SME BUSINESS EFFICIENCY SURVEY

2017

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Executive Summary

In the highly competitive Australian marketplace, small and medium sized businesses need to run as efficiently

as possible, in order to remain competitive and grow the business sustainably.

Australian SMEs tend to feel that they are being run efficiently, with 81% of organisations stating that, overall,

they’re running a lean operation. And yet, that statistic only tells part of the story. Australian organisations also

often struggle to invest in high level efficiency, and though many of them believe that they are running efficient

businesses, the statistics also show that there is a lot more that they could do.

This is the third annual OKI SME Business Efficiency Survey, was started in 2015 as a way of tracking the

ongoing health of Australian small businesses, from an efficiency point of view. The comprehensive survey not

only tracks the general perceptions of efficiency, but also delves deeply into where the efficiencies are coming

from, how organisations that embark on efficiency initiatives then invest the savings, the challenges that

businesses face in achieving efficiencies, and then general perceptions around the “next wave” of efficiency.

Tracked year-on-year, there is the sense that Australian businesses are becoming increasingly aware of what

they can achieve through efficiency investment, but at the same time, the data suggests that businesses

are finding themselves unable to invest as much into efficiency as they might like to. Overwhelmingly, the

investments that are going into efficiency at the SME end of the Australian business spectrum are focused in

on the “low hanging fruit” - simple, small things that can be done cheaply with IT systems, rather than major

projects around automation and the like which would deliver major savings.

The data also suggested that the biggest challenge is in resourcing, and businesses finding the ability to

initiate the first business efficiency campaign. Once that first campaign has been financed, the data suggests

that the savings is split evenly between saving the money, reinvesting in additional efficiencies, or investing the

business, showing that an efficiency campaign is an effective way to mitigate financial risk within an SME, or

alternatively, an opportunity to find additional scale.

And, of course, the more efficient the business, the easier it can resource its ambitions to scale, as an efficient

business is less expensive to grow.

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Contents

EXECUTIVE SUMMARY 2

CONTENTS 3

METHODOLOGY 4

RESULTS 5

DEMOGRAPHICS 5

HOW EFFICIENT ARE SMES? 8

WHAT IS DRIVING INEFFICIENCY IN THE BUSINESS? 10

HOW SMES ARE TAKING ADVANTAGE OF EFFICIENCY 13

INSIGHTS ON AUTOMATION 15

CONCLUSION 17

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Methodology

In July 2017, OKI created an online survey, in order to better understand how new technologies are impacting

on the efficiency of small to medium businesses in Australia.

The survey was emailed out to 3,000 of OKI’s active Australian business customers, with a narrow focus on the

IT decision makers within each organisation. In the majority, it was the business owners and others in high-level

management positions that answered the SME Business Efficiency Survey, with responses gathered across a

wide cross-section of industries and sectors.

This was a branching survey, in that the questions that each respondent saw were determined by the

previous answers they had made. Specifically, the survey questions branched depending on whether the

decision maker felt like the business was being run efficiently, and whether he/she felt that it was not being

run efficiently.

The questions asked through the survey are essentially the same as were asked in the 2015 and 2016 OKI

SME Business Efficiency Surveys. We felt that the greatest value in the data was in being able to compare

trends from one year to the next, and with that in mind, we have maintained the question set across years.

Throughout this report we will be making reference to how this year’s report compares to the historical data

from last year.

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RESULTS

Demographics

The 2017 OKI SME Business Efficiency Survey was sent to 3,000 small and medium business owners

and senior decision makers that are existing customers of OKI, across the entirety of Australia. We invited

customers across all six states and two territories to participate in the survey, and these businesses operate in

a wide range of sectors and employ varying numbers of full time staff.

In terms of location, NSW was the most populous, with 30% of responses coming from businesses located in

the state. This was followed by Victoria (26%), Queensland (23%), South Australia (8%), Western Australia (8%),

and the ACT (3%).

Tasmania and the Northern Territory each accounted for 1% of respondents. Finally, a further 1% of

respondents selected “Other,” representing businesses that had key operations overseas, or were

headquartered overseas with local branch offices. Overseas locations were New Zealand and/or

Papua New Guinea.

Compared to 2016 report: The demographics were similar, with 35% of responses from NSW, 26% from

Victoria, 25% from Queensland, 6% from South Australia, 4% from Western Australia, and 1% each from the

ACT, Northern Territory, and Tasmania.

Graph #1: What state is your business located in?

