RSM Bird Cameron’s thinkBIG 2011 study reveals regional and rural SMEs still experiencing tough conditions

May 5, 2011RSM Bird Cameron’s thinkBIG 2011 study has revealed that small to medium-sized enterprises (SMEs) in regional centres and rural areas are still experiencing tough conditions compared with SMEs in capital cities.

SME owners in capital cities reported significantly stronger revenue growth over the past two years compared with businesses in rural areas and regional centres. 82 per cent reported growth in capital cities versus 62 per cent in regional centres and 65 per cent in rural areas.

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 their businesses.

Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “thinkBIG 2011 highlighted continuing tough conditions for regional and rural enterprises, with regional and rural SMEs recording lower levels of revenue growth following extreme weather events around the country.

“Catastrophic weather conditions during the summer appear to have impacted negatively on regionally-based SME businesses, with only 60 per cent reporting growth in 2011 compared with 80 per cent in thinkBIG 2010. Unfortunately, many rurally-based SMEs endured drought followed by floods in short order, making conditions much tougher.”

thinkBIG 2011 also found that to combat economic conditions in the next 12 months SME owners in rural areas are more likely to reduce overheads than increase prices.

Graham said, “It is not surprising that SME owners in rural areas are choosing to reduce overheads rather than increase prices. Everyone in rural areas is doing it tough at the moment and increasing prices would only alienate customers who are already struggling.

“Care needs to be taken with this approach to ensure that the overheads reduced will not impact on the ability to deliver goods and services to customers.”

41 per cent of SME owners in regional areas identified management time as a key barrier to growth.

Graham said, “Given the deluge of natural disasters most rural SME owners have been dealing with recovery and just trying to stay open, which means finding time to manage the business is not the number one priority at the moment.”

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thinkBIG 2011 fast facts

Impact of the global financial crisis
* SME owners in capital cities reported significantly stronger revenue growth over the past two years compared with businesses in rural areas and regional centres. 82 per cent reported growth in capital cities versus 62 per cent in regional centres and 65 per cent in rural areas.

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

* 61 per cent of respondents are more likely to increase prices compared with 51 per cent in regional centres and 52 per cent in rural areas.

* 71 per cent of respondents from rural areas are more likely to reduce overheads compared with 62 per cent in regional centres and 51 per cent in capital cities.

* 41 per cent of respondents from rural areas identified management time as a key barrier as opposed to 29 per cent who identified finding skilled people, 24 per cent who identified access to capital and 24 per cent who identified lack of capital.

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.

RSM Bird Cameron’s thinkBIG 2011 study reveals micro SMEs that don’t plan are experiencing less growth than larger SMEs

May 5, 2011RSM Bird Cameron’s thinkBIG 2011 study has revealed that Australia’s micro-small to medium-sized enterprise (SME) owners’ are less likely to undertake formal business processing than their larger counterparts, and may be forfeiting growth as a result.

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

The study shows that SME owners who conduct planning are significantly more likely to experience revenue growth, with 80 per cent who planned their business experiencing revenue growth over the last two years compared with 60 per cent who did not plan. There is, however, still a considerable gap between the planning practices of smaller SMEs and larger SMEs.

Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “71 per cent of micro SMEs don’t plan. RSM Bird Cameron’s thinkBIG found that only 49 per cent of owners in businesses with three to five employees and 29 per cent with one to two employees plan their businesses on a formal basis.

“thinkBIG 2011 also revealed that these businesses were significantly less likely to have experienced revenue growth over the last two years.”

64 per cent of micro SMEs mistakenly believe that their business is too small for formal planning.

ThinkBIG 2011 also reveals that 25 per cent of micro SMEs are forgoing salary to fund the business.

Graham said, “Micro SMEs need to ensure they have plans in place to grow the business, even when they are still in the ‘set up’ stage. It is never too early, and no business is ever too small to establish good practices when it comes to business planning.

“Having a business plan in place will ensure that micro SMEs can stop using their own salary to fund the business. Forgoing salary should be a very short-term business tactic not part of an ongoing funding strategy.”

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thinkBIG 2011 fast facts

Planning the business
* 93 per cent of respondents from SMEs with 50+ employees undertake formal planning compared with 29 per cent from SMEs with 1-2 employees.

* 80 per cent of respondents who undertook formal business planning reported revenue growth over the last two years compared with 60 per cent of respondents who did not conduct formal business planning.

* 27 per cent of SMEs with three to five employees experienced no revenue growth or a decline in the past two years and 21 per cent of SMEs with one to two employees experienced no revenue growth or a decline in the past two years compared with 50 per cent of SMEs with 50+ employees that experienced revenue growth of 15-29 per cent.

* 64 per cent of respondents who do not plan their business formally said it is because the business is too small – this is in line with thinkBIG findings in 2010, 2009 and 2007

* 26 per cent of SMEs said they don’t plan because they don’t know their market well enough, 19 per cent because they don’t know how to complete a plan and 18 per cent because they do not have time.

* 27 per cent of respondents from SMEs with one to two employees are significantly more likely to rely on foregone salary as their main source of funding. 29 per cent of respondents from SMEs with three to five employees are significantly more likely to rely on foregone salary as their main source of funding.

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.

