June 18, 2013 – Small to medium-sized enterprise (SME) owners are positive about growing their business in the next twelve months, according to findings from RSM Bird Cameron’s thinkBIG 2013 study.
thinkBIG 2013 measures the pulse of the Australian SME sector. It benchmarks business confidence and the attitudes of owners towards planning, growth and profitability, exit planning and superannuation. 308 business owners participated in the 2013 study, providing insights into how Australian SMEs feel about their business.
42 per cent of respondents report revenue growth over the past twelve months, 33 per cent report no change and 25 per cent report a decline.
Andrew Graham, national head of business solutions, RSM Bird Cameron, explains, “It is not surprising that more than half of businesses reported a flat or reduced turnover. Many industries are still experiencing difficult times. The retail sector faces challenges such as the battle for online sales, decreased consumer confidence and unemployment. Resources, mining and manufacturing encountered challenges caused by exchange rates and the high cost of doing business in Australia.”
Despite a difficult year, 64 per cent of SMEs are optimistic and believe their business will grow in the next twelve months. When breaking down the numbers across Australia, SME owners in regional centres are most optimistic about growth (69 per cent), followed by those in capital cities (65 per cent) and then rural areas (57.5 per cent).
Business planning key to success
Business planning is a critical ingredient to running a successful business. thinkBIG 2013 results reveal that 68 per cent of SME owners make business planning a priority.
42 per cent of SME owners prepare a business plan annually, 9 per cent prepare one every two years and 6 per cent every three years. 32 per cent of businesses still don’t undertake any business planning.
Graham clarifies, “There continues to be a focus on planning. The majority of the owners understand the value in completing a business plan. Many industries face increased scrutiny from government and financial institutions. Banks require a much higher quality of management reporting and strategic planning to support funding applications and reviews. A solid business plan is critical in meeting financing requirements.
“All business owners should consider completing regular business plans that are updated as market and economic conditions to ensure they have the right strategies in place for success.”
Self-managed superannuation funds (SMSFs) on the rise
SMSFs are increasingly popular with Australian SMEs. thinkBIG 2013 shows that 45 per cent of SME owners currently have a SMSF. This is an increase from 33.5 per cent in 2012.
The study also reveals that 12 per cent of owners are considering moving to a SMSF in the next 12 months.
Graham says, “The findings indicate that more SME owners are seeing the benefits that come from a SMSF in terms of flexibility and control.”
The study also reveals that satisfaction with superannuation planning has dropped in 2013, despite an increase in 2012.
Graham explains, “This shows that business owners are uncertain and confidence is slipping as government changes to superannuation remain unclear.”
Prepare exit planning strategy early on
34 per cent of SME owners expect the proceeds from the sale of the business to be their primary source of retirement funds. This highlights the need for SME owners to start planning their exit strategy early to ensure they maximise a sale.
Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “This is a huge increase. Reliance on the sale of the business to fund retirement reflects the generally poor investment returns SME owners have received over the past few years. It may also be due to the need to sell external assets to help fund the business while things have been tough. This means SME owners are left only with the sale of the main business to fund retirement.”
The survey results indicate that 44 per cent of SME owners have a plan to exit the business, which is almost double compared with 2012 (24 per cent). 29.5 per cent of owners expect to exit the business by passing it on to a family member, an increase from 17 per cent in 2012. 23 per cent expect to sell to an outside investor.
Tax concessions remain largely unknown
thinkBIG 2013 reveals that tax concessions available upon sale of the business remain unknown to many SME owners. 54 per cent say they are not aware of these, which is virtually the same as in 2012 (55 per cent).
Graham says, “This illustrates the importance of consulting an advisor and building the tax strategy into the five-year business plan. Some concessions are very generous and will support funding the owners’ retirement. They ultimately reduce the overall taxation liability that arises as a result of the sale of the business.
“Not only is it important to consider these concessions, but also the structuring of the sale transaction, which can have a fundamental impact on both the price a potential acquirer is willing to pay and the ability to extract the maximum after tax sale consideration for the owner.”
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 seventh largest network of independent accounting and consulting firms in the world.