ACT NSW Northern Territory Queensland South Australia Tasmania

Victoria Western Australia Other (Please Specify)

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In terms of company size, this survey remains targeted towards SMEs, and OKI provided the survey

predominantly to smaller businesses. Of responses, 70% came from the owner or decision maker at a

business with between 1-5 full-time staff, and a further 17% came from organisations with 6-20, 6% came

from organisations with 21-50, another 6% from organisations with 51-200, and 1% of responses were

from organisations with over 200 people. These numbers are approximately in-line with the results from the

2016 survey.

Australia’s SME space is a vibrant, innovative, and entrepreneurial one, with small businesses thriving in a vast

range of different sectors. For this reason, breaking demographics down by sector is always challenging, as is

reflected in this year’s survey data where, as with last year’s the “other” category dominated the responses to

the question of which vertical the business operates in. A full 25% of businesses operated within businesses

outside the norm, ranging from HR, not-for-profit, and tourism, through to consulting, beauty therapy, and

logistics and distribution. Of the other sectors, Retail was the largest (11%), followed by IT (9%),

Manufacturing (8%), and Financial Services and Construction (7%).

Graph #2: How many full-time employees do you have?

1-5 6-20 21-50 51-200 200+

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Administrative/Support Services

Education/Training

Medical/Health Mining/Resources Real Estate/Property Retail Other (Please Specify)

Financial Services Manufacturing/Transport Marketing/PR/AdvertisingIT

Agriculture/Environmental Construction Creative Industries/Entertainment

Graph #3: What sector does your business operate in?

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How Efficient Are SMEs?

At the most basic level, the overwhelming majority of Australian SMEs believe that they are running cost-

effective businesses. This reflects the commercial necessity for Australian businesses to run lean, and the

cost of doing business in Australia being significant enough that running cost-effectively is a critical concern.

Of those surveyed, 82% of respondents felt that their businesses were, on the whole, running cost-effectively.

Compared to 2016 report: This is a significant lift on last year, where 76% of respondents said that they were

running cost effective businesses.

However, despite the positive sentiment towards the efficiency with which Australian SMEs are being run,

much of this efficiency is coming from a recent proactive drive towards efficiency. Over 50% (51%) of SMEs

surveyed said that they have implemented new initiatives to improve their cost efficiency over the past

year. A further 21% are planning on implementing cost efficiency initiatives within the next year. Just 28% of

organisations have neither implemented new cost efficiency initiatives in the last year, and have no intention

to in the year ahead.

Compared to 2016 report: There is some deviation here when compared to the 2016 report, which found that

a larger number of organisations had implemented cost efficiency initiatives in the past year (65%), and that

significantly fewer were planning on implementing new cost efficiency initiatives in the year ahead (13%).

Graph #4: Is your business running cost effectively?

Yes No

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This suggests that of those organisations that aren’t consistently undertaking efficiency programs, the next

year ahead will be one of investment for businesses, looking to modernise their operations, IT, and general

business efficiency. The data suggests that for many businesses it has been some time since the last

investment in efficiency, with businesses looking to capitalise on the significantly improvements into business

efficiency that are now being offered over a number of years ago.

Graph #5: Have you implemented new initiatives to improve cost efficiency over the past year?

Yes No, but we are planning to within the next year No, and we have no future plans to

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What is driving inefficiency in the business?

When we look at where businesses are making investments to improve efficiency, there are three key

trends that emerge in terms of where businesses see inefficiencies in their organisations; SMEs are making

investments in general ‘efficient’ IT technology, improving their business’ efficiency through Website/ Apps/

eCommerce, and making investments in Digital Marketing/ Online Advertising.

Of businesses that have invested in business efficiency in the past year, 74% made investments in efficient

IT, a further 29% invested in Website/ Apps/ eCommerce, and 28% invested in Digital Marketing/ Online

Advertising (Note: For this question respondents could pick multiple responses, to reflect that many have

made investments in multiple categories).

What is noteworthy is that, for all the interest in Big Data, automation, and other advanced IT technologies that

are being lauded for the efficiency that they bring into an organisation, Australian SMEs are still overwhelmingly

more interested in finding efficiencies in general technology. While 74% have invested in making technology

purchases that improve the efficiency of the IT in the organisation, only 18% have invested in automation.

Compared to 2016 report: This question was worded slightly different to how it was in the 2016 report, in

order to break “general IT purchases” out from other technology categories. The massive response to the new

general IT purchases category shows that, when an SME business is making efficiency investments in any

category, technology is often the principle driving factor.

Graph #6: Where have you made investments to improve efficiency and reduce long-term costs over the past year?

Digital Marketi...

Automation

General ‘effici...

Other (Please S...

Website/Apps/...

Supply chain an

Operational mat... HR/Staffing co...

Leasing Office/...

