Small business trends 2021: Advisers prove the key to survival
Practitioners were under the pump in 2020, and their efforts paid off in helping many SME clients. Here’s a look at what 2021 forecasts.
Jacqueline Blondell | January 2021
Throughout 2020, practitioners reported heavier workloads due to increased interactions with clients struggling with straitened circumstances caused by widespread COVID-19 lockdowns.
Recent research shows their efforts have not gone unrecognised.
A survey of more than 1500 small-to-medium enterprises (SMEs) conducted on behalf of non-bank lender Scottish Pacific Business Finance (ScotPac) reveals that more than half (54 per cent) turned to advisers such as accountants on average 13.3 times each quarter last year.
ScotPac’s SME Growth Index shows that an overwhelming eight in 10 respondents (81 per cent) reported that the advice they received had a positive impact on their businesses.
The top five positive impacts were:
- A boost to the bottom line through cost reduction (63 per cent)
- Helping access government support and stimulus measures (37 per cent)
- Providing confidence in the direction the business was taking (28 per cent)
- Improving customer relations (18.5 per cent)
- Assistance with funding access (18 per cent).
Advisers also played their part in assisting negotiations with the Australian Taxation Office, aiding one in 10 clients, with one in 12 survey respondents noting advisers also helped with the sale of assets.
Further, the index reports that in 2021 many SMEs are aware urgent action is the key to future business survival. Right now, many businesses are prioritising debt repayment, looking at alternative funding avenues, and making the hard decisions on whether to close the business if access to funding does not improve.
Recovery in sight
However, there may be light at the end of a long, dark tunnel. An IBISWorld SME Industry Report covering five industries – scenic transport, clothing retailers, restaurants, funeral services and child care – shows these sectors are expected to grow strongly, albeit on the back of partial recovery from the disruption caused by the pandemic in 2020.
On a more sobering note, it also predicts many businesses in these industries will take up to five years to return to their pre-COVID performance heights.
Key trends for 2021
Xero has declared that in 2020 SMEs stared down the “biggest and weirdest challenges” they’ve ever faced, with the software provider adding that the business lessons learned were all around adaption and resilience.
Based on data from its 2.3 million users, here are some trends Xero identified in 2020 and predicts will be vital for SMEs in 2021:
Seventy per cent of business owners reported they experienced cash flow difficulties last year. It is, therefore, no surprise that cash flow forecasting shot to prominence in 2020 and will remain critical this year.
Saving for a rainy day
Contingency became a byword – not just a budget line – in 2020, with the year’s events proving that a cash cushion is a necessary survival tactic. Some advisers have advocated a reserve of four months’ business running costs.
Goodwill worth its weight in gold
Business relationships assumed even more importance in 2020, with SMEs relying on customers, employees and advisers. 2021 will be all about paying it forward.
Technology as a key asset
Xero reports that users who used at least one other business app suffered 12 per cent less lost revenue than other businesses. Those using five or more managed 33 per cent less loss.
The online pivot
E-commerce returned with a vengeance with many businesses pivoting to online operations. According to Xero, heavy users search for e-commerce tools such as Shopify, WooCommerce Square and Stripe.