Consumer sentiment remains in the doldrums, yet the latest feedback from the mid-market business community is that they remain broadly optimistic for the future.
Newly updated ANZ-Roy Morgan consumer sentiment data shows 53% of respondents say their family is worse off now than they were 12 months ago, while just 8% are anticipating ‘good times’ for the Australian economy in the coming year.
Based on that consumer outlook, it’s easy to jump to the conclusion there may be a disconnect between business and consumers but it pays to look deeper to understand the mindset.
Pitcher Partners’ latest Business Radar report makes it clear that almost half of mid-market business owners are indeed preparing for turbulent times now and in the months ahead, but they have confidence that their preparation will make their business resilient enough to see them through a stagnant or contracting economic situation
Assured businesses tend to feel more prepared – while 45% of respondents overall say they are mostly or very prepared, that number jumps to 64% for businesses with a high confidence in future success.
Most respondents said it was business fundamentals that topped their priority list, such as strengthening customer relationships (29%), building cash reserves (26%) and reducing operating costs (26%).
Having lived through struggles to recruit staff in recent years, only 10% of prepared businesses are likely to reduce their headcount, compared to 20% for businesses who are not prepared, while one-in-four will consider increasing their marketing against 13% for unprepared businesses.
Different risks for small and larger businesses
When we break down the data based on business size, smaller mid-market businesses are more concerned by the operational fallout from a recession than their larger counterparts.
Smaller mid-market businesses’ most immediate concerns are all financially focused – supplier price rises (47%), declining revenue and cashflow (47%), debt and repayments (44%) and higher operating costs (44%) were the most significant risk factors.
Larger mid-market businesses still have an eye for the future. Weaker consumer demand is their top worry (37%) followed by employee retention (33%), but the prospect of stricter government regulation (33%) and de-prioritising innovation (29%) are also high on their list of concerns.
The latter issues, should they materialise, have far reaching implications for businesses.
While stricter regulation does carry benefits for some sectors, a heavy hand also creates barriers to entry which can lead to higher costs and a dampening of business progress.
Similarly, innovation is critical to a dynamic, adaptable and growing economy. Deprioritising innovation could set Australian businesses back in the medium to long term as a globally competitive environment accelerates.
Double down on customer experience
Mid-market business leaders retain a confident and optimistic attitude while keeping an eagle eye on the economic outlook, which is a healthy position because turbulent economic times can present both challenges and opportunities.
While streamlining operations and reducing input costs is always a priority, taking both defensive and offensive actions lays the groundwork for surviving, and even prospering, during a downturn.
On the defensive side, business owners should watch for changes in behaviour of customers, suppliers or stakeholders, and even competitors, that may open a window into challenges that could impact your operations.
Keeping an open and honest dialogue with stakeholders and suppliers offers an opportunity to insulate or minimise any potential negative impact from changing business conditions.
On the offensive, business owners should consider strategies to segment customer bases, to allow greater focus on those that value your offering and are likely to be repeat buyers.
Double down on your customer experience. Actively engaging with your customers creates a greater chance of retention and attracting new business.
Similarly, maintaining marketing efforts ensures customers know you’re still there. If competitors are cutting back in that area, the same marketing budget can deliver a higher share of voice and provide growth opportunities.
While many people harbour legitimate concerns about the economic situation, Australia’s mid-market businesses are still optimistic about the future and see calmer economic seas ahead.
Prudent leaders are not ignoring the potential challenges that lay ahead but they are also simultaneously exploring new opportunities available now and positioning themselves to take advantage of opportunities when they present.