Businesses adjust to a 'new normal'

Private businesses are less optimistic about the year ahead, and see "the new normal" as less profit and slower growth, a new PwC survey has found. Source: The Australian

ONLY one out of every two private businesses in Australia intends to hire staff over the next six months, according to a survey by financial advisory firm PricewaterhouseCoopers (PwC).

And fewer than one in three businesses are planning for a major investment in the year ahead - the lowest level in five years.

PwC on Monday released its 2013 Private Business Barometer Pulse, a survey of more than 300 private businesses across Australia, each of which has an annual turnover of between $10 million and $100 million.

The survey found that many businesses were less optimistic about the year ahead than in previous years.

"They appear to be adjusting to the 'new normal' and accepting that massive growth or profit margins are not necessarily realistic, at least not without a change in focus or significant investment," PwC national managing partner for private clients, David Wills said.

Mr Wills said fewer businesses had reported profit growth in the last 12 months, and profit and sales growth were the lowest since February 2008.

Forecast profit increases were easing.

Consumer confidence was seen as the biggest barrier to growth.

On the positive side, 64 per cent of businesses met or exceeded their revenue targets, up from 62 per cent in the prior year.

Mr Wills said businesses that were doing well were either seizing opportunities or re-inventing themselves.

They were not waiting to see what would happen on the domestic or global economic and political front.

Instead, they were looking to innovate, enter new markets, improve their business models, consider new channels to market such as digital, and invest for long-term growth.

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Small businesses more upbeat

MORE small business owners are upbeat about the economic outlook, but they say rising fuel costs are the biggest constraint for doing business.

Software provider MYOB's 2013 business monitor found fuel prices remain the biggest pressure point for small and medium sized enterprises (SMEs), followed by attracting new customers.

But cash flow is becoming less of a problem.

"Interest rates are also less of a concern," MYOB chief executive Tim Reed said.

The Reserve Bank of Australia (RBA) will hold its monthly board meeting today and is widely expected to keep the cash rate at three per cent, its lowest level since the 2008-2009 global financial crisis.

The monitor's study of 1005 business owners an managers found over a quarter (26 per cent) of SMEs were expecting the economy to improve within 12 months, up from 19 per cent in its July 1012 report.

"It indicates hope is springing back for Australia's business coalface," Mr Reed said.

The proportion expecting an economic improvement to take one to two years is now 37 per cent, down from 42 per cent previously, while 22 per cent think it will take more than two years, down from 24 per cent.

Almost a third (30 per cent) of SMEs expect their revenue to rise this year, while 42 per cent are expecting revenue to be stable.

Mr Reed said the combined 72 per cent of SMEs expecting increased or stable revenue was encouraging when compared with only 58 per cent last year.

Looking back over the past year, 40 per cent reported steady revenue, only just above the 39 per cent who saw a decline, while 18 per cent reported increased revenue.

Operators in the manufacturing and wholesale industry were hit hardest, with 52 per cent experiencing a revenue fall, while 29 per cent of finance and insurance businesses recorded a rise.

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