RMS Bird Cameron’s thinkBig study reports rise in growth expectations
Small and medium-sized enterprises (SMEs), the drivers of national economic wellbeing and freight transport demand, are showing increasing signs of bullishness, RSM Bird Cameron’s thinkBig 2015 survey of 446 businesses shows.
The mid-tier accounting firm finds 68 per cent of business owners, including those running freight transport enterprises, anticipate growth in the next 12 months, compared with 64 per cent last year, and that 74 per cent of business owners agree or strongly agree that their business is successful, up 8 per cent from 2014 results.
The expectation of 53 per cent of respondent is that technology developments will help their businesses.
However, they do not believe they are out of the woods yet, with cash-flow remaining a strong concern.
“Cash flow management has become a constant source of worry for more businesses due to a tightening of the cash cycle whereby more businesses are waiting to be paid before paying their own bills,” the report says.
“This is also more of an issue because SME owners are looking to fund their businesses increasingly through equity rather than debt.
“Bank debt is declining as a preferred funding mechanism, while more owners are relying on cash flow, reinvested profits, and foregone salary.
“This could be in part due to more difficult lending conditions and covenants placed on loans by banks.”
And while 58 per cent do not believe a recession is on the way, that leaves many that do.
Other relevant findings include that 49 per cent of SME owners reported growth over the last 12 months, up 3 per cent from last year.
Just 16 per cent reported a decline in revenue compared with almost 20 per cent last year.
“Business owners are cautiously optimistic about the medium-term prospects for their business,” RSM Bird Cameron business solutions national head Andrew Graham says.
“Despite official interest rates hitting a historical low, consumer sentiment and spending remain subdued.
“Business owners are also feeling the pinch from a tightened cash cycle.
“When looking at the results over the past few years, we can see however that the optimism is not always realistic.
“When comparing expected growth with achieved growth, there is a clear gap.
“For example, in 2014, 64 per cent of business owners believed their business would grow; however, the 2015 survey reveals that only 49 per cent achieved revenue growth.”
For 40 per cent of businesses, growth is expected through increased sales in the current pipeline.
And 26 per cent say they will achieve growth by targeting new markets, while 21 per cent and 20 per cent respectively say they will launch new products or services, or expand the business.
“To compete effectively, businesses must adapt and evolve quickly to respond to what is becoming the new ‘norm’,” Graham says.
“Competition for customers and share of wallet is intensifying and now more than ever business owners need to be better connected to customers with a real focus on sales planning as part of their overall business strategy.”
The skills shortage remains the main barrier to growth, increasing from 35 per cent in 2014 to 39 per cent this year.
A lack of management time has jumped to the second-biggest barrier to growth from 18 per cent last year to 28 per cent this year.
“These figures suggest that business owners are spending more time thinking and planning in response to the changing demands of the market,” Graham says.
“Business owners are well aware of the need to change their business model to remain relevant and keep their business sustainable.
“The red flag here is the readiness and capability of business owners to reposition their business to handle the challenges and take advantage of future opportunities.
“The most successful businesses will be those that address the rapidly-changing sales environment by recognising growth opportunities, ensuring due diligence and financing is appropriate and engaging their workforce to drive productivity.”
RMS Bird Cameron gives six pointers to growth and profitability:
- Be prepared to evolve and embrace new business practices in order to achieve the kind of growth that contributes to profits
- Prepare a business plan. Businesses with a strong business plan are more likely to grow
- You can’t cut your way to growth. Once you have reduced your costs to ensure a lean organisation, you need to focus on the sales that are most likely to produce results
- Understand what your customers want and be prepared to deliver this
- Use low-cost technology to improve internal efficiencies and support sales growth
- Keep on top of your cash flow. Create a cash flow forecast, give customers options for paying their bills, send out invoices promptly and monitor stock closely.