Many small businesses find it difficult to attract passive equity investment which enables them to grow without taking on additional debt or giving up control of their business.
As one solution to this challenge, the Australian government has started to encourage the creation of a private sector-owned $100-million Business Growth Fund that would provide longer term equity funding to small businesses.
The AU fund is expected to cultivate similar investments as other international growth funds. For example, since 2011 the United Kingdom’s Business Growth Fund has invested $2.7 billion in a range of sectors across the economy.
In my capacity as the founder of the Australian Advisory Boards Institute (AABI) and a business growth strategist, I’m often asked about the likely effects of such a plan.
The plan came about to ensure that small businesses are able to fulfill their potential and continue to underpin economic growth and employment. The Australian Business Securitisation Fund will invest up to $2 billion in the securitisation market, providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses with more competitive terms.
The Australian Business Securitisation Fund news came after the publication of the Affordable Capital for SME Growth report by the Australian Small Business and Family Enterprise Ombusdman, which identified a major funding gap for Australian SMEs to start or grow their business.
“The government recognises that they need to stimulate and help small business,” Peter Williams said at the outset of a recent press interview. “Small business owners are the backbone of our economy in Australia. They’re very clever, they’re very inventive and they’re very creative people.”
Since Peter works with many of them in an advisory capacity and even chairs a number of advisory boards, he’s got his finger on the pulse of the growth dynamic.
“So any form of assistance that can help them grow and stimulate their business, I think is worthwhile,” Peter says. “And I think both sides of politics and may want to do it differently, but they have a recognition that small business really is the backbone for what we do in Australia.”
Since the Australian Business Securitisation Fund news came during a political cycle, this gave rise to the question of why governments tend to forget such a significant sector for such a long time during a political cycle. It obviously doesn’t help politicians when they appear to have dropped the ball on policy.
“It’s an interesting point,” Peter said, “because small business creates millions of meaningful jobs for everyone. I think there’s around 5.7 million people in small business in Australia. So it’s important that they look after how SMEs are doing all the time, not just at election time.”
Peter Williams is Australia’s #1 Authority On Leveraging Business Growth Through Advisory Boards and author of the book, Are You Ready For Your Own Advisory Board?
Chris Ilsley: Also at the Morrison governments announce today a hundred million dollar Australian business growth fund. It’s designed to stimulate SME Growth that’s Small and Medium Enterprise Growth with private capital. We’re joined by Peter Williams who’s a small and medium enterprise growth specialist and also the founder of the Australian Advisory Boards, Peter, and thank you very much for having a chat with us this evening.
Peter Williams: It’s a pleasure to be here.
Chris Ilsley: Before we go any further, all the polls and the polls continue to point towards Shortens victory. There was a television about between Scott Morrison and Bill Shorten tonight, which, people have overwhelmingly given to Bill Shorten. We’re having this discussion now Peter about whether this is a good idea or not, but are we really having a discussion about a moot point? For example, should organizations like yours be going and having a chat to Bill Shorten who more realistically post May 18, is going to be the prime minister of Australia?
Peter Williams: Well, certainly, I think I’m from both sides of politics. They recognize that they need to stimulate and help small business owners. Because small business owners, they are the backbone of our economy in Australia, they are very clever, they’re very inventive and they’re very creative people. And I work with many of them in an advisory capacity and I chair a number of advisory boards. So any form of assistance can help them grow and stimulate their business, I think is worthwhile. And I think both sides of politics and may want to do it differently, but they have a recognition that the small business is the, is the backbone for what we do in Australia.
Chris Ilsley: Peter, we always hear, particularly around this time of the year, this time of the political cycle, that small businesses are the backbone of the economy, but how can governments don’t seem to care about the backbone for all those other years, days and months before an election. So why is given the fact that it’s a big employer? So as your huge employer, it’s a great contributor to even the the the material aspect of people’s laws. But this social logic, having a job is really important. It helps people fulfill their life dreams. How come governments tend to forget such a significant sector for such a long time in the political cycle?
Peter Williams: It’s an interesting point, isn’t it? Because certainly small business, you know, like create millions of meaningful jobs for everyone. I think there are around 5.7 million people are in small business in Australia. So it’s a, certainly a significant one. And they tackle political risks. They build their businesses at a time; they bear the stresses of unrelenting challenges in their business environment. So it’s important that they, looked after all time, not just at election time, but obviously, that’s in the sweetness come out and hopefully, the right type of sweeteners will actually be a fruit, in terms of the incentives and for the business, in the next, year, to the next political cycle.
