The bottom line

The last half of this financial year will be relatively stable and a great time to reach out for new ventures, but the first half of the next financial year is likely to be growth constrained and highly influenced by the RBA’s determination to pour a bucket of uncertainty on capacity to pay high wages and raise consumer costs of living.

Smart companies that have prepared their financial year forecasts and completed their next year business plans must head for the banks in the next month. As inflationary pressures from the commodity boom rise and the bottom line of small business declines, growth is the key to success.

The main concern for business owners and investors alike should be the bottom-line rate of return that comes with reducing both inventory and costs on the one hand and expanding into new markets on the other.

Small business and retailers already have to be much more targeted on profitability and valued customers rather than volume and those that have resorted to discounts are already finding that there is little room to raise prices and pass on costs.

There are considerable signs of commodity speculators surfing on the food and petrol price rises to anticipate a significant rate rise from central banks around the globe. Even the Chinese Government is now withdrawing capital from the market to damp down expectations of its domestic economy.

While resource commodities are bringing in record revenue flows into the Australian economy, the impacts of the inflationary impacts on other sectors of the economy are going to feed into wages demands from unions seeking a share (in the absence of a mining tax).

At the same time, the climate changes around the world have lead to food price inflation, adding to political turbulence and volatility. As the price of grain, gold and oil are all heading upwards, there will be an inevitable flow on to the costs for small business seeking to expand offshore, develop new products and retain quality sales and production staff. The fact that wages in the North West are now the world’s highest in the oil and petroleum industry and the pressures from public sector unions no longer constrained by Labor governments, will add fuel to the inflationary fires.

The impact of all this on monetary policies will either lead to a bulging bubble of speculative cashflows into the country or reduce the value of our currency. As purchasing power becomes less predictable, small business owners will have to plan ahead to get the capital needed for expansion locked down now.

A modest rise in inflation, however, will not harm the ongoing recovery in the share market and more funds will be available for small business investment from investors looking for opportunities to buy into sound medium and entrepreneurial ventures.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.