The Voice of Australian Business - Wave 5

The Voice of Australian Business 2016Wave 5

The Voice of Australian Business 2016

Mark Chapman – CEOThe Bentleys Networkceo@bentleysnetwork.com.au

What is The Voice?The Voice of Australian Business is a long term research project that follows and explores the mindset, needs, expectations and concerns of the Small to Medium (SME) business environment in Australia. The survey is conducted online with business owners, ‘C’ suite or Directors (decision makers) who are remunerated for their time. The survey has been carried out twice a year since 2014 and each survey examines key areas of SME concerns yet retains lines of questioning around business confidence, growth and technology. This is the fIfth ‘Voice’ survey and the data represents what SMEs are telling us.

Why does Bentleys collect this data?

• There are 2,121,235 businesses in Australia

• Of which 2,045,333 are SMEs

• They produce over 90% of GDP

• They provide approx. 69% of the workforce

Source Australian Bureau of Statistics 2015

• SMEs feel that they do not have a ‘Voice’

• A professional services firm needs to understands its clients concerns.

• Bentleys wants to position itself as a ‘thought leader’

The Voice 5 - What did Bentleys ask?• The current SME

environment– • Business Confidence• Barriers to Growth and success• Start-ups, founders and failures

• Attitudes towards technology–

• Who has adopted the Cloud?• How has the NBN been

received?

• Domestic and International Influences –

• How is the Turnbull Government tracking?

• Brexit and Trump –so what?

• Superannuation and Retirement

• The proposed changes – do you know what is happening?

• Can SME business owners retire comfortably?

• SMEs and Foreign Investment–

• Do SMEs want foreign investment?

• How do SMES get advice on foreign investment

What is an SME?

Definitions?

micro: 1-4 employees

small: 5-19 employees

medium: 20-200 employees

Metro – A capital city or its surrounding suburbs

Non-Metro – a non state or territory capital or a regional or remote area

Data Available

Medium

By Size

Improve profits

Improve cash flow

Improve business value

By Location

Non-metro Metro

The Voice 5 - What did we learn?• Larger SMEs are maintaining greater confidence than

their smaller counterparts• Growth is the goal for the coming year for small and

medium businesses• Willingness to lean on external advice and guidance

greater for larger businesses • Outsourcing is occurring most commonly for accounting

and IT support• SMEs will generally apply technology once they feel it is

needed, rather than proactively implement • Mixed reception to the NBN • Trump, Brexit, Terrorism –not a concern, but market

volatility is• Expectations on Turnbull doing right by SMEs are

generally low • Awareness of proposed changes to Superannuation is

The current SME Environment

Wave 5

Wave 4

Wave 3

Wave 2

Wave 1

Confidence in business prospects over next 12 months

Extremely confident Somewhat confident Neither confident nor worried

Somewhat worried Extremely worried

Confidence is beginning to recover

Medium

Non-metro

0.207317073170732

0.186746987951807

0.229885057471264

0.226666666666667

0.217391304347826

0.197604790419162

0.402439024390244

0.373493975903614

0.448275862068966

0.413333333333333

0.397515527950311

0.407185628742515

0.234756097560976

0.253012048192771

0.206896551724138

0.226666666666667

0.211180124223603

0.25748502994012

0.168674698795181

0.0804597701149425

0.130434782608696

0.119760479041916

0.0304878048780488

0.0180722891566265

0.0344827586206897

0.0533333333333333

0.0434782608695652

0.0179640718562874

Extremely confident Somewhat confident Neither confident nor worriedSomewhat worried Extremely worried

Confidence in business prospects over the next 12 months

This confidence leads to…likely business action

Acquire new customers

Grow revenue

Grow profits

Hire new staff

Introduce new products or services

Invest in new technology

Invest in new plant or equipment

Invest in marketing/advertising

Exit the industry (e.g., orderly closure or sale)

Introduce new initiatives to support your employee value proposition (e.g., flexible working; staff bonus scheme)

Invest in new premises

Obtain/seek specialised turnaround or restructuring advice

Re-finance

Acquire a new business

Make formal appointment over business (e.g., Administrator/ Liquidator)

None of the above

This confidence leads to…an opportunity – a touch point

Grow revenue

Grow profits

Hire new staff

Invest in marketing/advertising

Re-finance

None of the above

Trends over time – 12 months

Grow profits

Grow revenue

Hire new staff

Invest in marketing

Re-finance

None of the above0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Where is this confidence coming from?