Chris Ilsley: But the thing I was going to ask you about that Peter is we often hear about these elections, sweetness. We also know that politicians, regardless of the flag, they’re flying often suffer very, very bad amnesia once in the election is behind them. So even though we’re talking about these kinds of proposals, realistically, how are we likely to see them materialize in the event that the government is successful in getting re-elected? But more importantly, what’s the possibility of being able to get them past, especially when we have some people in the Senate who seemed to be quite hostile to the business community?
Peter Williams Yes. Well, that’s a very interesting question then and I guess all we can do is we can keep loving and we can keep putting pressure on the politicians of all sides of their persuasion. That small business is important. And it’s not about big business. It’s actually about small business, medium business, people who have a risk, everything to help grow the economy of Australia. So I think we all have to keep putting the pressure on them, on the government and on the opposition. And on the other side and particularly where there are parliaments to actually do the right thing to make sure that the considerations are, and that’s why this initiative and a number of the life of party initiatives are very welcome because they will stimulate, if they get up and go, they will stimulate growth and particularly support high growth for the companies.
Chris Ilsley: Obviously Peter, you’re a great supporter of SME I was looking to, to get either businesses visors or creating an advisory board. How, how many small business owners do you think are really aware of how important, I’m looking for a percentage here, how important it is to have the objective survives when It comes with an advisory board.
Peter Williams: Yeah. So a very good point. Advisory Boards are very embryonic in Australia. They’re much more established in America and Canada and extract, but some very good evidence out of Canada where they surveyed, 4,000 SMEs about the performance of advisory boards. Interestingly in Canada, only 5% of that survey had advisory boards, but on that 5%, 80% said they would have won again. And the results were quite spectacular for those that actually have the advisory board, 68% increase in sales, 5.9 they have seen Increase in productivity and these files are generally 24% higher than those companies in similar industries. So the number of buyers we boards, in Australia is certainly not known cause it’s very embryonic. Certainly, businesses use consultants a lot. But consultants have tend to have fixed projects, fixed timelines, whereas an advisory board of external advisors helping the business has no vested interest other than to help the business succeed and grow and, and become thriving and outpace the competition.
Chris Ilsley: I’m guessing the critical point that would be to make sure those people on the board had practical knowledge and understanding of the business they’re advising. Because you made mention of consultants Peter, now even within this industry, we’ve often seen consultants who’ve had, they might have business degrees and they might have lots of other credentials that arguably put them forward as being ideal. But they seem to have the very little practical understanding of the business they are advising. So when we go to these business boards that you speak of, as far as I can see as long as they made up of people who actually have practical understandings of the business and how it works in the context that it needs to work, then all good. If they don’t, if they’re just simply people who are experts because I happen to have a piece of paper from a nice university hanging on the wall that doesn’t necessarily produce the best outcomes.
Peter Williams: I wholeheartedly agree with you. I think it’s very important when businesses look to take on external advisors in a structured way as in an advisory board, but they actually look for people who haven’t seen me and done it before. People have actually grown a business. They’ve actually sat where the CEO or the business owner seats in the driving seat late. They understand the challenges, they understand the risks and so they can bring that practical hands-on experience and expertise to help drive the growth of the add on. I think that to me is one of the most critical aspects of selecting members for an advisory board.
Chris Ilsley: It seems to me Peter, the two big lessons I picked up over the years running my own businesses. I, every decision you make have an implication on your skin, the skin that you’ve put in the game. And secondly, one of the greatest challenges of all-them, is that you might be good at all. I’m pretty good at finance. I’m good at giving people advice about how they build their wealth and whatever. But I wasn’t all that great at leading human beings who are working for me. And that was a real learning curve. I needed to improve my leadership skills.
Peter Williams: Yeah, absolutely. It is about leadership and it’s about a number of factors. It’s a bad having strategies and having that shared vision that you’re creating, able to not only have the vision and the strategy but being able to execute or implement it, if you need, If you’re looking to implement strategies, then you need people. So you need good people and you need to know how to empower those people as distinct from being just a manager, which is task oriented. So that’s one of the big, big take outs for most business owners is that their people management skills have to be first class. And if they don’t, this is where, again, external advisors around the advisory board can help cause it can, it can identify where the holes and the goals are in business, in a, in a medium-sized business. So what’s working, what’s not working, what do you need to do to improve it? Because quite often as business owners, we get too close to our own business. And so having external eyes, external perspectives can really highlight the areas for improvement. And then you can just set about actually doing something about that. But there’s absolutely no doubt that people and having the right people in the right spot, doing the right thing and doing things right are the key to, to success and growth.
Chris Ilsley: Peter, that it’s been a pleasure having you on the program. Thank you very much for your time.
Petter Williams: Okay. You’re welcome.
Chris Ilsley: Peter Williams, by the way, is the SME growth specialist at small and medium enterprise growth specialist and the founder of the Australian Advisory Boards.