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Cash flow constraints prevent SMEs from investing in marketing initiatives

Posted: 4 October 2019 8:00 am

Picture not describedSmall business owner reading budget

Research reveals that while most Aussie small businesses see the importance of self-promotion, the majority can't put their money where their marketing should be.

Marketing spends are being pushed down the list of priorities because of a lack of funds, research commissioned by the QuickBooks cloud accounting software provider, Intuit Australia suggests. While the overwhelming majority of small businesses understand the value of marketing (80%), only just over a third (34%) actually prioritise marketing in their budget.

Most "millennial" business owners, or business owners aged 25-44, saw high value in marketing (58%). However, only 31% of "baby boomers" considered it a highly viable business venture. On top of this, the channels considered to be the most important by Australian SME owners were website (47%), social media (42%), email marketing (25%) and digital marketing (24%).

And what is it that small businesses think that marketing achieves? Well, 38% of small businesses who claimed to value marketing viewed it as a means to achieve direct sales, while 42% viewed it as a way to bring in new business leads and 39% valued its potential to grow their customer database. However, just less than half of small businesses are facing cash flow issues that are preventing them from allocating enough, if any, budget towards marketing.

Even in the age of social media, many businesses are still relying entirely on word of mouth for self-promotion. Natira Drayton, Country Manager of Intuit Australia, described this as "concerning" and also alluded to the fact that many Australian businesses are potentially "sacrificing opportunities to grow their business".

So, why aren't small businesses prioritising marketing?

Small businesses are allocating their budget, the research suggests, not out of preference but out of a necessary need to spend in other areas. The top three recorded reasons for not allocating a marketing budget were relying on word of mouth, lack of budget or other prioritised spending.

These findings follow research conducted last year. This research revealed that 63% of small business owners reported that they had experienced more than one cash flow issue during the past financial year. This lack of cash flow meant that business owners were missing potential financial opportunities to expand their industries.

"Our research highlights the importance of business owners reviewing cash flow on a regular basis in order to ensure their finances are healthy and that they can budget for investments (like marketing spend) that can help to grow their business," Drayton suggests.

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