What was wanted from the Budget?

Medium

Non-metro

0.230994152046784

0.127272727272727

0.222222222222222

0.436781609195402

0.295698924731183

0.153846153846154

0.37719298245614

0.454545454545455

0.322222222222222

0.28735632183908

0.349462365591398

0.41025641025641

0.391812865497076

0.418181818181818

0.455555555555556

0.275862068965517

0.354838709677419

0.435897435897436

Will the 2016-17 Budget include measures beneficial to business operations?

I’m not sure

What did you get from the Budget?

Medium

Non-metro

The Federal Budget announced in May this year – how has it impacted your business?

A significant positive impact A positive impact No impact A negative impactA significant negative impact

What affects Confidence?

Recent interest rate cuts

The re-prioritisation of the small business portfolio by the Federal Government

The falling Australian dollar

The Federal Budget announced in May this year

The election of the ‘slim majority’ Turnbull Government

The threat of Australia’s AAA credit rating being downgraded

Attitudes to the impact of Australian political and economic events on business - overall

Brexit, Terrorism, Refugees and the US Election

Attitudes to the impact of international political and economic events

General market volatility

The slowdown of China’s economy

Terrorist activity

The upcoming US elections

Humanitarian issues (e.g., refugee crisis in Europe)

Brexit (UK exit from the European Union)

Not much faith in the Turnbull Government

Medium

Non-metro

0.0152439024390244

0.0120481927710843

0.0114942528735632

0.0266666666666667

0.0062111801242236

0.0239520958083832

0.149390243902439

0.13855421686747

0.172413793103448

0.146666666666667

0.124223602484472

0.173652694610778

0.38109756097561

0.367469879518072

0.390804597701149

0.434782608695652

0.329341317365269

0.265243902439024

0.259036144578313

0.275862068965517

0.266666666666667

0.273291925465839

0.25748502994012

0.189024390243902

0.22289156626506

0.149425287356322

0.161490683229814

0.215568862275449

Expectations of the Turnbull government to address issues af -fecting SMEs

Very high expectations High expectations Neither high nor low expectations Low expectationsVery low expectations

Not much faith in the Turnbull Government -quotesChaos.

Micro, Brisbane

Constant bickering between the parties over non-significant issues, and not much real action on anything.Micro, other Queensland

Ditching the obsession with same sex marriage and getting on with reducing burdens on small business.Small, other QueenslandI'm afraid not much. The lack of a Senate majority is going to be a significant issue in terms of moving forwards.Medium, other Victoria

Little - no decisions made as majority is too slim.Small, Brisbane

The leader of the country needs to have courage and to have some people not like them for the good governing of this country... turning over leaders and not letting them complete term is a great distraction for polls and ratings only… these people need to be in term for the whole 9 yards to make any small improvement to this country. BTW it is in such disarray it need stability which we have not had the past ten (10) years and I feel we are a laughing stock and not taken seriously on the world stage.Micro, Melbourne

The senate not being an obstruction to the government in getting the budget under control. The Senate to do its job with the Australian economy and what is good for Australia as its focus and get rid of stupid political self interest. Micro, other NSW

They move very little really, every change costs us more for services and goods, then there is more rules and changes to try to keep up with.Micro, other NSW

To follow through with the promises. he needs to go back to the parties conservation roots this will encourage small business. Try and get the company tax cuts through the senate and to push the building regulation policy through.Small, other Queensland

