CPA Australia’s 2016 small business survey shows it’s the innovative, younger small business owners who are setting the pace for growth and optimism in the sector.
Small businesses focusing on innovation, e-commerce, social media and exporting are significantly more likely to grow and create jobs, the seventh CPA Australia Asia-Pacific Small Business Survey (PDF) has revealed.
These innovative and entrepreneurial owners and managers are far more likely to be aged less than 40, says the survey of more than 2900 participants in eight markets.
They are planning to hire and increase their training effort this year, probably because they need to enhance the skills of their staff as they grow.
More than 48 per cent of businesses that are growing, and expect to grow, intend to increase their focus on training, compared with 14 per cent of businesses that don’t expect growth.
Of businesses that definitely expect to innovate through the introduction of a new product, service or process unique to their market, or the world in 2017, 93 per cent expect to grow.
This compares to the businesses that don’t intend to innovate – with only 50 per cent of those businesses expecting growth.
The percentage of businesses that reported growth in 2016 was 66.7 per cent, a figure that’s largely unchanged from the 2015 survey’s 68 per cent. About 70 per cent of businesses expect to grow in 2017.
Jobs growth in small business
The report says encouraging younger people to set up in business will create jobs.
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Governments wanting to encourage an innovative, tech-savvy and export-orientated small business sector should encourage and support more young people to start their own small businesses, it says.
Where is small business confidence high?
Businesses from Indonesia and Vietnam are most likely to expect growth in 2017, continuing the trend of previous years.
Their optimism isn’t misplaced. Business owners from these countries did grow in 2016.
The report says the high levels of economic and business confidence in Indonesia and Vietnam are very impressive.
“This growth and investment in their future success could see a number of current small businesses in those markets evolve to become large, global businesses in the next few years.”
Singapore has joined Australia as the two markets where small businesses are least likely to expect growth.
Small business confidence in New Zealand is significantly higher than in Australia, despite the close economic ties between the two. The survey was taken before New Zealand’s uncontroversial change of prime minister in December 2016, and before the latest Organisation for Economic Co-Operation and Development (OECD) report in November 2016 predicted strong economic growth would slow.
|Expect to grow in the next 12 months
|Expect their local economy to grow in the next 12 months
Australian small businesses are falling behind
Australia ranked last of the eight markets surveyed on each of the main indicators of business growth: innovation, e-commerce, social media, training and exporting.
On the key measure of innovation, only 5 per cent of Australian small businesses definitely expect to introduce a new product to their market in 2017.
This compares with 48 per cent of small businesses in Indonesia, 31 per cent in Vietnam, 29 per cent in Mainland China, 26 per cent in Malaysia, 15 per cent in Hong Kong, 11 per cent in New Zealand and 9 per cent in Singapore.
“Many Australian small business owners may be happy with things as they stand, and they are not looking to actively grow their business, but in the longer term a lack of focus on the drivers for growth may undermine the value of their business,” says the former CPA Australia chief executive Alex Malley.
He says the survey results are a wake-up call to government to ensure the policy settings in place actually support small businesses to innovate, embrace the digital economy and grow.
“Small business is a critical driver of the Australian economy and these results would suggest there are opportunities that are not being exploited.”
What’s hurting small business?
Businesses reported that increasing costs, such as staff costs and rent, plus increasing competition had a detrimental effect on their operations in 2016.
Businesses in Asia were more likely to see increasing competition as a threat and this, with stronger business confidence and the changing demand associated with a fast growing middle class may explain their greater focus on innovation, says the survey.
Businesses are finding it harder to get finance
All markets found it harder to access finance in 2016, but businesses in Hong Kong, Indonesia and Mainland China reported the sharpest drop in their ability to raise funds.
Indonesia and Vietnam, the two markets most optimistic about growth, are also the most likely to invest in their business assets in 2017, with 56.8 per cent of Indonesian businesses and 36 per cent of Vietnamese businesses expecting their investment in assets will grow strongly.
This compares with just 5.7 per cent of Australian small business owners.
Customer satisfaction or customer loyalty?
The main factors that had a positive impact on businesses across the region in 2016 were customer loyalty, good staff and improved customer satisfaction, but growing and established businesses diverge markedly when it comes to the importance of building customer satisfaction compared with retaining customer loyalty.
Small businesses in Vietnam and Indonesia report that improving customer satisfaction is much more important to them, while owners and managers in Australia, New Zealand and Malaysia are more likely to value customer loyalty.
Australian small business owners tend to be older, and these older owners who have perhaps already built a customer base are more likely to value customer loyalty, while people aged less than 40 are more likely to rate improving customer satisfaction more highly.
The survey shows that improved customer satisfaction has a strong connection with business growth.
Which business sectors are innovating?
Top innovator: Manufacturing, where 32 per cent say they “definitely” plan to introduce a new product, process or service to their market or the world in 2017.
E-commerce: Accommodation and food services, where 45 per cent of firms expect to increase their investment in e-commerce to a large extent.
Top exporter: Manufacturing, where 26 per cent expect their revenue from overseas sales to grow strongly.
Online sales: Information, media and telecoms, where 60 per cent of businesses earn more than 10 per cent of their revenue from online sales. Manufacturing, at 58 per cent, is a close second on this measure.
Social media use: Education and training providers are the biggest users of social media to spread their message and engage with prospective students. Only 11 per cent did not use social media.
The online survey was conducted with a random sample of 2971 small business owners, senior managers and qualified accountants between September and October 2016. Businesses had to employ fewer than 20 people.
Survey participants, by country
Mainland China 621 (Beijing, Chongqing, Guangzhou, Shanghai)
Hong Kong 311
New Zealand 301
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