Small Business Market Update
The strength of the small business market in Western Australia appears to be aligned somewhat with the real estate market over the past five years, a trend which is reflected across the country to a certain extent. Nationally, strengthening business conditions should facilitate reasonable selling conditions, while the effects of the Banking Royal Commission has started to make it more difficult for purchasers to obtain finance.
The national economy is benefitting from general global expansion, as economic growth has reached 3.1% per annum; up from 1.75% a year ago. While we’ve seen an increase in the number of jobs, this has not yet translated into strong wage growth.
The Reserve Bank of Australia has forecasted the following going forward:
- GDP growth to be slightly above 3% in 2018 and 2019
- Relatively positive business conditions including higher government infrastructure investment, although household consumption remains unclear as due to high levels of debt and low growth in wages
- Inflation will likely only increase slightly above 2% in 2018
In essence, the current economic conditions make for a positive outlook for small businesses. By the looks of things, now is the time for gradual strengthening and stability, and as household spending increases in the future, business should pick up accordingly.
Over the past year, WA has seen an increase in the number of businesses listed for sale (over $50,000), specifically 9.33%. Despite this increase in sales, the value of these sales had generally not shifted much, and the time it takes to sell a business naturally depends on the type of business and its performance. Strong businesses with uniform profits often sell in 3-6 months and trade well.
Finance has become more of a concern on the purchaser’s side, as the banking sector reacts to the Royal Commission and changes to lending practices mean loans are taking longer to be approved, or not being approved at all. As a result, there has been an increase in the number of offers not proceeding to settlement. Small business purchasers now need to be prepared to provide a lot more data and expect longer processing times.
The May 2018 Federal Budget brought forward a few measures that affect small businesses, including the following:
- The up to $20,000 instant asset write off is being extended to cover the 2018/19 financial year – this not only provides tax savings to small businesses spending on assets, but also stimulates consumer demand to those businesses from where the assets are purchased.
- The black economy is to be curtailed by an economy wide cash payment limit of $10,000 to reduce money laundering and tax evasion.
- Pensioners are now allowed to earn an additional $1,300 per annum without affecting their pension – potential for more spending on small business goods and services.
Getting into small business – whether starting from scratch or buying an existing business – is a venture best made with help from McKinley Plowman. We have Perth’s premier small business accountants; business improvement specialists; bookkeepers and much more! Contact us today on 9301 2200
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