Mid-size businesses punching well above their weight
Mid-size businesses are the “forgotten child” of the Australian economy. They make up just 1 per cent of total businesses in Australia, compared to small businesses, which make up 91 per cent of total businesses in Australia, and large businesses, which account for the remaining 8 per cent.
But new research commissioned by Grant Thornton shows mid-size businesses are punching well above their weight in terms of the sales revenue and company tax they generate. Grant Thornton defines mid-size businesses as having between $50 million and $500 million in revenue.
According to data compiled by University of Melbourne and Cambridge University economist Professor Neville Norman, mid-size businesses account for 14 per cent of the total revenue generated by businesses in Australia and contribute 19 per cent of company tax.
But while they don’t receive the same level of government support as small businesses, they face many of the same regulation and reporting requirements as big businesses.
“Access to some tax incentives dry up the bigger your business becomes. This is counterbalanced with increased rigour around regulation and reporting. The same requirements we have for the big multi-nationals operating in Australia also apply to family run businesses with operations across two states,” Greg Keith, CEO of Grant Thornton Australia, said in a statement.
But Keith argues they have the advantage of being able to take advantage of market opportunities more easily than their smaller and larger counterparts, since they have scale without legacy issues. Even a one-off 10 per cent increase in annual revenue could have a significant impact on profitability and cash flow over the next five years.
According to data modeled by Neville, a “typical” mid-size business with $100 million in revenue could expect a $15 million increase in profit, or 20 per cent, over a five-year period, as well as an $35 million in cash flow, or 35 per cent. It would be good for the broader economy too, as this company would pay an extra $5.3 million in tax, Neville found.
According to Grant Thornton, mid-size retailers are particularly well positioned to punch above their weight by being more customer-centric.
“In many ways, mid-sized businesses in the consumer products and retail sector are in a great position to compete with the big retailers in how they respond to customers – creating a consistent and responsive in-store shopping experience, and a seamless end-to-end online experience,” Simon Trivett, Grant Thornton’s national head of consumer products and retail, said.