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Why the catapult effect is key to long term success for Australian SMEs

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Those SMEs who “catapult” their business will be key to the growth of Australia’s economy over the next 12-24 months.

The catapult effect is where businesses have to pull back on everything due to a crisis – such as COVID – and reduce spending, hiring, buying inventory and so on, but at the same time also improve their operations.

Catapulting involves leveraging a rebounding economy to grow at double the speed of everyone else – and will be the secret of long-term success for many SMEs.

There are five key things that businesses can do to catapult.

First they must become leaner and more vertically integrated.

There is no room for waste, inefficiency or dead wood in tough times.

They need to adopt better technology to improve efficiencies.

Supply chains must be optimised, Staffing should be pared back, with poorer-performing staff removed and fewer good ones hired.

Finally they need to unleash as the economy gathers pace.

These businesses will “catapult” ahead because they have in effect rebuilt themselves and are much better positioned to take advantage in a post-COVID world.

Australia is recovering well from the COVID crisis, especially compared to other countries, growing 3.1% in the last quarter of 2020, faster than expectations.

Australia’s resilience is partly due to swift lockdowns, travel bans and quarantine arrangements. The Government’s response, in terms of financial support to both businesses and individuals, has been another key factor.

As such, the Australian economy has now seen consecutive quarters of growth in the most recent September and December quarters, creating a positive outlook for 2021.

The “savings stimulus”

Savings have also become a “second stimulus”.

Despite the challenges of COVID-19, a combination of the relative security offered by the Government’s financial support programs and the lifestyle restrictions created by the pandemic, has created a huge reserve of savings in the pockets of Australians.

In addition, with interest rates at historic lows, money is cheap to borrow right now.

One of the biggest factors in this savings increase has been travel restrictions. The money that Australians would have normally spent going overseas has now accumulated and is ready to be spent domestically.

This is further driven by continued international travel restrictions, compared to the relative lack of domestic restrictions. The supply chain of manufacturing to wholesale to retail could strongly benefit from this surge in savings.

Many businesses have also managed to save capital. They haven’t spent on expansion or T&E (travel and expenses). They have renegotiated contracts and possibly reduced rent/office space, so have more cash.

This puts them in a much better position to invest in new technology and processes and hire the talent they need to drive growth as the economy recovers.

The agility of smart technology

Businesses need to be adaptable to take advantage of this “savings stimulus” opportunity. This means being able to quickly respond to increased and/or modified customer demand.

Managing supplies and inventory will be crucial to this. During Covid, businesses the world over faced severe supply squeezes.

The worst of these have passed, but many companies are rethinking their supply chain and considering how to make it more resilient.

To be resilient, businesses need to be adaptable. Investment in ERP and other business technology is crucial for businesses to be truly adaptable in this changeable environment.

This type of technology can deliver the flexibility and agility that’s needed to pivot products and business practices to meet changing customer needs.

Having an intelligent ERP system, with real-time data, means you can instantly account for every element, even as costs move. It enables demand forecasting which can track customer trends, keeping fingers on the pulse.

The economic journey for businesses is not likely to be smooth sailing from here.

While this “savings stimulus” presents a great opportunity, the situation globally remains unpredictable. Therefore the situation in Australia will continue to fluctuate in response, for example in the easing of travel restrictions).

Businesses that catapult will look quite different to how they looked pre-Covid. Possibly they now have ecommerce stores whereas before they were just wholesalers.

They have full cloud based tech so they can work from anywhere, and they have better reporting and a keener eye on data. They have more connected technology. Their staff are more focused and value-adding.

They have better relationships with their customers and suppliers (having weathered the storm together) and they have consolidated these relationships to the key few that generate most value.

Only a fraction of the SME community will catapult. Most will simply recover in line with their industry or economy. But those few that do catapult will shoot ahead of their peers, achieving growth at two to three times the rate of their peers and the economy.

Jonathan Attia is the Managing Director of Wiise, the cloud ERP and accounting software for SMEs created by KPMG, supported by CBA, and a gold Microsoft partner.

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