On the Radar: Understanding the businesses that drive Australia’s economy

From

Gavin Debono

The Pitcher Partners network has released its annual Pitcher Partners Business Radar: Understanding the businesses that drive Australia’s economy.

Canvassing the trends, challenges and opportunities faced by middle-market businesses across Australia, the report shares insights into how the COVID-19 pandemic has affected business confidence and the top priorities for businesses as they move ahead to continue growing.

As the engine room of Australia’s economy, the middle-market produces just under 25% of Australia’s revenue ($645b) and one-fifth of the nation’s net tax revenue.

Key findings from the report include:

  • Riding the COVID-19 wave: 40% of middle-market businesses felt that the pandemic had a positive impact on their business. One of the biggest challenges that arose in 2020 was the realisation of how reliant businesses and countries are on only having one export market or concentrating a large part of their supply chain in one destination.
  • Strategic planning and business confidence: Middle-market businesses with low confidence in their current strength are twice as likely to make ad hoc decisions as businesses with high confidence (33.9% v. 15.9%).  In contrast, confident businesses have formal mid to long-term strategic plans and take a strategic approach to decision-making.
  • People challenges: Staff retention is a challenge for 50% of businesses surveyed. Remuneration is perceived to be the largest contributor to staff turnover (34.5%). Staff attraction and retention are the most common challenges for businesses with 200+ employees.

Gavin Debono, Executive Director at Pitcher Partners Melbourne, acknowledged that while the pandemic was challenging for businesses, confidence levels remained strong between the first edition of the report and this second edition.

“Businesses did not let the pandemic go to waste,” Mr Debono said.

“Our research revealed that confidence increased across most areas. Levels grew in current business strength, the future success of the business, industry, and the Australian economy. Confidence levels in the global economy declined slightly.

“It is a testament to the growth mindset and resilience among Australia’s privately owned businesses.

“Driven by the changes businesses had to make throughout the height of the pandemic in 2020, there were, unsurprisingly, some shifts in the top five priorities for Australia’s middle-market businesses. Consumer preferences dropped out of the top five, indicating that it could be time for businesses to re-engage with their customers now they have weathered the challenges of 2020.

“Technology advancements and digital marketing remain high on the list for business owners and leaders, seen as both a challenge and an opportunity. Similarly, navigating and understanding government regulations remained in the top five priorities for business.”

One of the key findings in the first edition of the Business Radar report[1] was that global geopolitical and macroeconomic events did not impact confidence levels amongst middle-market business owners and leaders. While some of these events eventually filtered down to affect the middle-market, it was not a significant consideration for many businesses.

“Arguably, the events of the last year have changed this. The pandemic has impacted businesses across many sectors. It has also reinforced the importance of understanding what is going on beyond their immediate organisation or industry,” Mr Debono said.

When research for this second edition of the report was gathered, Australia was moving on from the height of the first wave of the pandemic. The economy was recovering quickly, and business and consumer confidence had reached all-time highs, despite the nation’s continued vulnerability through exposure to global events and intermittent domestic lockdowns in most states.

“Thinking ahead, knowing how to plan effectively, and being ready to adapt to and overcome challenges along the way, is front and centre for middle-market businesses as they turn their minds to the continued recovery and a new normal,” Mr Debono said.

“Not surprisingly, the most confident businesses have systematic, ongoing, strategic planning processes, and have engaged in succession planning. We found that less than half of mid-market businesses are confident in their strategic planning and decision-making.”

Having a formal strategic plan in place, whether short or long-term led to higher confidence levels: 52.5% have a formal mid to long-term strategic plan in place, 31.7% have a formal, short to mid-term strategic plan in place, and 15.8% say they tend to make strategic decisions in an ad hoc manner.

More than half (58.4%) of businesses still had not undertaken succession planning. Organisations that incorporate succession planning as part of their strategic planning are significantly more confident in their business and the effectiveness of their decision-making.

At least 62% of businesses intend to implement or continue succession planning, in a sign of an increased focus on this issue, with a quarter of mid-market businesses expecting succession to be a pressing issue within months, growing to more than a third of those businesses with 200+ employees.

“As our clients’ advisors, we are well-placed to help businesses continue the momentum and capitalise on newfound opportunities for growth they may have discovered in 2020,” Mr Debono said.

“Equally as important, it is our role to support business owners and leaders in addressing challenges to realise their personal and business goals.”

The Pitcher Partners Business Radar: Understanding the businesses that drive Australia’s economy report is an independent research report conducted with strategic growth consultancy Forethought.

The research canvassed 400 businesses using both quantitative and qualitative research to further understand the mindset and unique challenges of businesses in the middle-market.

Read the report.

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[1] Business Radar report

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