It’s Official – Size does matter!
The Australian Taxation Office has just compiled a snapshot of Small Business (turnovers between $75,000 -$2,000,000) by industry type and it is very revealing. Have a look at the ATO website and click through to your business type. What band is your business in? You will be most interested to see where your business lies in terms of its size and relative efficiency verses your competitors.
I have crunched the numbers the ATO has provided and a number of conclusions stand out:
* With a few exceptions, a big Small Business is best.
* Micro businesses usually run at a loss and are uncompetitive
* Medium sized businesses are the least efficient
* If you want to compete and run successful enterprise, get big.
Big Small Businesses have less costs and better profits per dollar revenue. In other words big small business is more efficient than medium small business or micro business. The implication is that growing and growing quickly from a micro business to a substantial size is the way to go.
If there is a way of avoiding being a medium sized business or a way of moving through this stage quickly, you should consider it.
When the cost of the owner/operator's wages are added back most micro businesses don’t even break even until they approach the medium size for their industry. As they break even and enter the medium size these enterprises are at the stage of maximum inefficiency and least competitiveness. Their costs per dollar revenue are the highest.
If profit is the objective and competition a concern, then growth to being a big operation is the key to winning the game called competitive business.
Obviously, exceptions occur and if you are a “tradie” or run a hair dressing/beauty/road freight business then micro is the way to go, but for the rest, Big is Best...or that’s what we told the tax man (woman).
Seamus O'Brien
Small Fish Business Coaching
www.smallfish.com.au
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