RSM Bird Cameron’s thinkBIG 2011 study reveals global financial conditions continue to take toll on SMEs superannuation planning provisions

May 5, 2011RSM Bird Cameron’s thinkBIG 2011 study has revealed that uncertain global financial conditions are continuing to take their toll on Australia’s small to medium-sized enterprises (SME) owners’ satisfaction with their superannuation planning provisions.

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 their businesses and personal finances.

Just 7 per cent of business owners’ are completely satisfied with their superannuation provisions, while 23 per cent are not at all satisfied.

18 per cent of SME owners reported that the economic uncertainty of the last two years has impacted on their superannuation planning, causing them to decrease their superannuation contributions.

Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “Inadequate superannuation provisions continue to play on the minds of SME owners, leading them to seek advice, where they have not previously been inclined to.

“Despite this, thinkBIG 2011 reveals more SME owners indicated they would invest some of their retirement funds into superannuation, indicating a marginally higher level of confidence in the sector.”

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thinkBIG 2011 fast facts

Superannuation planning
* 43 per cent of business owners will invest some proportion of their retirement funds into superannuation after leaving the business, up from 34 per cent in 2010.

* SME owners continue (compared to thinkBIG 2007 findings) to be less than satisfied that their total superannuation provisions will be adequate in retirement, recording an overall satisfaction rating of only 4.5 on a scale of 1-10, where 10 represents complete satisfaction.

* Owners of larger SMEs (with 6 or more employees) reported higher levels of satisfaction with the adequacy of their superannuation provisions, recording average scores of 5.7 (with 6-19 employees), 5.5 (20-49 employees) and 5.8 (50+ employees).

* 23 per cent of SME owners are not at all satisfied with the adequacy of their superannuation provisions, a marginally improved result on findings in thinkBIG 2010, in which RSM Bird Cameron reported a figure of 25 per cent.

* Consistent with 2010, only 7 per cent are completely satisfied with their superannuation provisions.

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.

RSM Bird Cameron’s thinkBIG 2011 study reveals SME owners confident about the future despite concerns regarding financing their business

May 5, 2011RSM Bird Cameron’s thinkBIG 2011 study has revealed that two years on from the global financial crisis Australia’s small to medium-sized enterprises (SME) owners are more confident about the future despite concerns about financing their business.

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.

SME owners maintained a high level of satisfaction with their decision to run their own business over the four-year period from 2007 to 2011, reporting improved trading conditions over the last two years compared with 2010, with 73 per cent experiencing revenue growth, up from 68 per cent in 2010.

Despite improved trading conditions, the majority of SME owners do not expect to see any improvement in the availability of finance in the short term, with 64 per cent responding negatively when asked whether financing the business will be easier in the next 12 months.

Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “SME owners recorded a marginally higher level of optimism about their company’s medium-term prospects in thinkBIG 2011.”

With financing not so readily available, SME owners are expecting to place greater focus on reducing overheads and increasing prices in response to business conditions over the next 12 months. 57 per cent of SME owners will also invest in technology to increase efficiency, and 38 per cent expect to inject capital into the business.

Graham said, “SME owners will focus more on reducing overheads and increasing prices to protect their margins over the next 12 months.”

44 per cent of SME owners report a low-to-moderate impact from the investment allowance, 37 per cent from the water policy, 37 per cent from paid parental leave, 40 per cent from the stimulus package, and 48 per cent from Fair Work Australia policies.

SME owners remain nervous about interest rates, with 17 per cent reporting an increase in interest rates of one per cent would cause financial difficulties for their business and 35 per cent reporting it would cause some impact their business.

52 per cent of SME owners report no impact from the increasingly strong Australian dollar.

“RSM Bird Cameron anticipates that the effects of the Australian dollar on SME owners is yet to be felt and the full extent to which they are impacted on will be revealed throughout 2011,” Graham said.

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thinkBIG 2011 fast facts

Impact of the global financial crisis
* 19 per cent of SME owners faced extra scrutiny from external financiers in the last six months.

* SME owners reported improved trading conditions in the last two years, with only 27 per cent experiencing no revenue growth or a decline in revenue, down from 32 per cent in thinkBIG 2010.

* SME owners in capital cities reported significantly stronger revenue growth over the past two years compared with businesses in rural areas and regional centres, with 82 per cent in capital cities reporting growth versus 62 per cent in regional centres and 65 per cent in rural areas.

* 44 per cent of SME owners report a low-to-moderate impact from the investment allowance, 37 per cent from the water policy, 37 per cent from paid parental leave, 40 per cent from the stimulus package, and 48 per cent from Fair Work Australia policies.

* 17 per cent of SME owners reported that an increase in interest rates of one per cent would cause financial difficulties for their business and 35 per cent reported it would cause some impact their business.

* 52 per cent of SME owners report no impact from the increasingly strong Australian dollar.

Business outlook
* 76 per cent of SME owners expect the business to grow in the next two years. 12 per cent believe their business will not grow and 12 per cent are unsure.

* A majority of SME owners do not expect to see any improvement in the availability of finance in the short term, with 64 per cent responding negatively when asked whether financing the business will be easier in the next 12 months.

* 57 per cent of SME owners expect to increase efficiency through technology in 2011 versus 51 per cent in 2010.

* 38 per cent of SME owners expect to inject capital into their business in 2011 versus 32 per cent in 2010.

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.

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.

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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.