Research by small-business lender OnDeck Australia reveals that the majority of Australia’s small businesses have a surprisingly limited customer base, thereby putting their stability at risk.
According to the survey, a worrying 71 per cent of small-business owners say they face some level of risk arising from a small customer base and 10.2 per cent believe this risk is ‘extreme’ owing to dependence on a small number of customers. Only 12 per cent of small-business owners see no risk at all associated with the scale of their customer base.
“Our survey results highlight how common it is for small businesses across Australia to rely on a small number of customers,” Cameron Poolman, CEO of OnDeck Australia, commented. “This phenomenon is referred to in the industry as ‘concentration risk’ and brings inherent challenges, particularly if, for whatever reason, an enterprise loses one or more key customers.
“I appreciate that not all small-business owners want to scale their enterprise,” Poolman acknowledged. “However, by growing a customer base, a business can significantly reduce the risk of instability that tends to go hand-in-hand with a restricted customer base.”
OnDeck Australia noted that for many small businesses, the ability to grow its customer base can hinge on access to funding, with Poolman pointing out that a small business is a valuable investment that can “benefit greatly” from diversification.
“As [this year] may bring difficult trading conditions for some small businesses, it has never been more important to explore ways to expand an enterprise’s customer base,” Poolman concluded.
