Facing of a range of issues beyond their control, small businesses are having a tough time. And there appears to be no silver bullet, other than the continuing innovation, drive and determination demonstrated at a recent WA Business News forum.
It is the small business ethos to look for opportunities, no matter what the economic circumstances.
But make no mistake, despite Western Australia’s booming economy, it’s tough going in the sector that represents the overwhelming majority of businesses in the state.
Monopolies and big companies drawn by the boom, faltering bank relationships, a massive skills and commercial property shortage, a rash of fallible communications services, and a morass of time consuming regulations are just some of the stumbling blocks to being successful in what’s generally an over-governed environment.
Despite these impediments, including the fact than many SMEs probably aren’t saleable in the current highly paid employment market, there is an almost unwavering belief that good opportunities exist for the fleet footed, entrepreneurial SMEs against the largely constrained and slow-moving big guys.
Philip Doust, founder of award-winning Malaga tapware and plumbing products manufacturer, Doust Plumbing Products, believes the runaway growth of the monopolies is the scariest thing happening in Australia right now.
And it’s happening throughout all the major sectors of the economy, such as supermarkets and fuel sales, in a relatively small marketplace with various groups also taking control of the standards of products supplied.
Doust Plumbing, for instance, was recently hit with a 100 per cent price increase on a critical component for which there was no apparent alternative.
Cassandra Stipanicev and husband, Jeff, have battled five years to make their confectionery manufacturer, Walker’s Candy Co, profitable.
Two months ago they withdrew from the big department store chains because their production and price demands were, as Ms Stipanicev puts it, “terrifying”.
The big chains had previously accounted for nearly all Walker’s business, though the Stipanicevs had been weaning themselves off it.
“They are buying on price, not quality. There is no way I want to be a client of theirs, because the potential for them to ruin my business is extraordinary,” Ms Stipanicev said.
The company was now completely restructured and pursuing different markets, with an emphasis on producing high quality, specially designed, hand-crafted confectionery for the corporate market.
It’s an opportunity born of adversity.
“The lack of quality and service from the big corporations provides such an opportunity for all of us, because the worse their service and products, the better they make us all look. And our business is driven on service,” Ms Stipanicev said.
“We get enquiries from people who want a corporate product and they have been to Cadbury and Allens, both of which have huge infrastructure with set machinery and product runs, and production timetables. We can make special flavours and have much lower minimum runs.
“So it is about having the courage to change the market focus of your business.”
A counter to Walker’s success on the marketing front was the recent extraordinary failure of its single Australian sugar supplier to be able to supply its basic commodity.
The price of sugar has doubled during the past two years.
Icon Business Solutions co-owner Deborah Pitter agreed the big groups presented real opportunities because they were often slow to move.
“As an SME you can see an opportunity, you can change your offer, the way it is serviced, you can change your whole strategy reasonably quickly. They are big, slow animals basically,” Ms Pitter said.
Relocations West Pty Ltd’s Pauline Pietersen pointed to the need to form strategic relationships with associated businesses in the same general market to head off big competitors, such as Crown Relocations and Toll Group, and meet increasing client requirements for single source invoicing.
“In answer to that, a lot of us medium sized businesses are forming national relationships with partners in the industry, such as visa and migration agents, and recruitment agents,” Ms Pietersen said. “We now have our own network so that we can also create the corporate one stop shop.”
Tony Westall, founder of specialised security, safety and risk management company Gone in 5, determined at the outset he was never going to buy business.
“I am not interested in being the cheapest. You want quality, then you have to pay for me. As long as the quality is delivered, I think most people understand that,” Mr Westall said.
But a new problem is the salability, or non-salability, of these SMEs in a high employment market where unskilled workers are able to demand $100,000 salaries.
Ms Pitter said that, three to five years ago, people were prepared to buy a job.
“Today, if a businesses doesn’t generate $100,000 net profit or turnover $120,000-plus, they are not saleable and the operators are stuck with them,” she said.
Ms Pitter also believed the current economic environment as one in which SMEs needed to focus on fighting the battles worth fighting and had some hope of winning.
“So there is no point in food manufacturers taking on the multi-nationals,” she said.
SME also had to look closely at their long-term sustainability.
“Nothing is more certain than change. I think that instead of operating in boundary areas that require the current economic buoyancy, small businesses should be looking to consolidate and prepare for the future because there is nothing surer than the economy will change,” Ms Pitter said.
The new industrial relations laws were generally seen as logical and reasonably supportive.
Ms Pitter said the very buoyant employment market and IR reform put SMEs in a reasonably good position.
“The reality is, you are never going to sack a decent worker in this market,” she said.
“I think the new IR legislation has restored a bit of equality on both sides, as it was previously very much weighed in the employees’ favour, and that’s not appropriate at all.”
FX Digital Pty Ltd’s Steve Cartwright said the new IR laws had precluded him employing two commission-only sales people in the last two months.
“Unless I am 100 per cent certain they were going to make it in the sales market, I’m not going to give it a try,” he said.
