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The Five Most Dangerous Trends In Australian Small Business Today!

Guest post by: David Flannery

Article Overview: It's safe to say most business owners have attended seminars on everything from leadership to sales and marketing and they say they know their importance. Some have paid business growth gurus thousands of dollars to show them how to grow their business and increase sales; they all say they know the importance of ongoing staff training and business innovation. They attend networking events to make new contacts to grow their business. However, there is plenty of evidence to show that while Australian SME owners are talking the talk, they are not walking the walk.

The Five Most Dangerous Trends In Australian Small Business Today!

It's safe to say most business owners have attended seminars on everything from leadership to sales and marketing and they say they know their importance. Some have paid business growth gurus thousands of dollars to show them how to grow their business and increase sales; they all say they know the importance of ongoing staff training and business innovation. They attend networking events to make new contacts to grow their business. However, there is plenty of evidence to show that while Australian SME owners are talking the talk, they are not walking the walk.

SME's in Australia

How important are SME's to the economic well being of Australia? According to the Australian Bureau of Statistics, SME's account for between 95 and 99 percent of all Australian private sector entities. SME's are without a doubt the backbone of the Australian economy.

It is therefore safe to say that for the Australian economy to remain strong and grow, SME owners need to be on the ball and focused on doing the very best they can.

However, that being said, how do businesses in the SME sector perform? The answer to that question is...not well, not well at all. Figures in 2008, the latest available, show that of the 1.87m businesses operating in June 2004, only 65 percent of them were still trading in June 2007 and only 58.4 percent in June 2007. That means just under half of the businesses had ceased to trade after just four years. Businesses least likely to survive are new firms, non-employing firms, and low turnover firms. Analysis also shows that 62 percent of all SME's will never grow past $199,000 in sales per annum.

Why have so many Australian business owners in the SME sector, the backbone of the Australian economy, found it so hard to succeed?





The Five Most Dangerous Trends

1. Innovation

From the beginning of the 21st century the importance of innovation in Australian business was known. As far back as the year 2000, Professor Mark Dodgson in his capacity as Executive Director of the Australia-Asia Management Centre, Australian National University in Canberra, stated that "Very simply, innovation is what is going to enable Australia to pay her way in the world. Without it many of our firms will go out of business, and those that remain will become second-rate and subservient to international leaders in decision-making and profit taking. Without innovation, there won't be the new businesses and jobs that are necessary in a modern dynamic economy." The year before, " The Economist" magazine called innovation " the industrial religion of the 21st century". It is eight years and more since those sentiments were voiced and how have Australia's SME's owners embraced the religion of the 21st century? ...Well... they haven't.

Figures from the Australian Bureau of Statistics show that year ending June 2007, 83 percent of small firms and 77 percent of mid sized firms had no innovation in either the goods or services they produced or sold, this trend stayed roughly the same June 2008. 84 percent of small businesses and 71 percent of mid sized businesses had no new innovations in their operations, this trend increased to 86 percent and 79 percent, respectively, in the 2008 figures and finally 85 percent of small businesses and 70 percent of mid-sized businesses had no new innovations in any of the strategies, structures or routines of their business which aim to improve performance. Again these figures trended upwards to 87 percent and 80 percent, respectively, in the 2008 figures. 34 percent of business owners stated that innovation was not focused on at all within their businesses. When asked if they had any barriers to innovation, issues that stopped them from innovating in their business, 67 percent of small businesses and 53 percent of mid-sized business replied that they had " no barriers to innovation"



Dangerous Trend Number One: Increasing lack of innovation

2. Sales/ Profit Growth

It is common knowledge, and common sense, that in order to be a success a business needs to grow its sales and profits. It is talked about on T.V., books are written about it, it is part of every business course on the planet.

There is no doubting its importance. Why then are Australian SME's owners failing to give it the attention it requires and deserves? Figures show that when asked 16 percent of business owners said they did not focus at all on financial measures such as sales growth and profitability when accessing their business performance, and 15 percent stated they only focus on them to a small extent. This means that a total of nearly one third of the businesses surveyed do not focus on the likes of sales growth or profitability as business performance measures.

Dangerous Trend Number Two: Lack of focus on business growth factors

3. Quality

Quality issues have been at the heart of business management issues since the 60's, culminating in the strategies of Total Quality Management (TQM). Quality issues are interwoven into the very fabric of business ownership, issues such as, customer relationships and customer satisfaction, supplier relationships, manufacturing or service delivery.

However, when surveyed in June 2007, 17 percent of small businesses stated that they didn't focus on quality issues at all and 12 percent only focused on quality issues to a small extent. Again nearly one third of SME's did not focus on quality issues to any great extent. There was no major change to this trend in 2008.

Dangerous Trend Number Three: Lack of focus on quality issues

4. Marketing

The Marketing Association of Australia and New Zealand defines marketing as consisting of activities that facilitate and expedites satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion and pricing of products (goods, services, ideas).

Marketing in its broadest sense encapsulates advertising, public relations, selling and distribution. It is basically the act of letting people know what you have to sell, where they can get it and what value it has. In order to grow a business, a business owner must be constantly looking at creating and putting in place new marketing methods in order to gain access to new prospects and customers for the business.

In 2007 88 percent of small businesses and 81 percent of mid sized businesses stated they had done nothing new with their marketing, basically they had no new or significantly improved, product or service design, packaging or sales methods aimed to increase the appeal of their goods or services to new markets. In 2008 this trend increased to 89 percent and 84 percent respectively

Dangerous Trend Number Four: No new marketing methods

5. Employees

Good employees are critical to the growth of any business, but more especially SME's. Therefore it would make sense for the SME owner to take care of his employees and grow them as the business is growing, making sure that they are satisfied in their jobs and well trained etc.. Employees make the product/ perform the service, sell, deal with customers and suppliers etc. so any owner who ignores Human Resource issues is just asking for trouble, but that's basically what 46 percent of SME owners stated when asked in 2006, with the trend staying nearly exactly the same in 2008, with 3 percent of businesses saying they actually spend less in 2008 than 2007 on staff training.

Dangerous Trend Number Five: Lack of focus on staff issues





Consequences of the five most dangerous trends

So what if any, have been the consequences of these five trends for Australian SME owners.

According to the latest figures available, those being 2008, 21 percent of Australian SME's reported that their income stayed the same in 2007, with 23 percent reporting a decrease in income in 2008 compared to 2007.

A full one-quarter of Australian SME's reported that their profits had decreased in 2008 compared to 2007, with 30% reporting that profits only stayed the same over the same period.

What that means is 55 percent or over half of Australian SME's made no significant process forward in 2008. And that was before the global finanicial crsis.

Action Steps For SME Owners

1. Innovate in at least one area of your business over a 12-month period.

2. Focus on growing your sales and profits and use them as indicators of performance.

3. Institute some form of quality management into your business.

4. Add at least one new marketing method into your business per year

5. Take care of your staff.

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Article Tags: business growth, business innovation, dangerous trends, leadership, networking events, sales and marketing, small business, sme owners, staff training



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