Small Business Survival – TGR Magazine – Aug 26 2013
Small business requires support not rebuff. Jonathan Jackson looks into the issues affecting small business, particularly those caused by government, and whether they are an ongoing concern.
In July, Queensland Premier Campbell Newman launched the inaugural Queensland Small Business Week. The move by Mr Newman was one designed to reconnect government with 412,000 small businesses that prop up the Queensland economy.
The two-day summit brought industry together with government to discuss the problems currently facing small businesses.
“Small business is the backbone of the Queensland economy,” Mr Newman said. “As a government, it is in our interests that our small businesses are profitable, innovative and resilient enterprises. We also want them to be competitive, to create jobs and to contribute to building a robust economy.
“That’s why we’re slashing regulation and cutting red tape so that business can do what it does best. We know that economic growth in our state will ultimately be driven by growth in Queensland’s small business sector.”
The Premier hit the nail on the head when he spoke about eliminating red tape. Over- regulation has been the bane of small business for some years and in an era where small business should be supported more than ever, it seems it is being over-burdened by bureaucracy.
According to Hayes Knight Melbourne managing director Paul Dal Bosco this was no more evident than in the delivery of the 2012 Federal Budget, which he termed “disappointing”.
“There was no uplift for taxpayers, there was no incentive given for big businesses to take risks and this has a flow on effect for the small business market.”
Dal Bosco says the budget was dependent on a single revenue – the mining tax – while blind Freddy could see that the government was not going to reap the reward it had expected.
Hayes Knight corporate advisory consultant Paul Dubois says the revenue hit was bigger than expected.
Essentially, the ledger didn’t balance.
“Their revenue hit was large, while their expenditure was more than they were making. Projecting a budget surplus of just $1.2 billion only allowed for the smallest hiccup.”
Where there is no revenue, there is no support for small business.
According to Wealth Advisory Group Chan & Naylor, government needs to ‘raise the standard’ in five key areas to help restore small business confidence.
This call to action follows industry and Treasury forecasts indicating that the Australian economy will endure, albeit at a slower than expected 2.5% growth rate amid weakening business confidence.
“A strong economy needs stability, viable sectors and the efficient use of labour, capital and resources,” said Ken Raiss, a director at Chan & Naylor.
Raiss says that Australia is not lacking any of these fundamental ingredients and supports Reserve Bank governor Glenn Stevens’ recent comments that ‘principled and consistent’ policy making is needed to revive business and consumer confidence.
“The question is how? It is certainly not cheap money as the record low interest rates have not encouraged people to spend and the banks have not been passing these on anyway.”
Paul Clements, a director at Hayes Knight Melbourne, puts some of the onus back on small business to deal with the current situation.
“To survive, businesses need to adopt clear management structures and adapt to change,” Clement says. “They may have to consider changes in price to maintain their margins. They should also consider expansion of internet trade.”
Dubois agrees but offers that businesses should also be looking at risk mitigation strategies.
“Businesses need to consider that the way they did business four to five years ago has changed,” Dubois says. “The mix of retail and wholesale is different now. This means SMEs need to start thinking about an action plan and make that investment into their business as soon as possible.”
One of the more important points made by the Hayes Knight team relates to banks. Both Dubois and Clements believe the banks are making it even harder for SMEs to find funding.
“This is 2013, not 1983. In 1983 if you had assets and no profit, you’d still receive funding, but banks have tightened up and unless you can show a strong loan to value ratio you won’t receive anything. As for start-ups, they’ve never been able to get bank finance in Australia, it’s all been through venture capital funds.”
So who will survive? The good players definitely. For the average players, according to Clements and Dubois, it is a case of improving the business sooner rather than later. Structural changes may be necessary if you are in manufacturing, as this sector is on the nose. Looking how to best adapt to interest rate fluctuations is also important.
“Across the board there is uncertainty in business,” Clements says. “The markets are affecting the way business is done and what business is conducted. If you have market knowledge utilise it and move with the times. Internet sales may only be 10% of your business, but this has become one of the most important aspects of your business. If you can’t be found online, you’ll make it harder for yourself.”
Mellissah Smith is a business owner. The Marketing Eye founder says that small business owners are eagerly and nervously awaiting party platforms that impact them.
“I understand the pressure and considerations of running a small business more than most. I founded my first business at age 25, and in 2004 established Marketing Eye, a marketing consultancy firm for small to medium businesses.
“Every day, I talk to small business owners about issues that matter to them – like company tax rates, hiring and retaining exceptional employees and calculated risk taking.
“My biggest criticism of the Labor Party since it took power in 2007 is that it has been impossible to get a meeting with the Small Business Department, despite numerous attempts. This is in contrast with the previous Coalition government, which I generally found approachable and receptive.”
Marketing Eye has more than 100 clients nationwide, spanning industries such as transport, mining, logistics, information technology and finance. How can these small businesses feel that their voices are being heard by the people in power, when the person representing them is constantly rebuffed?
“The Coalition pledged to axe the carbon tax and cut $1 billion of red tape if it is elected, whereas one of Labor’s key promises is the rollout of the National Broadband Network (NBN) which will improve affordable access to technology for small businesses. Regardless of who is in government, I hope to see people in charge that understand the intricacies of small business.
Looking forward, I also want to see more government contracts, and easier access to the tender process for small businesses across the country. Without small businesses, Australia wouldn’t be Australia as we know it.”