Five things to expect in 2012

The New Year is now well and truly under way. Knowing what to expect in the year to come will give your business a head start.

The problem is that no one has a crystal ball good enough to be certain of the future; the most unsettling thing for SMEs is uncertainty.

Good times or bad times, small businesses are often better positioned to adapt quickly to change, providing they know what to expect.

So what predictions can we make with a reasonable degree of certainty?

1. Business failures will increase throughout the first half of 2012

Not good news or a great way to picture the New Year, but this is a reality.

Over 2011 there was a steady increase in the number of businesses put into administration and the Tax Office has indicated that it will continue to get tough with businesses with outstanding tax debts.

You need to monitor your own position and also be aware of the condition of your customers.

2. Keep an eye out on what is happening in Europe. It’s a long way away but the more problems that emerge there, the greater the likelihood that it could have a flow-through effect

If there are major failures in Europe then this is likely to have a ripple effect into our banking system.

It could mean that funds are harder to borrow. If you are going to have funding needs throughout the year put your arrangements in place with the bank earlier rather than later.

Better to have the funds there and not need them immediately than wait until later in the year and take your chances with the conditions then in place.

3. February will be a tough cashflow month

It always is. It is a seasonal feature.

You have the Christmas hangover with bills to be paid, dislocation of cashflow in some cases over the holiday season, quarterly superannuation payments due in late January, followed by the quarterly BAS in late February.

Watch your cash position and monitor closely any adverse trends. The “squirrel approach” of having a bit extra tucked away may come in handy.

If things are looking tight, start chasing up your outstanding accounts early.

4. There will be an increase in succession activity

Some SMEs are looking to sell, and there are plenty of buyers out there for good quality businesses.

They are looking to bulk up and get greater critical mass than organic growth can bring. February to June will be a busy time for this. The buyers will be selective; they will pay the right price for well run, profitable businesses.

Poor performers are likely to be left on the shelf. If you are thinking about selling, make sure the numbers and the business model stack up. If you are looking to buy, make sure you buy value.

5. Competition is likely to increase

Look for smart ways to differentiate and compete in your market.

Don’t get sucked into competing on price alone. For the majority it is a no-win solution.

So where is the good news?

It sounds like a tough 2012.

The good news is that you can often make more money in a tough market than in a buoyant one.

Tougher markets will shake out lesser quality competition, leaving more business for those that are still around.

You need to know your numbers, manage them closely and be prepared to make tough decisions if necessary.

Australia is much better placed than a lot of other countries. In most sectors there will still be a steady market.

Keep on top of it and make the right decisions as the year progresses and your business should be well placed for the future.

Greg Hayes is a director of Hayes Knight and specialises in taxation & business planning advice.