SMEs confident about medium-term outlook, but many underprepared for exit: Survey

Small- to medium-sized businesses are reasonably confident about the medium-term outlook, and most have managed to grow during the global financial crisis, but many remain underprepared to exit, a survey shows.

A survey by accounting firm RSM Bird Cameron found more than half of SME respondents expect to exit by 2015, having put off exit plans during the GFC.

“The SME market is generally experiencing growth, up over the past few years, so it’s actually pretty positive,” Ray Scott, a director of business solutions at RSM Bird Cameron, said.

“There’s more opportunity out there and more certainty, and people are finding that their clients are more willing to commit to orders.”

Three-quarters of SMEs actually have an exit plan these days, although one in five has delayed passing the business on because of the lingering effect of the GFC, Scott says.

“Although significantly more businesses undertake formal business planning than two years ago, over half of the SME owners in this year’s study said they do not plan their business on a formal basis and there is still a considerable gap between the planning practises of micro-SMEs and larger SMEs,” the accounting firm says.

The survey also found a high level of satisfaction among SMEs despite the challenging economic environment of 2007 to 2009.

It likewise noted that more respondents said they started their business because they wanted to be their own boss and wanted a better work/life balance rather than to create wealth.

Respondents to the survey were mostly 35-44 years old, with one to five employees. The services sector accounted for the largest percentage of respondents.

The survey, which is conducted every two years, also found that SME owners reacted decisively to the downturn, by reducing overheads and personal drawings from their business.

The accounting firm expects SME owners to maintain their focus on reducing overheads over the next 12 months, with margins expected to be protected via price increases or technological improvements.

RSM Bird Cameron’s recommendations for SMEs include:

• Write a simple turnaround plan and convince your creditors to stick by you.
• Consider investing in business tools to improve efficiencies.
• If looking to sell, minimise your dependence on other investors.
• Look after your retirement, as well as your business
• Today’s decisions must maximise the value of your business and enable it to meet future needs.
• Maximise the time left to contribute to your super fund prior to your retirement, and make regular contributions.