Australian technology companies alert, and poised to grow

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Australian technology companies alert, and poised to grow

Macquarie Business Banking is a familiar name amongst technology business owners, offering tailored solutions to technology businesses, and recently conducted industry research looking at how businesses can capture opportunities early, and grow in accordance with their goals.

In Macquarie Business Banking’s first technology pulse check report, which surveyed a broad range of Australian businesses late last year, it became clear that while the pandemic applied pressure on businesses, technology companies weathered the storm better than most – staying “alert but not alarmed” as their customers doubled down on technology spend – and are optimistic about their prospects for 2021.

Results included in Macquarie Business Banking’s technology pulse check report indicated that rapid pivoting towards digital communication and transformation technologies helped the sector maintain its optimism and profit through 2020.

Although the technology sector endured the same disruptions and uncertainties others faced in 2020, its decision-makers reported adapting faster to the new conditions, feeling more hopeful about the future and an expectation of healthy earnings.

Almost half of respondents (44 percent) said their revenues grew during the pandemic, with 63 per cent turning a profit – including one in five that enjoyed healthy profit margins of more than 20%.

“Twice as many technology businesses rated COVID-19 as being of little concern as non-technology businesses,” said Evan Hinchliffe, Macquarie Business Banking’s Industry Lead for Technology.

“Efforts to uplift Australia’s technology IQ absorbed much of the pandemic’s economic shock,” Hinchliffe said. “While their exuberance may be discounted as the enthusiasm of young and rapidly growing businesses, their financial performance has supported the optimism they’ve felt.”

Building the future – and funding it

Survey respondents were asked to rate their strengths, weaknesses, key focus areas, hiring intentions and challenges over the past 12 months – and looking forward to the next 12 months.

Some 69 per cent of respondents said they would focus on working on the business, with a similar proportion expecting to hire staff to add growth skills in areas such as business development, sales, technical support, product development, and customer service or marketing.

Looking ahead, 32 per cent of respondents said they would be acquiring a business, reflecting optimism across the technology sector and a recognition that rapid market changes had created new financial opportunities for companies with strong balance sheets.

These results translated into industry optimism over the next 12 to 24 months, with 85 per cent of respondents expressing a positive or very positive outlook – well ahead of the levels expressed by companies in other industries.

With such widespread optimism, companies said they would be looking to grow through a range of ways: just over half said they would be leveraging their financial success to attract private investors, while a little over one in four said they would be borrowing to fund their expansion.

Some 27 per cent named access to growth funds as their biggest challenge for growth, while 20% recognised that many of their competitors would also be growing and 16 per cent were cognisant of the increased cybersecurity risks they face.

Stronger financials during the downturn will put technology companies in a good position to access a range of funding options including cashflow lending  – which is particularly relevant to companies providing information and communications technology (ICT) services and support in areas such as cloud, software integration, testing, managed services, strategy and change management.

Cashflow lending is normally only available to specific corporates meeting a range of criteria, although it has become available at earlier growth stages as technology companies generate an increasing proportion of their business through repeat or annuity business with marquee customers.

As well as working to develop their businesses, respondents said they would be prioritising investment in customer experience, key customer relationships, new product development and integration with other providers.

Hinchliffe said with the support of a key banking partner, buoyant technology businesses would be well positioned to realise their plans for the future, helping business owners to network and manifest their plans. A key factor for fuelling growth will be working with lenders who deeply understand the sector that they lend into, and take the time to understand their customer’s business, back their vision, and share the risks, leading to shared success.

“Whether it’s a start up or a mature business taking the next step to scale up and reach out for new markets and opportunities, Macquarie has the products and understanding to support them on their journey.

“At Macquarie, we add the greatest value over the entire lifecycle of our relationship with the businesses we work with,” Hinchliffe concluded.

To learn more about Macquarie Business Banking’s offer to technology businesses, please visit www.macquarie.com.au/technology.

 

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