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    Karen Crawford, PricewaterhouseCoopers

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    Every six months, PricewaterhouseCoopers conducts the most comprehensive survey of private Australian businesses with annual turnover between $10m and $100m. The second Private Business Barometer was released in October, reflecting the performance results and insight into the issues challenging the 750 private businesses surveyed, covering areas such as funding, growth, people and operations. Anthill Editor Paul Ryan chatted with PricewaterhouseCoopers’ Karen Crawford about the latest barometer findings. The news is good, but could be better.
     
     

    Paul Ryan: Firstly, I wanted to pick up on the issue of funding. Private business owners often want to build organically. They don’t want to dilute their equity and they want to keep their cash-flow healthy. But I was staggered that seven out of ten of the companies surveyed in the barometer either didn’t want or didn’t understand private equity. Can you explainwhy so many private Australian companies don’t have private equity in their business plans, even as a contingency?
     
    KC: The barometer emphasised that private businesses remain fiercely private. That term ‘private equity’ to business owners is still, in fact, outside equity, and there’s a fair degree of unknown associated with what that might bring. There’s a lot of anxiety and perhaps uncertainty as to why a business would need to go down that path. In essence, the growth of a business is constrained to what it can achieve organically. At the same time, it’s an interesting quandary. We have, on the one hand, a lot of private equity / venture capital / private investors who have money in their pocket and are looking for somewhere to invest it, and at the same time we have the majority (70 percent) of private business owners who actually say they aren’t prepared to make the necessary sacrifices to get that money or the strategic input that comes with it.
     
     

    PR: Given how hot the economy is right now, there is a lot of strategic capital that could be being invested that perhaps isn’t, based on ignorance or stubbornness.
     
    KC: It’s not for everybody. It suits some businesses and not others. It certainly suits businesses that are on a high-growth phase, looking to leverage into new strategies and new markets. Private equity is more than the money. Active strategic involvement comes with it – particularly if you can get the marriage right.
     
     

    PR: It’s not for everyone, but it’s something that should at least be considered and factored into a business plan.
     
    KC: I agreed that it should at least be on the agenda. And certainly the barometer seems to be highlighting that the thinking of many private business owners wasn’t even at that point.
     
     

    PR: To the issue of personnel… The barometer revealed that more than half of the business surveyed said they were facing challenges finding the right people. This seems to support the theory that there is a skills shortage in Australia. Is it more complex than that?
     
    KC: It’s a fairly complex issue. Almost all of the respondents to the barometer indicated that they face some sort of hiring constraint. A huge percentage of those are saying it’s finding the right people with the right skills. Australia is in a phase of low unemployment, causing a skills shortage. That’s going to continue. The challenge is really to start doing things differently. Business owners have to start looking at how they have recruited in the past and the sorts of people they’ve recruited. Now the challenge is to start to recruit people with different skills that can be retrained. There’s an enormous amount of pressure around the flexibility of work practices and employer of choice, because that’s where the skilled people and good people are flocking to. It really is an employees market at the moment.
     
     

    PR: With regard to incentive beyond remuneration and work/life balance, is that something the respondents felt strongly about, or were they begrudgingly acknowledging the requirement to be flexible in an employee’s market?
     
    KC: The issue around non-remuneration type of benefits or flexible work practices is a huge challenge for employers. The barometer revealed that less than a quarter of respondents are actually looking to do something different within their business in respect to flexibility or innovation within their employment practices. That means three-quarters of private businesses think that salary alone is enough to attract and retain talented employees. It definitely will not suffice. The skilled employees in demand are flocking to the employers who actually have these non-financial aspects embedded into their businesses.
     
     

    PR: Now, depressingly, the barometer reveals that 90.9 percent of business owners surveyed are male.
     
    KC: Much to my personal distress!
     
     

    PR: Is there something that can be proactively done to encourage more female business ownership?

     
    KC: It’s an interesting statistic, and one that jumps out off the barometer. I should emphasise, however, that the barometer surveyed businesses with turn over of $10m – $100m. There are a lot of female entrepreneurs running very successful businesses, and they’ve done very well for themselves – particularly emerging in the last the last three years. But they may not have grown to that size yet, so obviously they haven’t been included in the barometer. As more and more entrepreneurial women are realising that it can be done, we’re seeing more move into the market. I think it’s going to take a couple of years before we really see the impact of that.
     
     

    PR: Tim Harcourt, Chief Economist at Austrade, noted the fairly low level of interest in exporting as revealed in the barometer. Do you think that exporting should be fundamental to early business planning, in terms of five to 10 year growth horizons?
     
    KC: Yes, we were actually quite surprised to see that only about 20 percent of businesses were looking to expand into new geographic markets. The assumption there is that we’re talking about global expansion, but that could also be referring to further geographic markets in Australia. So the number’s probably even worse.
     
     

    PR: Though it could be that some were already in several overseas markets and seeking to consolidate them rather than expand.
     
    KC: True. But we’re certainly sensing that businesses know they need to work this into their business plans somehow, but perhaps don’t know where to start or haven’t got the resources. It’s an interesting challenge, because private business owners are maintaining a very healthy outlook for the next three years, with forecasting profit grosses over 12 percent. But the majority of them are saying that’s going to come from organic growth, as opposed to purposely pursuing a global export business. Certainly the message that Tim Harcourt has given us through the barometer is that there could be a real pay off and some real benefits for the businesses that can plan and execute well.
     
     

    PR: Just as funding business expansion through organic growth can be quite limiting, doggedly sticking to a rigid business plan can see a business miss out on wonderful opportunities that could never have been foreseen when the plan was formulated.
     
    KC: You absolutely need to continue to be opportunistic, but there also needs to be (and it is highlighted throughout this entire barometer) a high level of strategy. The problems occur when this strategy remains locked up solely in the business owner’s head. It should be well communicated and shared and owned across the management team. There are certainly benefits to be gained from getting everybody on the same page. Whether it finds its way onto a clean sheet of paper is another thing.
     

    Download the PricewaterhouseCoopers 2nd Private Business Barometer www.anthillonline.com

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