The top 5 reasons SMEs fail to reach revenue targets

by Sophia Auld – journalist

If it looks like your business won’t meet 2022 revenue targets, you’re not alone. Figures from the latest SME Growth Index report, produced by Australia’s leading non-bank business lender ScotPac, show just under half (46%) of the 700 plus SMEs surveyed are on track to reach revenue goals this year. The survey also uncovered the top five reasons for the predicted shortfalls, which were:

1. Staff shortages

Two in five businesses stated this was a major contributing factor, with larger SMEs being most affected. While unemployment remains low, the report indicates workforce gaps related to underemployment and COVID-19 border restrictions are key challenges.

2. Working capital constraints

One-third of businesses reported poor access to finance was preventing them reaching their revenue targets. Long loan approval times was of particular concern for Australian SMEs, with the average now sitting at a lengthy 35 days.

3. COVID-19 restrictions/prevention measures

Just under three in ten (28%) SMEs stated these were impacting revenue, as was an associated reduction in demand for services or products (25%). The survey was conducted earlier in the year before easing of COVID-related restrictions, which may impact figures going forward.

4. Supply chain issues

Almost one in five SMEs (18.4%) reported this as a hindrance. In addition to COVID-related disruptions, natural disasters have afflicted supply chains this year.

5. Difficulty accessing grants

Issues associated with qualifying for government grants and support schemes – including the SME Loan Recovery Scheme – were a hindrance for 18% of SMEs.

3 solutions for closing the shortfall gap

In light of these findings, the below strategies can assist SMEs to optimise their performance and potentially come closer to achieving their revenue targets this year.

1. Focus on your team

Ensuring your team is as productive as possible may help to offset staff shortages. You can support this by building a positive workplace culture that boosts morale and engagement, which will also help you become an employer of choice. According to a report in Harvard Business Review, researchers have long known autonomy, competence, and relatedness are key to building thriving workplaces and high-performing teams. While COVID-19 has bolstered autonomy with many working from home, it has negatively impacted workplace relationships. Recent research shows that during the pandemic, high-performing teams found subtle ways of leveraging social connections – including phone calls, well-planned meetings, bonding over non-work topics, and more frequent giving and receipt of appreciation – to boost their success.

2. Optimise cash flow

Cash flow has always been a make-or-break issue for SMEs, with the pandemic highlighting this challenge. Cashflow solutions are many and varied, with just some options including:

• Building a cash reserve to provide a safety net should an unexpected expense, payment delay, supply chain issue or growth opportunity crop up.
• Overhaul your invoicing strategy – if you have revenue tied up in overdue invoices, consider tactics such as shorter payment terms, invoicing more frequently, offering early payment discounts, or invoice finance.
• Reducing expenses – strategies like eliminating unnecessary spending and negotiating discounts or better trade terms with suppliers can free up cash.

3. Fast access to working capital

With lack of access to finance a top hindrance for 33% of SMEs, look for funding solutions specifically designed for this sector. While banks are dragging the chain, non-bank lenders can frequently provide rapid access to tailored SME lending options, such as trade, invoice and equipment finance.

As ScotPac CEO Jon Sutton notes: ‘Fast and flexible access to finance is critical for SMEs looking to reinvest in their businesses post COVID, particularly those recovering from labour shortages and supply chain issues.

‘ScotPac’s range of finance options include applications for some products which can take as little as 10 minutes to complete, and in some cases funding can be approved in 24 hours.’

ScotPac’s product range enable us to help almost every business, whether you’re looking to unlock business assets, minimise cashflow constraints, or ensure you’re well prepared for business disruptions.

Feel free to contact us for anything that relates to your business finances so we can help with your success.

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