Nearly four in five mid-market companies are confident of their ability to bounce back from the COVID-19 crisis, a KPMG survey of 225 Australian businesses finds. The majority feel they could be back to business as usual within three months of the pandemic ending.
The survey, carried out last month, finds that the lockdown has taken its toll with 86 percent of business leaders emotionally concerned at a personal level and with 94 percent saying the crisis had impacted their business – 52 percent of them ‘significantly’.
Notably, businesses with 50-499 employees were less likely to be concerned than larger companies. Nearly two-thirds of companies in the next category up (500+ employees and/or $500m+ turnover) said they had been significantly impacted.
Yet despite their lesser concern, smaller businesses were more likely to consider themselves still in the early response phase, or managing through the crisis. Nearly 60 percent of overall respondents put themselves in those categories, but 32 percent of larger businesses now reported being in the recovery phase, resetting and identifying market opportunities and adapting to the new world.
Kristina Kipper, KPMG National Leader – Mid-Market, said: “It is very encouraging that almost 80 percent of respondents said they were confident of their organisations’ ability to bounce back financially from the COVID-19 crisis. There is no doubt it has hit them hard, but more than half believed they could be back up and fully running within 3 months of the end of the crisis.
“While the very smallest businesses, with less than 50 employees, were not so confident, the next bracket (50-499), which is the backbone of the Australian economy, were more upbeat. Of course the crisis won’t end overnight but it is good to know that this market segment has the resilience and flexibility to move quickly when it does. JobKeeper has played a vital role here in steadying the business sector, although some of the survey respondents reported compliance concerns. The extension of the instant asset write-off scheme will also be welcomed in the mid-market sector.”
The economic environment was overwhelmingly (79 percent) the biggest challenge for respondents, followed by other financial issues such as decreased consumer confidence (48 percent), cost bases increases and reduced profitability (43 percent) along with workforce engagement and capability.
In terms of responses, two-thirds of respondents said they had, or would be, financial stress-testing and forecasting and assessing liquidity with just over half carrying out cost containment measures. Next most common responses were: transforming business models and internal culture, (48 percent) promoting innovation and agility (47 percent). More than a third said they had cancelled or deferred planned investment.
Over the next year, ways of working (60 percent) and the financial strategy (54 percent) were the two likeliest areas to change, the survey found.
The KPMG study also interviewed a number of business leaders and found some key recurring themes of COVID-19 era focus. These were:
- Consistent customer and employee communication.
- Workforce restructuring – in some cases a smaller workforce, in others additional staff recruited.
- Investment in IT infrastructure – moving to cloud, working from home, moving to a digital model for clients.
In terms of business gaps and future needs, there were several areas:
HR support – businesses felt under-resourced in HR capacity to cope with the large increase in employee focus
- Tax changes – while JobKeeper was vital, some felt they needed a greater understanding of the support packages, eligibility requirements and tax changes.
- Marketing – much of this activity has ceased during the shutdown, and businesses had a challenge in deciding when and if to resume it.
Kristina Kipper added: “There are a variety of challenges now facing the mid-tier sector as we start to emerge from the lockdown, but the overriding feeling shown by the report is one of cautious optimism. Most businesses feel they will either grow, or if business performance is shifting, then the negatives will be outweighed by the growth in the next three-month period. And even those industries which have been in complete shutdown say they believe they will be back to 80 percent profitability by September to January.”