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When we asked SMEs about the primary challenges preventing their organisation from realising greater

efficiencies, a lack of finance to make up-front investments was the most common challenge, with 26%

respondents highlighting this problem. It was closely followed by both staff skilling challenges (24%) and

technology challenges, such as legacy equipment, and slow Internet preventing the adoption of Cloud-based

services (24%).

Having the lack of capital to make investments into efficiency is significant, considering that, when

organisations are making investments into efficiency, they’re also not investing heavily. According to those

surveyed, 59% of organisations spend less than $5,000 per year on efficiency initiatives, and a further 26%

spend between $5,001 and $15,000 on efficiency. A total of 6% spend over $50,000 on efficiency strategies,

suggesting that for those organisations that can afford it there is a real appetite and sense of urgency for

investing heavily on keeping an organisation’s costs down, but for the most part constrained budgets limit an

organisation’s ability to invest as heavily on efficiency as they might like. These constrained budgets lead SME

organisations to make what investments they can in areas that they can afford – such as general IT purchases,

in which greater efficiencies can be achieved through small - or a series of small – investments.

Graph #7: What is the primary challenge preventing your organisation from realising greater efficiencies?

Technology chal... Staff skilling... Lack of finance... Regulatory/leg... We are unaware... Other (please S...

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Compared to 2016 report: There has not been significant changes in terms of what inhibits an organisation’s

ability to make investments into efficiency. In last year’s report, the lack of finance to make investments

was also the top response to this question (at a slightly higher percentage – 30%), followed by staff skilling

challenges (25.0%).

Where there has been a slight shift is in awareness. Last year 14% of respondents said that they were simply

unaware of how they could achieve greater efficiencies, but this has dropped to 13%, while technology

challenges as an inhibitor is up to 24% from 13%. So there is more awareness among SMEs that there are

opportunities to realise better efficiencies in their environments, even if they’re not sure how to achieve it, given

the technology they have access to.

Graph #8: How much does your organisation currently spend in a year on technology to increase efficiency?

0-$5,000 $5,001-$15,000 $15,001-$50,000 $50,001-$100,000 $100,001+

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How SMEs Are Taking Advantage Of Efficiency

Finding new efficiencies in the business is seen as an opportunity to mitigate financial risk within the

organisation by saving money. The most common use of savings that the investment in new, efficient

technology returns to business is in savings, with 35% of SMEs opting to save at least some of the savings

from an efficiency campaign. 23%, meanwhile, are reinvesting the savings into finding further efficiencies,

using the savings from the initial efficiency campaign to address the challenge that many SMEs are facing in

financing efficiency campaigns. The third most common use of the savings is to re-invest it into developing

additional products and services - to grow the business, in other words (22%).

Note: Many SMEs are using the efficiency savings for multiple purposes – in this survey this question allowed

respondents to pick multiple options.

Graph #9: How are you leveraging the savings that new technology provides to your business?

We are re-investing it into finding further efficiencies

We are using it to recruit additional staff

We are using it to fund additional marketing activities

We have yet to see any savings Other (Please Specify)

We are saving the efficiency savings

We are using it to expand into additional products and services

We are investing in innovation/gaining competitive advantage

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Where investment is concerned, many SMEs do agree that technology is a key opportunity in finding cost

savings. To the question “do you consider finding new ways to implement technology into your business to be

a key opportunity for competitive advantage?” 74% of respondents acknowledged that technology did need to

be front of mind when investing in efficiency.

Compared to 2016 report: Interestingly, there are fewer business leaders that believe that finding new ways

to implement technology into the business is a key opportunity for competitive advantage. In 2016, a full 92%

of respondents saw the opportunities there, suggesting that while businesses still see the value in efficiency

and new technology investment, it is becoming more frequently a savings opportunity than a competitive

advantage one.

There is, however, a slightly lower inclination to simply pocket the savings from an efficiency campaign.

According to the 2016 survey, 37% of respondents were saving the savings from efficiency campaigns.

And, compared to the 23% of organisations that are investing efficiency savings into finding further efficiencies,

in 2017 only 16% of business leaders saw that as a priority.

Graph #10: Do you consider finding new ways to implement technology into your business to be a key opportunity for competitive advantage?

Yes No

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Insights On Automation

Automation has been identified as a major opportunity for businesses to leverage technology for competitive

advantage, and to realise better efficiencies within organisations, either by making some jobs redundant, or by

liberating staff from menial tasks in order to concentrate on real value creation for the business.

However, automation is expensive to implement well, and many Australian SMEs are wary of attempting it.

