A majority of Australia's small business owners have created diverse plans to face the continuing economic uncertainty, a recent survey by Galaxy Research has revealed
A 'tale of two profit lines' has emerged among small business owners seeking to future-proof their operations with companies that improved their product and service offerings reaping rewards, while those more focused on cost-containment being more likely to report a decline in profits over the past 12 months.
This is a key finding of a nationwide survey of more than 1,000 small business owners commissioned by American Express, which found that almost three-in-four businesses (73 per cent) had taken actions to future-proof their operations in the face of sustained economic uncertainty.
"We're seeing that small business owners are taking steps to safeguard their business and ensure its longevity," said Jason Fryer, Head of Small Business Services at American Express.
"What is interesting is that these businesses seem to fall into two camps. Some have focused their efforts on customer retention and growth, while others are more concerned with cost-containment, yielding significantly different results," said Mr Fryer.
Nearly a quarter of small businesses surveyed improved their product or service offering and half of these increased their profits in the last year. Similarly, 57 per cent of small businesses that ramped up marketing activity also enjoyed higher profits.
Other measures taken by small businesses include improving their cash flow with the majority of owners in this category reporting increased profit.
Executive Security Solutions Shows How
One business that has chosen to future-proof its operations through a new product offering is Executive Security Solutions, a company that has evolved from providing static guards and crowd controllers to all-encompassing security solutions.
"As a small business we have to adapt to changing market conditions to retain our competitive advantage," said Michael Cohen, Director of Executive Security Solutions.
The business, which started in 2006 continued to expand the service line year on year.
Mr. Cohen added that in the past 12 months the company invested significantly in monitoring capabilities, offering clients around-the-clock protection and emergency response.
"With a 37 per cent increase in revenue this past year sales achieved through improved service far outweigh the investment. We now provide equally sophisticated security services as larger companies, but with the customer service model of a small business," he explained. "Our clients get the best of both worlds and we find ourselves competing on a different platform which has helped drive growth and profitability."
In a significant finding, 40 per cent of the businesses that reduced expenditure as a future-proofing measure actually saw a reduction in profit, with more than a quarter (26 per cent) expecting the trend to continue next year.
"It really is a tale of two profit lines being driven by two fundamentally different approaches to business survival," Mr Fryer said
According to the research, businesses established for more than five years were more inclined to resort to safer internal methods of future-proofing, including reducing expenditure than their younger counterparts (56 per cent vs. 42 per cent).
In contrast, businesses younger than five years looked to their markets and were more likely to innovate by implementing or improving marketing campaigns (23 per cent vs. 13 per cent) and adapting their product or service offering to capture more market share (31 per cent vs. 21 per cent).
"The results of this survey provide food for thought for businesses focused on future-proofing their operations. There are valuable lessons for all of us here," Mr Fryer concluded.
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