While more small companies, struggling with rapidly declining profitability, were now looking to sell their operations, an increasing number were beginning to embrace digital technology, according to a report released today.
Author of the September 2011 Sensis Business Index, Christena Singh, said profitability amongst Australian small businesses fell sharply during the quarter and businesses were expecting further falls over the next 12 months.
“The profitability indicator is now strongly negative, and this is the weakest profitability result we’ve seen in the 18-year history of the report,” Ms Singh said.
The report found that half of small businesses experienced a decrease in profitability during the quarter, while just two in 10 experienced an increase.
“While there are marked differences across the nation, all states and territories recorded negative profitability indicators this quarter," she continued.
“Some sectors have performed better than others, but profitability has generally been weak across all industries."
The retail sector again experienced the weakest profitability during the quarter. For the coming quarter, profitability is expected to be lowest in the manufacturing and the building and construction sectors.
The report said that along with profitability, all performance measures deteriorated during the quarter. The indicators for sales, profitability and capital expenditure are now strongly negative, while wages and prices remain in positive territory, and employment is flat.
“However, Australian small businesses are resilient and very nimble, with many taking proactive measures to counteract the changing conditions experienced during the last six months,” she noted.
According to the report, 42 per cent of small businesses are planning to introduce new products and services during this financial year, while 38 per cent expect to increase their digital presence, and 35 per cent look to increase their sale force.
“In the face of rapid technological and economic change, there has been an upswing in businesses looking to increase their digital presence and social media activity over the last six months,” she concluded.
The report also indicates there is also an increase in small businesses looking to close or sell their business.
According to Sensis, the Index is based on telephone interviews conducted with approximately 1,800 small and medium business proprietors. The sample size comprises approximately 1,400 small businesses and 400 medium businesses, the latter defined as businesses employing between 20 and 199 people.