As part of this year’s survey, we asked for respondents to share their thoughts on the question “Is automation

the only solution to efficiency in the business and why/why not?” Below are some of the common themes that

respondents wrote:

“Automation helps reduce the need for more staff to produce the same job. The original cost might be large

but on the long run it is more effective than hiring more staff who prove to be an ongoing cost.”

“No. Staff training and positive attitudes are key to the growth in efficiency in addition to any automation.

Another factor in realising any gain in efficiency is the sense comradeship and teamwork amongst the staff and

management.”

“No, automation is not the only solution to efficiency in the business. There are multiple solutions including staff

willingness to embrace technology and change, management willingness to engage consultants and seek

advice, and of course stakeholders willingness to invest in people and systems.”

“Automation has its place within businesses especially in manufacturing and certain tasks within the front end

of businesses. The greatest efficiency is created with training staff and working with the technologies provided.

But at the same time not destructing the human contact with its customers! Without customers there is no

business.”

“Yes automation is critical to achieving higher productivity. The more tasks and processes that can be

automated, the more labour hours can be directed towards increased customer service and high value

activities.”

“Automation is not the only solution to efficiency in business but is often an enabler. Hiring and training the

right staff is also important , Not all automation will result in efficiency. The automation needs to be right for the

business - smart automation is essential.”

“No-automation is costly and is less effective in small businesses.”

“Absolutely not. It is an important solution, but human processes and relationships are also key. Efficiency is

not only about time and dollars, as investing in relationships and partnerships is vital. The greatest efficiencies

don’t happen in isolation, but as a whole.”

“Automation can be an effective tool in a business but it needs to be applied in an appropriate manner.

Complete automation takes out human creativity and satisfaction - two key areas for ongoing success in a

business. Sometimes, although automation may be efficient, it sucks the life out of what would otherwise be

a gratifying career.”

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“Automation technologies enable you to free up valuable time spent on redundant processes and help focus

your attention on growing your business. A wide-variety of automation tools are available to enhance a small

business’s digital presence and marketing campaigns. These business automation tools can make a business

reach a success by leveraging email, social media and web services.”

“A combination of efficient staff and efficient equipment is the combination for an efficient profitable business.”

“For business that rely on repeatable processes, automation is valuable, if they can confidently identify the

necessary steps that lend themselves to automation.”

“Automation isn’t the only solution but it certainly one area where the dividends are tangible immediately.

Long-term I view procedural and administrative improvements will benefit my business in reducing risk

and increasing the quality of service for clients. Like everything in life and in business a holistic approach

is required.”

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Conclusion

Australian SMEs generally believe that they’re running efficiently. But, those same organisations realise that

there is much more that could be done, given the resourcing and opportunity to make it happen.

The bulk of efficiencies that Australian organisations are finding are in general IT – hardware, Internet

connection, printers and other similar technologies. 74% of businesses made investments in finding

efficiencies here; a far higher percentage than looking for any other efficiencies within the organisation,

and more than double the percentage of organisations that are investing in high-end efficiency technology,

such as automation.

This is partly because there is a resistance to automation among Australian SMEs. In some cases it’s because

the business itself exists in an industry sector where automation doesn’t really apply – it’s useful to remember

that Australian SMEs are an incredibly diverse bunch. But, equally, it’s because the budgets for efficiency

programs among Australian SMEs tend to be very low. Almost two-thirds (59%) of Australian organisations

spend less than $5,000 per year on efficiency initiatives, and a full three-quarters (75%) spend less than

$15,000 on efficiency projects.

At that scale, general IT efficiency projects are manageable and affordable, but higher-end projects are out of

reach, meaning that though Australian organisations could benefit from automation, Big Data, and other new

technology concepts, financing them is simply unrealistic. 26% of organisations reported that financing was a

regular inhibitor to efficiency campaigns.

However, when a efficiency program is executed on, businesses use the money saved to benefit the

organisation in three significant ways: saving the money saved, helping to mitigate against financial risk in the

business (35%), reinvesting the savings into finding further efficiencies for the organisation (23%), and using

the money to grow the business by developing new products and services (22%).

This characterises the Australian spirit in entrepreneurship and the desire to build sustainable businesses,

It also shows that there’s an earnest desire among Australian businesses to continue finding new efficiencies –

even for the majority of SMEs that believe that they are running efficiently.

The OKI SME Business Efficiency Survey, 2017, shows that for all the talk that’s been happening in the

Australian business community about running lean and efficiently, business leaders and entrepreneurs are still

on the lookout for greater opportunities, particularly if those opportunities can be more strategic in nature; if a

business can find a way to finance a project to not only achieve efficiency, but also enhance the business, then

this will be far preferable than simply saving some money on equipment purchases, which most businesses

are already comfortably on top of.