Small businesses that focused on improving product offer and service capabilities as a measure to “future-proof” operations, are more likely to have increased revenue in the past year, a new survey shows.
In contrast, the survey found that 40% of small business respondents that focused on cost-cutting as a “future-proofing” approach were more likely to see a decline in profit.
The research, conducted by American Express, looked into 1000 small businesses across Australia with turnover of up to $2 million. It found that 74% of respondents had taken action in the last year to “future-proof” their operations against sustained economic uncertainty.
Measures taken to “future-proof” businesses varied, with 51% taking steps to reduce expenditure, 24% to improve products and services, 17% to improve cash flow, and 16% to boost marketing.
Steps taken to improve cashflow also improved profit for small businesses, the survey showed.
American Express head of small business services Jason Fryer says the results demonstrate there are two “fundamentally different approaches to business survival” – services versus cost-cutting.
Fryer told SmartCompany this morning that he found the efforts by small business to solidify their futures “reassuring”.
“It showed that the traditional method of cost-cutting to increase profit was not the fool-proof approach,” he says.
He says that businesses under five years old were more likely to be “agile and flexible” in their approach to growth, and more willing to take risk – services versus cost-cutting.
Fryer advises that small businesses embrace a “balance of tools”, “stay agile” and remember “they don’t always have to cut costs to drive profit”.