SMEs in need of guidance: report

The second Scottish Pacific SME Growth Index surveyed 1,253 SME CEOs, CFOs and owners from a diverse range of industries, with an annual turnover of between $1–20 million.

The findings indicate that one in three SMEs are not clear on what is fundamentally driving their business, with one in five nominating “good luck” as a key driver.

“Four out of ten businesses have a trade sale as the ultimate goal for their business, but an alarming 34.9 per cent of small business owners do not have any concrete long-term plans, which suggests a short-term focus amongst small business owners and decision makers,” Scottish Pacific CEO, Peter Langham said.

The index indicated SME owners are “broadly untrusting of outside advice”, with 38.6 per cent nominating no trusted business adviser. 26.6 per cent named trading partners, 9.7 named friends and 9.0 per cent named accountants as their trusted businerss advisers, while only 4.2 per cent nominated their bank manager.

“The fact they were more likely to trust a friend to provide advice about their business than their well-qualified banker or accountant shows there is a real opportunity for finance brokers, accountants and lawyers to step up and fill this gap for SMEs, to make the process easier for them,” Mr Langham said.

The index also revealed significant differences between growth forecasts for SMEs based in different states.

More than half (52.1 per cent) of NSW-based SMEs say they’re in a growth phase, compared to only 24.7 per cent of WA-based SMEs.

“It’s concerning that 38.9 per cent of WA SMEs currently find themselves in a contracting business phase, compared to only 2.1 per cent of NSW SMEs – perhaps a direct consequence of the major contraction that has occurred in the mining and resource sector,” Mr Langham said.

SMEs who indicated they were growing said red tape (53.8 per cent) and cash flow issues (51.8 per cent) were high on their list of barriers.

Other key findings included 13.6 per cent of SMEs naming the use of specialist non-bank lenders as the preferred method of funding future growth, up from 10.8 per cent in the September 2014 index.

Meanwhile, 89.6 per cent of SMEs indicated they do not look beyond their own funds and unsecured lending sources to fund growth, while 65 per cent noted they intend to add new products and services during the first half of 2015, down slightly from 68.6 per cent in September 2014.