The life of an SME

Age of the Business

Medium

Non-metro

0.173780487804878

0.228915662650602

0.126436781609195

0.106666666666667

0.136645962732919

0.209580838323353

0.301829268292683

0.265060240963855

0.367816091954023

0.306666666666667

0.347826086956522

0.25748502994012

0.524390243902439

0.506024096385542

0.505747126436782

0.586666666666667

0.515527950310559

0.532934131736527

0-4 years 5-10 years 11+ years

Describes their business as a start-up

Medium

Non-metro

Yes No

Founders and Sole Founders

Medium

Non-metro

0.185975609756098

0.265060240963855

0.160919540229885

0.211180124223603

0.161676646706587

0.277439024390244

0.373493975903614

0.218390804597701

0.133333333333333

0.242236024844721

0.311377245508982

0.536585365853659

0.36144578313253

0.620689655172414

0.826666666666667

0.546583850931677

0.526946107784431

Is the founder of their business

Neither Joint founder Sole founder

Age of Sole Founders

Medium

Non-metro

4132.8

Previous involvement in other businesses

10 or more6-94-52-31 only

43%42%

The number of businesses previously involved in on a senior/decision-making level

Previous involvement in other businesses that have failed?

Yes, after less than 1 year

Yes, after 1-5 years

Yes, after 5-10 years

Yes, after more than 10 years

If that business failed(previously involved in more than one business)

Competition.Small, Queensland

Director of the company taking money out of business and not replacing.Medium, Melbourne

Disinterest of bankers.Micro, SA

Economic downturn.Medium, Hobart

Foreign imports.Micro, Melbourne

Cyclone/fruit flySmall, Queensland

Government contracts that were tendered for not being renewed.Medium, Sydney

GOVERNMENT tariff changes.Micro, Brisbane

Increased government charges and taxes.Micro, Melbourne

Inflation.Micro, Queensland

It went bankrupt and we lost all of our money.Medium, other NSW

Lack of customers.Medium, Darwin

Lack of trade.Micro, NSW

Over extended in technology.Micro, Queensland

Poor management.Micro, Canberra

Slow economy.Medium, Perth

We did not anticipate market change quick enough and faced demand dropped too quickly.Micro, NSW

We moved out of the city area and postal rates were too high.Micro, Queensland

Withdrawal of vital contracts, product not sufficiently developed.Small, Sydney

Opportunities and Observations

Risk Management

Medium

Non-metro

0.335329341317365

0.207547169811321

0.340909090909091

0.563218390804598

0.359116022099448

0.30718954248366

0.131736526946108

0.106918238993711

0.136363636363636

0.172413793103448

0.138121546961326

0.124183006535948

0.532934131736527

0.685534591194969

0.522727272727273

0.264367816091954

0.502762430939227

0.568627450980392

Yes I’m not sure No

Competitors

Reputation

Information technology reliability

Employee resignation

Having a successor for the business

Premise leasing arrangements (rent)

Banking / financier relationship

Relationships with creditors

Under insurance

0% 10%20%30%40%50%

38%34%

23%21%

14%14%13%13%12%11%

9%8%8%7%7%6%5%

Do you have a formal Risk Management process? The top business risks for SMEs

Extent to which each area of the organisation is challenging and time

consumingThe active daily management of the

business

Accounting

Marketing/PR

Bookkeeping

Administration

IT support

Human resources

Most Challenging

Most time consuming

Describing technology use in the organisation

We are very tech savvy and we proactively look for new and in-novative technology to apply to our business practices

We keep abreast of new technologies relevant to us, but it’s not a core focus of our growth

We want to integrate new techonologies into our business, but don’t have the resources to do so

When we need a new technology solution, we will research and adopt

We don’t take much intereset in new technology and wouldn’t describe ourselves as innovative

Interest in attracting foreign investment

Medium

Non-metro

0.0152439024390244

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0.0114942528735632

0.0133333333333333

0.031055900621118

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0.062111801242236

0.029940119760479

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0.0542168674698795

0.114942528735632

0.130434782608696

0.0598802395209581

0.102409638554217

0.160919540229885

0.133333333333333

0.142857142857143

0.107784431137725

0.719512195121951

0.801204819277108

0.67816091954023

0.586666666666667

0.633540372670807

0.802395209580838

Extremely interested Very interested Moderately interestedSomewhat interested Not at all interested

