SMEs – the label that’s killing our growth

| September 18, 2017

 

I was asked to write this blog as a frustrated expert on medium businesses. To identify some of the key issues and potential solutions as a prelude to the September 7 – 8 GAP Conference. What I don’t want to see is a talk fest by a few speakers who then bolt for the door. Or time wasting on definitions when it’s more about aspirations than whether they have 20 plus staff or over $2 million revenue. Building a stronger medium business sector is not that difficult if we get our act together.


I have worked with medium businesses for over 40 years, including (1) co-founding Attaché Software who are the leading local supplier of accounting and payroll software to this sector. We are a medium business ourselves so we eat our own dog food; and (2) I am the co-founder of the NFP M-Institute (ANZ) and we have spent over $2 million studying this sector.

Let’s start with a key issue – we don’t even officially recognise there is a medium sector. Our use of the term SME is erroneous. Originally SME was small and micro enterprises. By lumping medium enterprises in the SME label they are totally forgotten. They have no similarity what-so-ever with small businesses. Medium businesses are more like large businesses in nearly every respect except they lack their depth of resources.

The second issue is commentators and governments focus on physical rather than economic numbers. Probably because of their concern for readership and votes, but numbers miss the point. There’s over 2 million businesses across Australia. About 95% are small and nearly 70% have no staff. There are under 100,000 medium businesses, while large business numbers are under 10,000. Despite this gross imbalance, the three distinct sectors – small, medium and large – each provide around a third of total revenue and employment. Looking only at the number of businesses has misdirected our energy to just a third of our economy. The consequences are particularly bad in regional areas where medium businesses are the life blood of the local community.

Recognising the three distinct sectors would also help create more balanced and bipartisan economic discussion and policy. Currently it is grossly overweight on small and start-ups which also damages confidence in two thirds of our economy. Medium business owners, like myself and those I represent, don’t seek special favours but we certainly want recognition of our economic importance and a level playing field. Some call it the forgotten child syndrome.

A recent survey across 22 European countries also supports my view. It concluded medium businesses were growing at 16% per annum versus 1.5% overall. But despite punching well above their weight, 90% said they face barriers to reaching their full potential. At the NFP M-Institute (ANZ) we believe all medium businesses face these six barriers to a varying degree: time to think, cash flow, succession, sales growth, digital technology and affordable assistance. We are endeavouring to build a trusted resource hub to assist them, along with keynote speakers and free business improvement guides.

Attaché also assists initiatives like the new ATO payroll reporting requirements. We have created a free video brochure and guide to assist medium businesses who are impacted the most. On the positive side, it also provides an opportunity for them to improve the performance and value of their business. Contact me if you’d like to know more about any of this or check out the following podcast which goes into more detail: https://smeradio.com.au/mmm-episode-one/.

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Mike Rich

Mike Rich is an expert on helping medium businesses improve their performance. He co-founded Attache Software to provide their core business systems and remains the top provider today. More recently, he co-founded and sponsors the NFP M-Institute (ANZ) to help address their barriers through a research and a trusted resource community. Accolades include Best Business Leader, numerous key-note speaker roles, business improvement guide author and business awards judge.

2 Comments

  1. Glyn MacLean

    September 19, 2017 at 4:03 pm

    Nice article Mike. Poignant.

  2. liz@csisolutions.com.au

    September 20, 2017 at 2:31 pm

    Great article Mike.
    I couldn’t agree more – It is scary how misunderstood Jargon can end up changing a whole community’s mindset and behaviours.
    I have many concerns about the lack of delineation in this area particularly with accounting software because the small business DIY software is never robust enough for a medium businesses. It is hard to articulate the difference to the business owner who wants to minimise overheads and may well be sales focused. The external (Tax) accountants don’t usually understand the different needs and so do not recommend the change…. Arrrgh….
    Furthermore, as a regional business owner working with small businesses, and the local Chamber of Commerce President, I see that in the eye of the public there is no distinction between small and medium business. Unfortunately that can mean that government funding packages to assist medium businesses also get lost amongst the noise and so do not get the traction for the economy that was planned.
    The needs of small and medium businesses are completely different but it is the medium businesses that Australia rides on the back of. It is hard to get consumer confidence up whilst job security is so scarce and Medium business is the heart of job security.
    I hope that our governments are able to hear this call for a distinction and build it into policy. Some well-intended policy failures such as the “pink batts scandal” and the “vocational education debacle” may have been avoided if policy makers understood that allowing “small” rather than “medium” businesses to deliver services is inviting unscrupulous individuals to “make a quick buck” exploiting both the tax payer and workers.
    Oops sorry – Rant over!