PRIVATE businesses may remain cautious in the short term, but Western Australia’s private firms are once again seeking funding to reinvest for future growth, according to a survey released this week.
PRIVATE businesses may remain cautious in the short term, but Western Australia’s private firms are once again seeking funding to reinvest for future growth, according to a survey released this week.
PwC’s Private Business Barometer showed 38 per cent of WA businesses were planning significant investments over the next year, just above the national average of 36 per cent and second only to South Australia.
The report is an independent survey of private businesses with an annual turnover of between $10 million and $100 million.
Of those businesses that responded to the survey, just more than half expected to grow organically over the next 12 months, while 37 per cent hitched their growth plans to expansions into new products and 28 per cent on new geographic markets.
For the longer term, organic growth remained the top means of growth at 54 per cent, followed by product expansion at 41 per cent and new geographic markets at 33 per cent.
“Unlike other parts of Australia, organic growth is favoured more in the longer term than short term,” PwC private clients partner Billy Meston said.
“Alternative strategies also decline as growth options in the longer term.
“With the two-speed economy at work, private businesses in the mining, oil and gas sector, and related mining service industries will have less of a challenge achieving the ‘aspirational’ growth and revenue targets.
“Businesses not in the resources fast lane will need to think outside the square and act on the alternative growth strategies such as expansion into new products and new geographic markets to remain competitive and reach the set targets.”
The factors private businesses nominated as the greatest impediments to growth over the next year were global economic conditions (56 per cent), business confidence (41 per cent) and consumer confidence.
Mr Meston said major banks were also back in favour with local businesses looking for sources of funding for investments.
“Lending criteria has not lessened, in fact it may have tightened, but private businesses are heartened by the focus of the major banks and the development of private banking companies over the past 12 months which better understand and cater to their needs,” he said.
WA businesses’ debt ratio of 18 per cent was below the national average of 21 per cent, which leaves plenty of room to fund growth through debt, according to Mr Meston.
The only factor that could derail growth plans, however, remained skills shortages, the survey revealed.
Nearly two thirds of private businesses nationally are looking to hire new staff in the next six months, and an average wage increase of 6 per cent is anticipated by four out of five businesses.
Mr Meston said finding competent staff was the number one challenge for WA businesses. Seven out of 10 private businesses in WA said training and the development of work-related skills was their leading strategy to retain staff, followed by regular career and salary reviews at 68 per cent.
Mr Meston said private businesses were also asking more questions about equity incentivisation schemes.
“These schemes are becoming increasingly popular in the private sector as a way to engage management and give them ‘skin in the game’,” he said.
