New research by the Commonwealth Bank of Australia (CBA) reveals that Small and Medium Enterprises (SMEs) are planning to innovate and invest in response to market challenges. The top strategies for growth include investing in marketing (45%) and staff (34%), revising pricing (31%), investing in new product/service development (31%), and diversifying stock and supply chain (13%).

Rebecca Warren, Executive Group Manager Small Business Banking at CBA, highlights the increased demand for marketing and communications services, indicating intensified customer acquisition and loyalty strategies. "Despite a difficult environment posed by inflation, rising interest rates and workforce challenges, the research shows small business owners are planning to take proactive action to drive growth over the coming months," Warren said.

Employee wellbeing and productivity are also being prioritised, with strategies to retain current staffing levels and improve performance through training and development. "Greater priority is also being given to employee wellbeing and productivity with many focusing on strategies to retain current staffing levels and improve performance with training and development," added Warren.

The research, conducted in partnership with YouGov, surveyed 529 Australian small and medium-sized business owners and senior decision makers between 21 December 2023 and 3 January 2024. CBA data shows a positive trading period for SMEs leading into the festive season, with earnings increasing 5.4% in the second quarter of FY24, compared to the first quarter of FY24.

Challenges for SMEs include rising input costs (41%), energy costs (35%), and managing cash flow in the next 12 months (42%). Only 20% of business owners reported staffing issues such as retaining staff (15%) and attracting staff (14%).

Many SMEs, particularly in hospitality and professional services, are planning to expand with new revenue streams by creating new products or services or by targeting new markets interstate and overseas. "We know many SMEs are innovating and investing to respond to challenges. A lot of businesses, particularly in hospitality and professional services, are taking proactive steps such as planning to expand with new revenue streams by creating new products or services or by targeting new markets interstate and overseas in a bid to win more customers," Warren noted.

Investments in new equipment and technology, including energy-efficient equipment and marketing and social media applications, are planned to boost efficiencies and reduce costs. "Energy efficient equipment such as electric commercial vehicles, and software including marketing and social media applications are high on the wish list for purchases 2024," Warren concluded.