Over the next 5-10 years, our community will face two separate but merging trends – the SME demographic bubble and market convergence. Combined these will create a ‘generational crisis’. This will likely result in a reduction in the value of business with business owners unable to meet their retirement expectations.

Small business owners in Australia (therefore SA) are getting older (ABS statistics show average is 45 years of age and family business owner = 57 years of age).

THE SA STORY

South Australians (ie the government and its people) should be doing the right things for the right reasons in developing the business environment in SA.

SA should more readily recognise its uniqueness – we are not simply a smaller version of the eastern states.

Whilst SA does have some very large successful industries, (eg Wine and Motor Vehicle – Southcorp and BRL Hardy, Santos and Mitsubishi etc) which we should continue to maintain and encourage, we will be best served by, instead of enticing large enterprises to SA with what are arguably not cost effective incentives, SA has greater opportunities to become the ‘SME Friendly State’ whereby the environment is conducive to setting up business and where growth and profit are encouraged.

Developing social and economic policies together, taking into account the realities of SA’s demographics and infrastructure, whereby SMEs would be attracted to a State that is family friendly and socially progressive. A theme such as:

‘Yes, we can do it. SA smart, socially progressive with great lifestyle’.

SME ISSUES

To be SME friendly, we need to address a number of key issues, some of which include:

Umbrella communications/PR and marketing organisation that links SA Tourism and SA Great with ‘SA Business Friendly’, whereby we showcase success stories, eg Collotype Printers, Codan, Coopers Brewery etc.

Encourage an enterprising community with entrepreneurial activity. Reduce regulation and red tape issues that stifle small enterprises.

Reduce and/or eliminate some taxes which inhibit competitiveness and growth.

Payroll Tax This is nonsensical tax. A tax on growth. Ideally this tax should be eliminated (if government were bold enough) but at the very least, our current threshold of $504,000 should be doubled (See accompanying article for further information).

Work Cover Educate employers to be more safety conscious and what happens if you opt out. Why do good employers get penalised and pay for bad or non-compliant employers? Provide incentives that encourage excellence.

Stamp Duty Why should there be a tax or duty on sale of business, transfer of ownership of shares and purchase/sale of property? New thresholds (ie higher thresholds) should be looked at to encourage young South Australians and business to own their ‘own dream’.

Completion of Adelaide Airport as a matter of priority – first impressions are important. Luckily this development has now been announced (and not before time too!).

Understanding/educating business in relation to the pros and cons of the Darwin to Adelaide rail link and how business can profit.

Providing some education and friendly advice on how SMEs can be more efficient in respect to obtaining advice re National Electricity Grid access to cheaper power.

Problem has always been: “I can never find enough good people!” There is a diminishing number of skilled workers at the youth end of the labour market – also many young workers are going onto tertiary study and simply because of declining birth/population rates, there are less young people to employ.

SA has an ageing population and, therefore, has proportionately more older workers.

Older workers who have lost jobs need to be re-incentivised and re-invented back into the workforce. SMEs are generally more flexible and are more likely to employ ‘older workers’. Large business take on high energy, high volume young workers who have high expectations, perhaps more readily due to shareholder expectations and accountability. SA, being a predominantly small business State, is likely to create more opportunities for more mature workers.

CPA Australia, through its small business centre of excellence and the Australian family business research unit at Monash University, completed a project in 2000 ‘Succession Matters – The Australian Family Business Survey 2000’.

It found a trend across industry whereby baby boomers are looking to exit their businesses but there were diminishing buyers in the market. Many of these business owners see their business as a significant contributor towards retirement. Some have managed to build superannuation savings outside their business, however, a sad fact is that many have not planned savings.

Without realising the assumed capital value of their business, they are likely to be forced to stay on in business longer than planned and possibly accept a significant reduction in their standard of living.

Competition, technology and pressure on margins and efficiency levels are changing fundamental business models. Larger businesses are driving down and competing with SME sector and is shifting the size of the segments within the SME sector (ie micro, small and medium).

Because small and medium segments are fragmented they are less capable of competing on price etc against big business operators. Therefore, the combination of the demographic bubble with the market convergence trend will have a major impact on the SME community, and South Australia especially.

In addition, if realisable incomes are placed under pressure and the ability to on-sell at par or better is substantially compromised, then the willingness to invest either at an equity or debt level will be challenged. Employment and capital investment levels will also be challenged if a significant change occurs within the sector populations.

The change anticipated cannot be prevented in the short term – it’s a factor of market and demographic conditions. Nonetheless, the SME market needs to be forewarned re its possible effects – this is a major SA issue, as we are predominantly a small business State.

The government needs to develop a 25 or 50 year vision or strategic plan for the State. It needs to be bold; it should be put together with input from its people and business leaders and, when completed, should be heavily marketed and communicated to SA people as well as interstate.

We have a great State. We have a great lifestyle. But we need to grow and provide future opportunities for our kids. We can be better. We just need to believe it ourselves and then shout the house down nationally!

Tony Martin – Director

Other new articles and information recently listed:

• Payroll Tax - A Tax on Economic Growth and Incentive
• The Changing of The Guard
• Allocated Pensions .... Are They Right For You?