EDITORIAL - Business Acumen's mantra, since its inception in 2004, has always involved being overwhelmingly positive about business. As a small business witnessing and experiencing the challenges that face business leaders right across the spectrum, we adopted that positioning naturally - it is, after all, the attitude and behaviour that characterises all who drive forward in business.
Traversing the ups and downs of the business cycles, along with our readers who are, in the main, business owners and leaders in business, we have retained that positive outlook and it is reflected upon and relied upon in our coverage.
It is the only way to avoid the paradox spoken of eloquently by French Renaissance writer and commentator Michel de Montaigne: "He who fears will suffer, he already suffers from his fear."
But certain worrying long-term trends and changes in the nature of business give rise to long-suffering fears for certain sectors of Australian business. More concerning is the fact that key indicators of an Australian business environment under heavy and widespread stress are not seemingly recognised by various levels of government or the mainstream media.
That small business insolvencies are at record levels is cause for debate. That this has been a growing trend since 2008, rather than a diminishing one, should be cause for concern by all levels of government.
Much is made of small business being the lifeblood of the commercial economy, but not much is being done to stop the current bleeding. It is death by a thousand cuts for small business right now.
Here is a digest of the main wounds not receiving attention:
- Too much time and money that is crucial for business development is soaked up by compliance and tax collection obligations.
- New changes in business regulations have not been well communicated to those being held responsible for complying with them, for example: the new Workplace Health and Safety (WH&S) rules (applied January 1); the Personal Property Security Register (applied January 30); the Carbon Tax (coming June 30);
- Several new regulations, such as WH&S, put managers and directors in the firing line personally for ‘duty of care' where they were not directly liable before;
- Small business loans are over-secured and over-priced by the major banks which, paradoxically while enjoying record profits, set the security bar and the interest rates too high for most SMEs. Incredibly, banks are now acting to lift interest rates in fear that their loan volumes are dwindling, placing profits ahead of public interest;
- Debt collection and control methods that were trumpeted, bundled and marketed in growth times - especially by legal firms - do not work in the current periods of steep cashflow decline;
- The Australian Taxation Office's ‘compassionate' approach during the GFC period has been replaced by record insolvency actions against defaulting businesses.
- Insurance premiums for business have soared unreasonably beyond the protection they actually provide;
- Many large organisations are increasingly heavy handed with small business clients and service providers - and have forsaken common sense and courtesy for the branding advantages of a corporate social responsibility (CSR) program
The numbers are telling: 2011 was a record year for insolvencies in almost every state, according to Australian Securities and Investments Commission (ASIC) records, and 2010 held the record before that. The average value of insolvencies is diminishing, but only because the blood-letting is moving down the line to small value businesses whose litheness and ability to react quickly to changing business conditions has kept them going so far.
Insolvencies for November 2011, at 983, were up 17 percent on November 2010. The 11 months to November 2011 exceeded the full calendar year of 2010, which was the previous highest full year. There are now well over 10,000 businesses a year going belly-up.
A recent survey by Dunn and Bradstreet revealed small business failures rose by 48 percent last year. Tellingly, the number of small business start-ups in the same period dropped 95 percent on the previous year.
Strangely, the term ‘crisis' is missing from most commentary on these figures. The types of securely employed people who analyse these things seem instead to take heart from the fact that the numbers ‘seem' to be tapering off. That has more to do with the mathematics than the statistics.
There are fewer and fewer numbers there to draw from, statistically, as business failures are not being complemented by start-ups.
The human cost of this is fast becoming a national disgrace. Financial institutions don't like to think in these terms, but some of their current decision making is costing lives as some business people are pushed to the precipice of financial ruin.
Australia likes to pat itself on the back that it has been ranked as one of the easiest places in the world to start a business.
What Australia must face up to is the fact that at the moment it is also one of the hardest places in the world to operate a small business reasonably successfully.
Credit is tight. Regulation is on the ascendancy and penalties and personal risk for business leaders are on the rise.
Consumers are fearful of debt and spending in general. Costs are going up for basic services continually, while the ability for consumers to earn more is diminishing.
Asset values are static or in decline. A high dollar and high interest rates, compared with our competitor nations, are having a debilitating effect on Australian industries including agribusiness, tourism, education and manufacturing.
The behaviours and financial mind-sets that caused the GFC are in ascendancy again, but this time the effects are immediate on a weary phalanx of business owners and leaders.
The Australia that loves to tout its advantages, both economic and societal, must surely look realistically at the business blood-letting that is going on and recognise that things have to change or the touting will soon be that of snake oil salesmen.
When it becomes easier and ‘safer' to surrender than soldier on in business, the war will end with a whimper.
Back to Michel de Montaigne who summed it up the condition five centuries ago: "Poverty of goods is easily cured; poverty of soul, impossible."
- Mike Sullivan, Managing Editor, March 2012.