Media Centre
31 May 2010
Private Business Barometer - Listening to Australia's private business
Simplification and fewer taxes are what private businesses wanted to see as the result of the Henry Tax Review.
According to the Private Business Barometer private businesses have a strong desire for tax reform. Of the 750 private businesses asked what changes to taxation policy would benefit them, the overwhelming response (78%) was a reduction in the number of business taxes.
Other changes private businesses hoped the Henry Tax Review would affect included an improved write-off for capital expenditure (61%), harmonisation of state taxes (57%) and simplification of income tax rules for small businesses (54%).
The government has heard a small part of what SMEs wanted, although overall the response was a missed opportunity.
Surviving the GFC & the Government’s stimulus package
On reflection of the past 12 months, around a third of businesses (36%) said surviving the GFC had been their proudest achievement. For another 39 per cent, their greatest achievement was not just survival but growth during the tougher economic times.
Did the Government’s stimulus package play a role? In the retail sector more than two thirds (69%) of businesses believed the Government’s stimulus package had a positive impact on sales. As proof, close to half said Christmas sales were up on 2008.
Growth: Businesses optimistic
Private businesses put in a strong performance over the last 12 months. Six out of 10 said they had met or exceeded set revenue targets. Across the states, sales and profits have been a mixed bag. Profits in New South Wales (NSW) and Victoria jumped from single digits in October 2009 to a healthier 22 per cent and 16 per cent, respectively.
The boom states, Western Australia and Queensland, are still seeing double digit growth but it has eased off since late last year.
Looking ahead, private businesses are optimistic about short and medium term sales and profit growth forecasts. The short term sales forecast is 13 per cent and profits are 17 per cent. The longer three year growth forecasts are the strongest we have seen since the first Barometer in May 2007 with sales growth of 18 per cent and profits growth of 25 per cent.
Business owners are confident about growing their businesses and are in it for the long haul with nine out of 10 having no plans to exit in the next 2 years.
Organic growth is the number one means of achieving short and medium term growth targets for more than half of the businesses surveyed. However, some businesses are starting to look at alternatives including expanding into new products, expanding into new geographic markets and acquisitions.
People: Number one challenge
As confidence returns to the market, funding has been bumped by people as the number one challenge facing private businesses. Half of the private businesses surveyed said attracting the ‘right’ people is the greatest test they now face.
Private businesses are optimistic about the future but face a brand new set of challenges dominated by people: attracting, retaining and skilling. Having the ‘right’ people will be critical to achieving growth.
With more than half of the businesses surveyed planning to hire full time equivalents in the next six months they will find themselves in a war for talent competing against each other and big business.
Remuneration will play a key role particularly with nearly nine out of 10 businesses anticipating wage increases of up to 7 per cent in the next 12 months.
Funding: Less critical
Funding has taken a backseat to people with close to two thirds of businesses (61%) having no major plans to invest. Five out of 10 businesses said they have had no recent difficulties in raising capital, a drastic change from six months ago.
However, businesses considering investments say they will seek funds from investment banks. In the previous Barometer in October 2009, generating capital internally was the most popular source of funding.
Business operations: GFC prompts better planning
The Barometer shows that businesses have learnt some valuable lessons from the GFC. At the top of the list is the importance of a business plan that is reviewed regularly.
Nearly every business (94%) surveyed had a business plan. This compares favourably with the results of the first Barometer in 2007, where 60 per cent of businesses said they had no formal plan.
The rise in the number of plans has been driven by the need to keep a close watch on organisational goals and finances not just a way to get funding.
As the economy continues to improve, it will be imperative that businesses don’t fall into old habits and lose the discipline of planning and regular reviews.
For more information on how you can maximise the financial performance of your business or for further information in relation to this article please contact:
Gregory Will
PricewaterhouseCoopers
(02) 8266 3344
Adrian Bunter
PricewaterhouseCoopers
(02) 8266 5099
