75 per cent of Australian SMEs expect growth in the next two years

May 5, 2011RSM Bird Cameron’s thinkBIG 2011 study has revealed that 75 per cent of Australian small to medium-sized enterprises (SMEs) expect to grow in the next two years.

This optimism comes as 73 per cent of Australian SMEs report experiencing growth in last two years, with 31 per cent reporting growth of between one and 14 per cent.

RSM Bird Cameron undertook its fifth thinkBIG research study in March 2011, benchmarking the planning practices of SME owners and assessing the impact of recent global financial conditions on businesses.

Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “75 per cent of  SME owners expect their business to grow in the next two years, up from the 70 per cent recorded in thinkBIG 2010, although finding skilled people remains as the strongest barrier to growth.

“Following improved revenue growth over the last two years, SME owners appear more willing to focus on growth and using external expertise to plan their future.”

thinkBIG 2011 also shows that businesses that undertake formal business planning are more likely to grow. 80 per cent of SMEs that conducted formal business planning experienced revenue growth in the last two years compared with 60 per cent that did not plan.

47 per cent of SME owners report conducting formal business planning in 2011 compared with 39 per cent in thinkBIG 2010. SME owners who undertake formal business planning continue to focus their attention mainly on business goals and financial planning.

47 per cent of SME owners rely on reinvested profits as their main source of funding for growth. However, 25 per cent continue to rely on foregone salary, and 20 per cent rely on bank debt.

Graham said, “Being able to inject cash back into a business is great for growth, but SME owners forgoing salaries must be aware of the risks involved in having all of their financial interests invested in their business.”

thinkBIG 2011 reveals that 38 per cent of SME owners in thinkBIG 2011 have a plan to exit their business compared with 28 per cent in 2010, 26 per cent in 2009 and 24 per cent in 2007.

59 per cent of SME owners with an exit plan expect to leave within the next four years. Of those 56 per cent are not aware of tax concessions available for small businesses upon sale.

Graham said, “SME owners are getting older, which means for many, retirement is looming. The findings highlight a continuing need for SME owners with a plan to exit their business to gain more precise information about the value of the business and available tax concessions, so they can maximise income for their future retirement.”

32 per cent of SME owners report seeking help from external advisors in the past for business planning and 27 per cent for superannuation planning.

46 per cent of SME owners report they have used an accountant in the past for business planning and 45 per cent for retirement planning.

-ENDS-

thinkBIG 2011 fast facts

Starting the business
* 50 per cent of SME owners started their own business to be their own boss.

* 32 per cent report wanting a better work/life balance as a reason for starting their business versus 47 per cent in 2010.

Planning the business
* The proportion of SME owners that do not plan their business on a formal basis declined from 61 per cent in 2010 to 53 per cent in 2011, underlining the stronger focus on forward planning.

* There is still a considerable gap between the planning practices of micro-SMEs and larger SMEs. 93 per cent of respondents from SMEs with 50+ employees undertake formal planning compared with 29 per cent from SMEs with 1-2 employees.

* 56 per cent of SMEs in capital cities undertake business planning compared with 36 per cent in regional centres and 41 per cent in rural areas.

* Consistent with thinkBIG findings in previous years, approximately 60 per cent of SME owners who undertake formal business planning complete a business plan every year. 17 per cent complete a plan less than every two years.

* SME owners who undertake formal business planning continue to focus their attention mainly on business goals and financial planning. 79 per cent have a marketing plan, 56 per cent have a management plan and 53 per cent have an operating plan.

Growing the business
* 73 per cent of SMEs experienced some form of growth over the last two years. 31 per cent of SME owners reported growth in the range 1 -14 per cent.

* Businesses that plan are more likely to grow. 80 per cent of SMEs that conducted formal business planning experienced revenue growth over the last two years compared with 60 per cent that did not plan.

* 47 per cent of SME owners rely on reinvested profits as their main source of funding for growth. However, 25 per cent continue to rely on foregone salary, and 20 per cent rely on bank debt.

* SME owners continue to show faith in their businesses with 26 per cent reporting no barriers to growth. 26 per cent identified skills shortages as a barrier to growth, and 24 per cent identified management time as a barrier to growth. 18 per cent identified lack of market opportunity as a barrier to growth compared with 23 per cent in thinkBIG 2010.

Exiting the business
* Consistent with 2010 and 2009, 21 per cent of SMEs in thinkBIG 2011 reported delaying their exit from the business because of the impact of economic uncertainty over the last two years.

* Of the 38 per cent of SME owners with an exit plan, 40 per cent plan to work elsewhere when they exit the business, and 60 per cent plan to retire completely.

* 44 per cent of SME owners with an exit plan said the proceeds of their business upon exit would be the primary source of their retirement funds, compared with 34 per cent in 2010 and 26 per cent in 2007.

* 59 per cent of SME owners with an exit plan expect to exit their business within the next four years.

* 11 per cent of SME owners with a plan to exit the business are not sure of the proportion of their retirement funds that will go into their superannuation.

Passing the business on
* 77 per cent of SMEs have a succession plan.

* 19 per cent of SME owners who expect to pass on the business have delayed retirement because of the economic downturn.

* 24 per cent of SME owners who expect to pass on their business have a succession plan. 60 per cent of SME owners in rural areas have a plan compared with 26 per cent of owners in capital cities, and 15 per cent of owners in regional centres.

Use of external advisors
* 32 per cent of SME owners report seeking help from external advisors in the past for business planning and 27 per cent for superannuation planning.

* 46 per cent of SME owners report they have used an accountant in the past for business planning and 45 per cent for retirement planning.

About RSM Bird Cameron
RSM Bird Cameron is the largest mid-tier accounting firm in Australia with national ownership and profit sharing and offers a full range of specialist advisory services, including business consulting and advisory, assurance and advisory, taxation consulting, corporate consulting and turnaround and insolvency. RSM Bird Cameron is a core member firm of RSM International, the sixth largest network of independent accounting and consulting firms in the world.

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