More people selling businesses than starting them

The latest Sensis Business Index reveals that 12% of small Australian firms are looking to close or sell their business largely for lifestyle reasons while 9% are planning to start a new business.

The survey of 1800 SMEs shows small businesses have experienced tough trading conditions, with many facing the financial impact of recent natural disasters.

According to the survey business confidence remains at 44%, 8% down from this time last year, while perceptions about the current state of the economy have fallen from 23% to just 8%.

Profitability weakened in the small business sector, falling 5% to -10% and remaining in negative territory for the fifth consecutive quarter.

Support for the Federal Government’s policies increased during the quarter with SMEs citing small business management schemes as evidence that the government was trying to help small businesses, but it remains in negative territory at -25%.

According to report author Christena Singh SMEs are closing or selling businesses primarily for lifestyle reasons rather than due to economic uncertainty.

Singh identified the hospitality sector as having a high turnover of business owners, with 22% intending to sell their business.

Of the 9% who were starting a business, which includes those with existing businesses, Singh says retail is one of the most popular sectors despite tough conditions.

But she says small business can no longer “ride the wave” of the strength of the economy and will need to take a proactive approach to offerings and marketing strategies in order to stay afloat.

According to the report four in 10 small businesses are planning to introduce new products and services during 2011 while around a third plan to increase their digital presence.

One in five businesses is planning to implement social media activities and according to Singh only 13% of small businesses are planning to do nothing.

“There has been a shift in consumer expenditure patterns, saving rates are up around the 10% mark. Businesses are having to change their strategies (if they intend) to look at growth in the new market,” Singh says.

“It is important for businesses to analyse their products and services and see how these shifts (in consumer spending) will affect their cash flow. They need to be proactive about these things because the economy won’t do it for them.

“As lack of demand is the number one concern for Australian small businesses it is not surprising that many are ramping up sales activities, including expanding their sales force and increasing advertising.

“It’s about getting out there and doing the hard yards (after) assessing what the new consumer landscape means for their business.”