July 17, 2024

Optimism is growing again among small business owners

Optimism is growing again among small business owners

They make up an important part of the German corporate landscape: small businesses. A recent study found that not only are these companies more optimistic about the future, but they also invest more.

In 2021, the Federal Statistical Office (Destatis) counted about 3.1 million small and medium-sized enterprises (SMEs). Therefore, they represent the vast majority of German companies. 2.6 million of these companies are considered small enterprises. After a long drought linked to the crisis and little positive news of success, the owners, managing directors as well as the independents belonging to this group, which has an annual turnover of up to six million euros, see a ray of light on the horizon again.

Dissatisfaction with economic policy

55% of nearly 300 small businesses surveyed by the VR Smart Finanz collaborative in collaboration with the Center for Financial Services Research at Steinbeiss University rated the current economic situation as “good” or “very good.”

But only 35% attribute this to the positive impact of the economic policy framework. 34% rated the economic policy environment as “average,” while 31% described it as “bad” or “very bad.” However, companies increasingly view legal requirements as a burden. For 28% of small businesses, this is among the biggest challenges. One year ago only 13% said that.

The struggle with liquidity bottlenecks continues

Compared with the autumn survey of 2023, demand and sales development in particular improved for more than 40 percent of companies. “However, in an environment of rising costs and taxes, earnings development lags behind only a quarter of companies reporting an increase in earnings, while nearly 40 percent report a decline in earnings,” the study authors say. Almost every second owner or managing director (47%) complains of liquidity bottlenecks. In October 2023, the percentage reached 44%, and in April of last year it reached 46%. Currently there are three times as many as in 2019.

But the outlook for the future is optimistic: as a result of the improving demand situation, 35 percent of all those surveyed expect demand to increase in the next 12 months. Half of the participants (55%) assume that demand will remain the same. Overall, approximately 90% expect their company’s economic development to be positive or stable. Only ten percent expect a decline in demand.

Greater willingness to invest again

In contrast to the initial surveys conducted in the spring and fall of 2023, in which high costs and uncertain economic conditions greatly influenced the willingness to invest, the current survey also paints a somewhat more positive picture here. Many small business owners just don’t want to catch up on most deferred investments. More than two-thirds plan to invest primarily in equipment for their business within the next two years. Digitization and automation also play an important role here.

In addition, sustainable improvements are becoming increasingly important. 52% of those surveyed are planning similar projects in the next 12 months. This is ten percent more than in the fall of 2023. Specifically, it concerns green energy or electric mobility, and therefore projects aimed at improving energy efficiency. Eight out of ten respondents also believe that a sustainable business structure will have a positive long-term impact on a company’s success. A year ago, 66% said so.

Bank credit is the most important form of financing

Regardless of the form of investment, when it comes to financing, small businesses rely on capital from the bank (32%), checking account lines (30%), leasing (20%), subsidized loans (19%), and employment. Purchase (twelve percent). In addition to low interest rates, what matters to respondents is flexibility, speed of decision-making and payment, as well as confidence in the lender. Nearly half of those surveyed attached particular importance to completing financing online.

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Overall, the study shows a significant increase in affinity for digital banking transactions or completing a product with the click of a mouse. 90 percent of those surveyed said they use online banking for their company’s finances. More than four-fifths of respondents have already used digital financial products with their organizations in the past or at least can imagine doing so.