SMEs target solid growth in new financial year despite missed profit targets in first half of 2012: SmartCompany-WHK SME Directions Survey

The patchy economy hasn’t deterred Australia’s small and medium business owners from chasing growth in the new financial year – although experience tells them that it won’t be easy.

The latest edition of the SmartCompany–WHK SME Directions Survey, sponsored by Australia’s leading SME accounting and financial services firm WHK, shows that entrepreneurs are targeting 10-12% revenue growth in 2012-13, and profit growth of 10%.

But the survey suggests achieving these targets will not be easy – a worrying 48% of respondents to the survey of more than 500 businesses said they had missed their revenue targets in the first six months of 2012, while just below 55% said they would not make their profit targets.

Respondents said the big challenges in the first half of the year were growing sales and managing cashflow in what is clearly a patchy economic environment.

Just over 36% of respondents are tipping negative growth in the next 12 months, while 47% expect economic growth to be steady.

Despite the latest GDP data showing the Australian economy is rolling along with growth above 4%, this doesn’t appear to be filtering down to many SME entrepreneurs – just 11.4% said they were expecting economic growth.

What shines through in the survey is a high level of concern about the carbon tax.

Just below 52% of respondents said they understood how the carbon tax would affect their business, but 57.6% of these entrepreneurs expect the tax to have a negative impact on profit.

The carbon tax also shot up the SME worry list, rising from position eight in the December 2011 survey to rank fifth in the current survey.

WHK Group chief executive and managing director John Lombard says the biggest concern around the carbon tax for clients is uncertainty around costs.

“With cashflow sitting at the top of the surveyed SME’s worry list, concerns about rising costs and managing margins are top of mind when it comes to the carbon tax,” Lombard says.

“It will take a complete financial year for business advisers to gauge how SMEs are coping with the new tax and what it does to ongoing costs. Whether much of the carbon concern was ill-founded is irrelevant. Businesses that operate in a global marketplace now have another tax on top of a strong Australian dollar and poor consumer confidence. While there are relief packages available, again, for SMEs, this can mean more red tape.”

However, Lombard says it is clear the resilience of the SME community shines through in the relatively strong revenue and profit growth expectations and strong hiring intentions, with 59.7% of firms expecting to hire in the next 12 months.

“It’s pleasing to see strong hiring intentions across Australia. Intention to hire is a great confidence measure because it is practical and shows that business expects a profitable outcome from having more staff.”

The survey also saw the SME community deliver its verdict on the federal budget in May – and it’s fair to say they were left decidedly underwhelmed.

A total of 52% of respondents said the budget would have no impact on them or their business, but 37% said the budget would harm them, with the decision to dump the company tax cut cited as the big disappointment.

Download the free eBook 10 Insights from the SmartCompany-WHK SME Directions Survey to learn:

• Which industry is most bullish about the outlook on the economy
• The tax changes SMEs have prepared for
• The full SME worry list

Download it now!