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The annual thinkBIG 2016 findings have found that 69 percent of SMEs expect to grow in the next year, up one percent from last year’s survey results.
The research carried out by RSM Australia showed that 49 percent of SME owners reported actual growth over the last 12 months, which follows similar patterns in 2015 and and is up from 2014. At the other end of the spectrum, 20 percent reported a decline in revenue, up from 16 percent in 2015 and in line with 20 percent in 2014.
thinkBIG has measured the pulse of the Australian SME sector since 2005. It benchmarks business growth, business planning, exit planning, superannuation and the impact and uptake of technology. Over 350 business owners participated in the 2016 study, providing insights into how Australian SMEs feel about their business and what keeps them awake at night.
A strong sales pipeline is the biggest contributing factor to optimism with nearly half of all businesses reporting an increase in their pipeline. However, this does not account for all of the businesses that anticipate growth.
Andrew Graham, national head of business advisory, RSM Australia, said, “The survey results demonstrate that, while many companies can forecast growth, only those with strong business fundamentals in place can actually deliver that growth. In 2015, 68 percent of respondents predicted growth over the next 12 months but, a year on, we can see that only 49 percent actually achieved it.”
“Overall, these growth predictions from SMEs are more bullish than expected. This is probably being driven by the low-yield, low-interest rate environments globally, which mean that businesses can borrow to expand with a very low cost of servicing the debt.”
When it comes to business funding, cash is still king for more than three quarters of businesses planning to fund their business through cash flow. Bank debt has also increased, with 29 percent of businesses funding operations through debt this year compared with 22 percent in 2015.
Andrew Graham said, “In some sectors trading banks are winding back their lending for the moment, often demanding property as collateral. This is inhibiting expansion for businesses that don’t have strong fundamentals, and 17 percent of SMEs expressed concern about access to capital.”
The skills gap is also hindering business growth for 35 percent of businesses while 33 percent reported that management time is a major barrier.
Despite these challenges, most SMEs remain optimistic about their prospects for growth and 84 percent say they agree or strongly agree that their business is successful.
Andrew Graham said, “The most recent Federal Budget has delivered some proposed benefits for SMEs, most notably the accelerated deduction for investment in plant and equipment. However, without a shift in personal tax rates, the changing corporate tax rate is just a cash deferral mechanism rather than an outright saving for SME owners. On the positive side, some 90,000 businesses will be added to the SME grouping thanks to the increased turnover threshold from $2 million to $10 million annually. And three million businesses with a turnover of less than $2 million now qualify for special SME relief.”
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