SMEs to prop local economy
Written on the 7 April 2009
WITH the traditional key economic drivers of tourism and property bamboozled by the credit crunch, does the Gold Coast’s once vigorous SME sector have the strength to underpin the local economy?
With an ageing population and the bulk of the cashed up baby boomer generation on the cusp of retirement, the challenge will be whether the businesses they leave behind can be adeptly run by their successors.
Scott Proud is the director of Diagno Strategic Business Tuning. The career accountant says a shift in spending patterns by this once all encompassing demographic will greatly affect small business trade over the next decade.
It is estimated that 85 per cent of all small business will change hands in Australia over the next 10 years, equating to $3.5 trillion, according to an MGM family and private business survey.
“When you look at the significance of the cash injection into the economy by the baby boomers, you get an idea of the effect it’s going to have when they stop spending,” says Proud.
“The kids have left home in the last 15 years, the parents have been pouring their money into super and many have paid off their mortgage and invested in property. When you compare this to Generation X, the average household income is negatively geared, the BMW is financed and the economy is slowing. People need to start making some crucial decisions and the crisis point will come in the next 12 months.”
Proud has been proactive, meeting with owners of SME and deducing credit risk and assessing growth strategies. He identifies a need for ‘absentee managers’ for owners looking at exit strategies in order to keep what he calls the ‘nucleus of the local economy’ operating successfully.
“SME balance sheets don’t tell these owners that they need to be focussed on the next six months, not the last six months,” says Proud.
“The paradigm is shifting and a lot of SMEs are still sitting on their hands. It’s time for a reality check and we see an increasing number of small businesses that need to get their house in order. You can’t fix new problems with old tools.”
Andre Van Zyl of national accountants WHK Horwath, says business opportunities ‘will abound’ for those that are prepared.
“In terms of the crisis, there are opportunities, so let’s get ready,” he says.
Opposition small business spokesman Steve Ciobo is confident the SME sector will adapt as long as the key fundamentals including strong balance sheets and adept succession planning are in place.
“The key is to recognise that the SME sector is the true and final driver of the local economy, otherwise we’ll languish in the downturn,” he says.
“I’m never pessimistic and I think the market will adapt but we have a serious economic problem in Queensland and it remains a fact that the current government has us $74 billion in debt.”
But Federal Small Business Minister Craig Emerson, says Australia’s banks have given important undertakings on the availability and cost of small business finance following a recent meeting between banks and small business representatives.
Emerson, who facilitated a roundtable discussion between bank representatives and small business organisations, says the banks have indicated that they will seek to maintain funding to the small business sector and pass on to small business.