Amongst Australia’s SME owners, millennials are not only more optimistic about the future, they are also more likely to expand their business in the near future, according to a new whitepaper from NAB.
Titled The Moments That Matter: Understanding Australian SMEs, the whitepaper reports on qualitative and quantitative research undertaken by IPSOS on behalf of NAB. As part of the study, IPSOS surveyed a representative sample of hundreds of Australian SME owners, of which more than 20% were millennials, across a wide sector of industries including retail, health, property, finance and transport. Small were defined as having a turnover between $100,000 and $5 million, while medium businesses were defined as having a turnover between $5 million and $50 million.
Speaking to Dynamic Business, Cindy Batchelor, Executive General Manager of Business at NAB, unpacked some of the key findings as they relate to millennial-run SMES.
Millennial-run SMEs are more optimistic about the future of the economy, with only 14% citing the economy as a future challenge compared to a quarter of all other SMEs.
Batchelor: Millennial SME owners are a class apart in many ways. They’re distinctly agile and focused on innovation and growth, and are confident in conducting business in the digital environment.
Part of the reason, I think, is that they have grown up in a period of economic prosperity and relative stability. They are accustomed to a relatively strong business economy, and this might contribute to their optimism.
Millennials SME owners are more likely to expand their business over the next three years, with 66% indicating their intention to do so compared with under half (45%) of all other SME owners.
Batchelor: While SMEs in general are focused on expansion, this ‘growth mindset’ ramps up amongst millennials. They are digital by default and, as mentioned earlier, distinctly agile, which opens up a wealth of opportunities for them to expand.
44% of millennial-run SMEs plan to either start selling online or grow online sales to expand their business over the next three years compared to just 28% amongst other SMEs. Additionally, one in four plans to invest in new technology in the same period, and a similar proportion plan to invest in new machinery or premises.
One in two SMEs, overall, believe the level of competition in their sector is a) making it hard to stand out (52%) and b) putting significant pressure on profit margins, while one in three (33%) of those businesses wanting to expand cite too much competition as a key reason holding them back.
Batchelor: Competition in the SME sector has always been intense, and we know that millennials are feeling it. While digital is often the backbone of their businesses, it’s providing many opportunities for other entrepreneurs to compete at their level. Millennials are aware of this and are alert to the new product updates and innovation appearing almost daily.
Interestingly, however, those Millennial-run SMEs who have undergone at least one phase of expansion during the life of their business are much more likely to cite ‘competitive pressures’ as a trigger (23% compared to just 14% of everyone else). This indicates that competition can have a positive effect by driving growth.
Finding: SME owners ranked ‘seeing a customer’s smile’ as the most important business moment, ahead of ‘becoming a viable business’ (second), making it through a period of economic downturn (third), becoming a profitable business for the first time (fourth).
Batchelor: Whether it’s the ‘big’ things that happen in a business, like winning a big customer, through to the ‘small’ but significant moments, like seeing a smile on the face of the customer, customers are imperative to the success of any business. Many businesses embrace a customer-centric business model, in order to achieve sustainable profit and growth. We’re operating in a business environment where customer expectations are at an all-time high. SMEs know the importance of customer satisfaction in driving repeat business, customer retention and attracting new customers.
Other findings from the NAB whitepaper include:
- Just over half of the SMEs surveyed (54%) believe the internet has disrupted their business, rising to 71% amongst millennials, with almost all of the top impacts relating to increased customer demands: 37% believe the internet has allowed customers to find them online, 27% believe it means customers now expect immediate and real-time updates, and 23% believe there’s been an increase in customer expectations as a result
- Six in 10 (63%) Millennial-run SMEs would not exist without the Internet (versus 52% of everyone else), while 1 in 4 (23%) are online-only businesses, compared to just 1 in 10 (9%) of everyone else.
- When asked to identify the measures of a successful business, while one in three (33%) SMEs rated high profits as an important measure, it lagged behind other factors; namely, good financial management (58%), positive word of mouth (56%), repeat business and customer retention (52%), productive staff (49%) and large turnover (11%).