Thanks to our friends at Xero.
Trent Innes is not an entrepreneur, but he urges you not to hold that against him.
As Managing Director of Xero in Australia and Asia (and CEO Magazine’s Managing Director of the Year in 2017), what he does have, however, is a unique insight into the small business sector. In a recent Masterclass Online, our CEO Olivia Ruello chatted to Trent about the shape of small business in Australia following the arrival of COVID-19.
Drawing on his passion for data, Trent unpacked the findings of Xero’s Rebuilding Australia report. In doing so, he laid out what we can learn from the businesses that have fared well throughout the pandemic and the trends that are emerging.
The pair also discussed all things leadership and shared advice for current and aspiring team leaders. Spoiler: It’s easier than you think (and you can find out more in our chat with Trent here).
The small business landscape in 2020
Trent launched Xero Small Business Insights in 2017, a snapshot of the sector’s health based on anonymised and aggregated customer data. By harnessing insights that no one else has, Xero is able to give policymakers, media and industry an accurate pulse check on small business and drive informed decision making in their support.
“I fundamentally believe that small business is the most important part of the economy,” he said.
Continuing the exploration of the role of small business in Australia, Xero’s Boss Insights Report, was released in February 2020. It revealed that two-thirds of the businesses created in Australia in the past decade were headed by women. And the average age of a new business creator is 45 years-old, with another spike at 55 (so if you’re reading this with a dream to run your own show, consider this your sign!)
Measuring COVID-19’s impact on small business
It’s no surprise that from March 2020, following the arrival of COVID-19, Xero’s Small Business Insights revealed a dramatic hit to small business revenue across the country. Small business job growth slowed, with casual employment being one of the few levers small businesses can pull to save money. The hit would have been more significant if it weren’t for the government stimulus.
Despite this trend, Xero’s Rebuilding Australia report also uncovered a number of promising bright spots. Several sectors have seen staffing increases in 2020, as exemplified by the fact that the demand for web developers has increased by 218% since COVID-19 hit. Manufacturing has also grown significantly, with local supply chains firing up to support the economy when global chains ground to a halt.
In addition, recent data from July revealed that overall revenues were only 1.9% lower than the same time 12 months ago. “We are seeing some great recovery,” Trent said.
Harnessing the power of resilience
Across the board, small businesses have demonstrated remarkable resilience in response to the COVID-19 crisis. They’ve done everything from finding new customer markets to staggering shifts, embracing remote working, adapting their operations, focusing on their digital offering, innovating new product ranges and providing alternative service channels.
Drawn from a study of 1,000 small businesses in early June, Xero’s Rebuilding Australia report found that 47.8% of small business owners felt confident about the future state of their industry. After all, in such times of uncertainty, it’s resilience and an entrepreneurial spirit that are crucial to successfully pulling through to the other side. Right now, the greatest skill business owners can have is the ability to shift to meet changing circumstances.
A consistent theme amongst the businesses that have thrived during 2020? Their online presence. “Digital has gone from a nice-to-have to a must-have. Those who have dabbled at the edges have had to dive right in. I’d argue that small business actually has better access to technology than big business does, as it’s more cost effective to set up,” Trent said.
From moving bricks and mortar stores online to the digitisation of payment processes, small businesses are rethinking the way they do things – often unlocking new ideas and systems that will endure long after the crisis ends. You can read all about the trends shaping the future and the tips and tools you can action here.
Advice for entrepreneurs starting or scaling a business during the pandemic
History has shown us that out of recessions come innovative businesses. Trent’s advice to entrepreneurs looking to launch a business in 2020 is to focus on the basics: prioritise your digital presence and stay flexible. “Given the unknown, if you are going to invest in your business, don’t sign off on long-term agreements. Try and keep contracts month-to-month so you can get out of them easily.”
According to Trent, the scalable businesses of the future will be collaborative, and values-based. “Be purpose-led and have something that people can stand behind. People will understand how to operate within that framework (versus rules). And you don’t have to do everything yourself. You can partner with someone else to help you grow. Think of Apple’s App Store. You’ve got to keep challenging and disrupting yourself – your own process and the way you go to market.”
So while the future may be uncertain, we know Australian SMBs are a resilient bunch. The next big thing could well be in the works, and we can’t wait to see what it is.
Want more from Trent? (we do too!) Check out his tips on leading a team during uncertain times here.
Download Xero’s free Stronger and smarter: a small business handbook for a practical guide made up of expert tips to keep your business moving during COVID-19 and into the future. For more guidance, you can check out the resources hub on our website.