A PricewaterhouseCoopers survey released last month found that one-third of Australian businesses do not understand how the carbon pricing mechanism will affect them. PwC private clients national managing partner, David Wills, explains why these businesses are at risk of being hit by higher costs, and why business plans are critical.
According to PwC’s Private Business Barometer, nearly two-thirds of private businesses (64 per cent) believe the introduction of the carbon pricing mechanism will impact their business.
The two areas of business they believe will be primarily affected are the cost of transport (42 per cent) and products and services (22 per cent).
There is still one-third of businesses who don’t believe or understand how the carbon pricing mechanism will affect them. It is these businesses that are at risk of being hit by higher costs.
Before any business can take action to reduce their carbon footprint, they must first understand the impact.
Planning is critical, and the key is to have a business plan and to revisit this plan regularly.
Six out of 10 private businesses exceeded or met growth targets over the past 12 months. Of those, half (54 per cent) credited having a strategic plan as the reason for their success.
According to the survey, 96 per cent of businesses have a business plan, compared to 60 per cent five years ago.
Looking to the next 12 months, private businesses are forecasting sales and profit growth of 14 and 18 per cent respectively.
For around half (58 per cent) of the businesses surveyed, the key to growth in the short term is organic.
Growth may be more challenging for some, with five out of 10 businesses reporting an increase in sales.
Increased sales suggest a focus on volume rather than price. This is not sustainable. Businesses need to shift the focus from cost cutting to maximising their return on sales and marketing, and investing in innovation, technology and new products.
According to the PwC Barometer, two thirds (65 per cent) of businesses reported no difficulties accessing funding.
By contrast only a third of businesses (34 per cent) are planning major investments in the next 12 to 24 months.
Instead, businesses are focused on paying down debt. Debt levels are low at 22 per cent, but that doesn’t mean there is a war chest of money for acquisitions and expansion.
The three biggest challenges facing businesses are finding competent staff (28 per cent), low margins and competitive pricing (17 per cent) and funding the business and cash flow (12 per cent).
We’re seeing a significant shift in the market, favouring price competition, and the results reinforce that shift.
One-third of businesses reported that pricing is the number one driver of competition for new businesses.
The PwC Private Business Barometer is a national, independent survey of more than 1000 Australian private businesses with an annual turnover of between $10 and $100 million.
It is released annually with research undertaken between February and March 2012.