Strategies for funding retirement

57% 43%

Has a strategy in place to fund retirement

Yes No

48%52%

Confident in ability to afford their desired lifestyle after retirement

(all respondents, n=328)

Yes No

Rely on my savings

Use income from rent or other investment dividends

Use my age pension

Sell my current house and move into a smaller one (i.e., downsize)

Sell my business

Sell my investments

Buy annuities (lifetime or fixed

Partially sell my business (e.g. find an equity partner)

Use an inheritance

Sell my house and rent instead

0% 10% 20% 30% 40%

Type of strategy for funding retirement

Level of awareness of the proposed changes to Australia’s superannuation system in the 2016-17 Federal Budget

Medium

Non-metro

0.0884146341463415

0.0843373493975904

0.0804597701149425

0.106666666666667

0.118012422360248

0.0598802395209581

0.405487804878049

0.379518072289157

0.413793103448276

0.453333333333333

0.422360248447205

0.389221556886228

0.332317073170732

0.385542168674699

0.298850574712644

0.253333333333333

0.298136645962733

0.365269461077844

0.173780487804878

0.150602409638554

0.206896551724138

0.186666666666667

0.161490683229814

0.18562874251497I have been following this issue closely and know a lot about the proposed changesI am aware that changes are being discussed, and have a rough idea of what they areI have heard that changes are being discussed, but I don’t know much about what they areI didn’t know that there were any proposed changes

Opinion of the proposed superannuation changes - overall

Introducing a $500,000 lifetime cap for non-concessional contributions

Lowering the superannuation concessional contributions cap to $25,000 per annum

Requiring those with combined incomes and superannuation contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from 15 per cent

Introducing a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts

Extreme impact on me High impact on me Moderate impact on me Some impact on meNo impact on me I'm not sure

Opinion of the proposed superannuation changes – Introducing a $500,000 lifetime cap for non-

concessional contributions Total

Medium

Non-metro

Opinion of the proposed superannuation changes –lowering the superannuation concessional contributions cap to $25,000 per annum

Medium

Non-metro

Opinion of the proposed superannuation changes - requiring those with combined incomes and superannuation

contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from 15 per cent

Medium

Non-metro (n=167)

Opinion of the proposed superannuation changes - Introducing a $1.6 million superannuation transfer balance

cap on the total amount of superannuation that an individual can transfer into retirement phase accounts

Medium

Non-metro

Has implemented The Australian Tax Office’s SuperStream system

Medium

Non-metro

0.317073170731707

0.307228915662651

0.35632183908046

0.293333333333333

0.335403726708075

0.29940119760479

0.26219512195122

0.174698795180723

0.28735632183908

0.426666666666667

0.229813664596273

0.293413173652695

0.420731707317073

0.518072289156627

0.35632183908046

0.434782608695652

0.407185628742515

Yes I'm not sure No

The impact of implementing SuperStream on business - overall

Savings in time spent on superannuation

Savings in resources allocated to administering superannuation

Other impacts

No impacts

Too soon to tell

SMSF use

Has an SMSF

Yes No

I manage it myself

Financial adviser

Family member

Friend

Someone else

The person who manages their SMSF

Working with our clients on their business

Case study• ‘Client A’ is a service based company• Operating in Perth for 10 years• And they have been a Taxation & Business

services client for 10 years

• The challenge: Falling profits • Our solution: Develop a budget and make a

plan based on the figures

What is the cash flow story?

By understanding the ‘financial story’ of your business:• Make informed strategies to improve your

business and • Review the impact that changes to key drivers

have on your profit, cash flow and the value of your business.

Profitability KPI’s

What is the cash flow story?

Business value indicator

Why is a 3-way forecast needed?

• Don’t drive your business blindfolded• Easier to gain funding from a lending institution• Helps in working out what needs to be done to

achieve desired results

3-way forecasting

KPI Dashboard

Bentleys Mentoring

• Tell your cash flow story• Get control of your numbers• Make informed decisions• Design a better future for your business

• Inspire, guide and give advice

QUESTIONS?

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