Australia’s small businesses were hit particularly hard by COVID-19. But as Xero Australia Managing Director Trent Innes explains, the pandemic also presented big opportunities for businesses who knew where to look.
Named Managing Director of the Year by CEO Magazine in 2017, Innes’ focus on people and next-level service has seen Xero Australia’s subscriber base grow to over half a million, with revenue growth of over 40 per cent. Under Innes’ watch, the small business accounting platform has secured its position in the ranks of Australia’s Top 100 listed companies.
Innes recently appeared at the Brisbane Business Hub for a booked-out Fireside Chat facilitated by Sofie Formica, where he shared findings from Xero Small Business Insights – a service launched this year to help policymakers make informed decisions about the Australian small business economy – and discussed his thoughts on the way forward.
The COVID effect
“From the very beginning, from the time COVID first hit in March, small business was hit twice as hard as the overall business economy in Australia,” Innes said. “The small business sector was hovering at around 6 per cent growth, year-on-year, and that dropped to -12 per cent in the space of three weeks. The industries that were hit the hardest were arts and recreation, hospitality… the industries that were most affected by lockdown restrictions, and the ones that weren’t able to pivot straight away.
“The good news is that if you take out Victoria, which is an anomaly, as of the end of September we’re actually back up to 5.2 per cent positive growth in the small business economy. So there was a dramatic drop, but it has actually come back.
“From an employment perspective, we saw an 11.9 per cent drop in jobs as soon as COVID hit – small businesses have very few levers they can pull when things go bad, and the biggest one they can pull is casual jobs. We’re still 3.9 per cent down from where we were pre-COVID, so even though we’ve actually got positive growth [in the small business economy], employment hasn’t come [all the way] back yet.
“You can draw a number of conclusions from that, but I think part of it is probably that there’s still a lack of confidence out there at the moment. Small business owners are saying, ‘I want to bring people back on board, but I’m not sure how this is going to go.’”
While the small business economy is still on the road to recovery, Innes said he has been heartened by businesses who were able to succeed during COVID by pivoting and innovating.
“There’s a lot of doom and gloom out there at the moment, but the flipside of that is that there are some small businesses out there that are absolutely blooming,” he said.
“I spoke to a sweetmaker this morning who makes rock candy. He’s based in The Rocks in Sydney, and all his business used to come from cruise ships. When COVID hit, there were suddenly no cruise ships and no traffic through The Rocks. His business went from what it was to zero, instantly.
“His 17-year-old daughter said they should do a TikTok video on how they make their candy. So they did a TikTok, they put it online, and it got 2.3 million views. It went viral. Now they make a batch of candy, and in 10 minutes, it’s gone. Sold out. Every single day. 80 per cent of their sales are overseas now, and they never had an overseas market before that TikTok video.
“Part of it is always going to be mindset and drive and ambition. There’s always a human element to it. But technology allows you to be global now… you can be big even when you’re small.
“I think what we’ve found is that in some industries, people already understood the value of technology and they implemented it because it made sense for their business. But now, businesses that didn’t see the benefit before have had to pivot to technology to survive. It’s gone from a ‘nice-to-have’ to a ‘have-to-have’.”
Another day at the office?
Previously based in Melbourne, Innes made the move to the Sunshine Coast in recent months for family reasons, and revealed during the Fireside Chat that he is set to relocate to Queensland full-time. Of course, working remotely isn’t unusual in 2020 – but Innes still expects the office to play a role in the future of work.
“I think we’ll see a hybrid [of home and the office],” he said. “I went into Xero’s Brisbane office a couple of weeks ago, and it was the first time I’d been in an office since the middle of March… I’d missed it more than I thought I would.
“I choose not to have a desk in our office, because I like working in the common areas. I like working in the kitchen and so on. I actually like overhearing conversations. It gives me a real sense of how the business is running and what people are doing. I’ve really missed that, and I’ve had to force that [while working remotely]. I randomly drop into people’s Teams meetings, but it doesn’t feel very natural… it’s not the same as if I’m just overhearing a conversation in the background, and I can interject and hopefully add some value.
“I’ve found that a lot more difficult during COVID. I’ve had to be much more deliberate about what I do in a remote environment. So I think it’s about giving people a choice… it’s not about saying you have to work from home or you have to work in the office.
“Traditionally, when businesses weren’t supportive of giving people that choice, it’s because they were scared of losing control. I might be naive, but I think most people go to work to have a good day, and to be able to say, ‘I had a great day at work today; I was productive and I got things done’. If you empower people, if you set them free… you need to be clear on what they need to achieve, but if you can do that, most people will pay you back in spades.”
Three key takeaways
Innes left the audience with three key things that every small business should be doing right now.
“First of all, know where you’re heading, from a digital perspective,” he said. “I think it’s really important for everyone to understand digital, even if you’re not a digital-native business. The word ‘digital’ gets overused and misused, but it’s basically about connecting to services that’ll give you time back to do things you really want to do yourself. So how does that manifest itself for your business?
“Secondly, be conscious of the things you can control, and not the things you can’t control. It doesn’t matter if you’re a big business or a small business – focus on what’s important and what you can control… you can’t control [the pandemic], so you have to operate within the confines that you can and make the most of that.
“Finally, if this situation has taught us anything, it’s to always be on top of your cash flow. Cash is king in any business… about 50 per cent of small businesses have been running month-to-month, with basically enough cash to get them to the next month. It’s very hard for a small business to raise working capital in the short term, and quite often they rely on credit cards, which is generally not the way to go. So you need to make sure that you’re always across your cash flow.”
For more information on upcoming Fireside Chats and other events, seminars and practical resources tailored to support local businesses across all industries, visit businessinbrisbane.com.au/workshops.