’ve just launched a new ‘Small Business’ section on the Sensis corporate website. Here you’ll be able to find all the free resources Sensis produces for SMEs  in one convenient location. And we can also confirm that a new book specifically for SMEs focusing on sustainable business practices is in the making.

The ‘Small Business’ page is the new home to a range of popular resources Sensis produces for Australia’s SMEs, including the Small Business, Big Opportunity advertising and marketing guide; Sensis® research reports such as the quarterly Business Index, Consumer Report and annual e-Business Report and a summary of Sensis’ small business partnerships and a useful links page.

With all the free resources produced for SMEs now in one convenient location, smallbusiness.sensis.com.au has been concluded and traffic to that site is now redirected to the new ‘Small Business’ page.

As well the new page, following the great feedback received about the advertising and marketing guide Small Business, Big Opportunity, Sensis has decided to produce a new book exploring how SMEs can grow and prosper by implementing sustainable business practices.

Jon Dee

Environmental expert Jon Dee has partnered with Sensis to research and write the book, which will deliver easy to understand practical insights.

Jon co-founded Planet Ark with Pat Cash in 1991 and today is Founder and Chairman of the Australian advocacy organisation ‘Do Something!’ He is also the Environment Editor for Channel Nine’s nationally broadcast TODAY Show.

Jon has more than 25 years working on cause-related projects. Some of the highlights include co-producing ‘The World Against AIDS’ global broadcast which launched ‘World AIDS day’ in 1988; initiating and running ‘Rock Aid Armenia’ in 1989; co-founding Australia’s ‘National Tree Day’ with Olivia Newton-John which resulted in more than 12 million native trees and shrubs being planted… and that’s just to name a few!

Jon and Sensis have worked together before when Jon initiated the Sensis sponsored RecyclingNearYou.com.au. Working alongside Sensis’ ongoing commitment to supporting SMEs, the new book will be available to download or order at no cost from the new ‘Small Business’ page towards the end of the year. Keep an eye out on about.sensis.com.au for updates.

If you have any feedback about the new ‘Small Business’ page or any questions about the upcoming book, please contact Smallbusiness@sensis.com.au.