Grim short term outlook for SME’s – SMH 9th August - Succession Plus

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Grim short term outlook for SME’s – SMH 9th August


Grim short term outlook for SME’s – SMH 9th August

By , August 15, 2011

The global sharemarket rout is likely to have a heavy impact on SMEs.

Small enterprises should brace for even weaker trading conditions this quarter as the global sharemarket rout batters consumer confidence, hampers credit availability and threatens cash flow.

MySmallBusiness asked credit collection, insolvency and small business experts for their assessment of the rout’s effect on small and medium-size enterprises (SMEs), and for early warnings signs about likely business conditions.

The views were grim.

Colin Benjamin, chairman of Marshall Place Associates, and a prominent strategic planning consultant, believes small enterprises face four key threats.

“The key issue is the availability of credit. Many SMEs are desperately concerned that the banks are increasingly being bastards about calling in their loans as the global economy weakens,” he says.
“One business I know recently received a letter from a bank demanding their loan be repaid in seven days. I expect to see more of this as banks move to limit bad-debt risk and improve their funding liquidity.

“The second issue is companies putting off forward orders due to all this uncertainty. The factory order that is normally made in August is now being deferred until October. That has a huge flow-on effect through the supply chains as people delay production.”

Dr Benjamin says the third issue is more SMEs laying off casual staff because of concern about business conditions, regulatory uncertainty and the impact of unfair dismissal costs.

“The final SME issue is a sense that no one is out there to buy their business. Baby boomers exiting the workforce are finding it increasingly harder to sell their enterprise at a decent price,” he says.

Despite these threats, Benjamin is more optimistic about trading conditions in the fourth quarter and next year.

Ferrier Hodgson partner Morgan Kelly is not as optimistic. The insolvency expert says: “The SME sector continues to have trouble accessing credit and meeting credit standards, consumer demand is slowing, the regulatory framework is changing at a rate of knots with carbon tax and employment law reforms, and wage costs are increasing for many enterprises. There is not a lot of good news for SMEs right now.”

Kelly says another big problem is more small business owners holding off selling their business until conditions improve, and others being forced to sell because of succession issues.

“We are seeing more owners who are unable to sell, facing the very real possibility of having to walk away from their business with nothing.”

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Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.

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