Lead Story

Issue No. 34 - April/May 2007

Small Business [The Untold Story]

by Professor Richard Blandy

Introduction

How many houses, townhouses, terrace houses, flats, apartments, units and other dwellings are in your street? If there are more than ten dwellings, the chances are that you have at least one small business operating in your street. The national ratio of home based small businesses to the number of dwellings is about 1.1:10. Nearly 1 million Australian businesses are home based. Nearly 1 million tiny economic units are embedded in the most fundamental units of our social fabric: our homes.

This astounding fact seems to be missed in our broad understanding of how our economic system operates. Our images of work and production are mostly of giant factories and tall office buildings owned by huge enterprises listed on the stock exchange. These large corporations (and even larger government agencies) do, indeed, produce a large share of our national output and employ large numbers of us. But the economic and social significance of the small and medium (SME) business sector is far greater than that of the large business sector. This often seems not to be understood in our economic and social thinking and in government policies. Perhaps this is because politicians and public servants have a natural preference to deal with just a few, powerful people. Policies that advance the interests of a million small firms (like reducing the amount of small-business-strangling red tape, for example) are less easy to capture in TV footage on the 6 o’clock news than policies that advance the interests of the big end of town (like providing special advantages to induce a big company to locate or expand here).

An economy of minnows

In June 2006, there were nearly 2 million businesses in Australia. Their size distribution is presented in Table 1, below.

Table 1: Employment Size Distribution of Australian Businesses, June 2006

Source: ABS, Counts of Australian Businesses, Including Entries and Exits, June 2003 – June 2006, Canberra, 26 February 2007, cat. no. 8165.0.

As Table 1 shows, 58.9 per cent of Australian businesses are operated solely by the principals of the business (mostly sole operators). The ABS defines Small Business as businesses employing fewer than 20 persons. As Table 1 shows, 95.6 per cent of Australian businesses fall into this category. The ABS defines Small and Medium Business as businesses employing fewer than 200 persons. As Table 1 shows, 99.7 per cent of Australian businesses are SMEs.

The big firms (with 200 or more employees) employ much more than 0.3 per cent of the total labour force, of course. Big firms employ about a quarter (26.0 per cent) of all the people at work in the private sector. Medium firms (20-199 employees) employ about a quarter (26.7 per cent), as well. Small firms (0-19 employees) employ (or use the services of) just under half (47.3 per cent) of all the people at work in the private sector. So, even if one looks at where people are employed rather than the numbers of firms in each size category, SMEs (firms employing fewer than 200 people) dominate the economic landscape. SMEs employ three quarters of everyone at work in the private sector in Australia.

Where the small businesses are

In what industries do these firms dominate? Nearly half a million businesses (492,453 businesses, 25 per cent of the total) are engaged in property and business services. Next come

•308,405 construction businesses (16 per cent of the total),

•217,684 retail trade businesses (11 per cent of the total),

•214,879 agriculture, forestry and fishing businesses (also11 per cent),

•129,646 finance and insurance businesses (7 per cent),

•115,642 transport and storage businesses (6 per cent) and

•106,778 manufacturing businesses (5 per cent).

No other industry division has more than 90,000 businesses.

This picture is rather different from the industrial distribution of output (value added). Property and business services is still the biggest sector (13 per cent of value added), but only by a whisker from manufacturing (12 per cent). After that come finance and insurance (7.5 per cent), construction and retail (dead heating on 7 per cent each), transport and storage (5 per cent) and agriculture, forestry and fishing (3 per cent).

The relative size (in value added terms) of the average firm in each sector can be calculated from these last two sets of figures.

Manufacturing businesses are nearly 21/2 times the size of the average business in the economy, showing that manufacturing is not a good model of a typical business. Transport and storage, and finance and insurance businesses are better models - they are typically about the size of an average business in the economy. Retail trade businesses are about 60 per cent of the size of the average business; property and business services businesses are about half the average size; construction businesses about 40 per cent of the average size; and agriculture, forestry and fishing businesses are just over a quarter of the size of the average Australian business (and only 1/10th the size of the average manufacturing business).

Small business (and people) demographics

South Australia has about 140,000 of Australia’s 1.964 million businesses (about 7 per cent, which is similar to South Australia’s share of Australia’s population). The number of businesses in South Australia is growing at 1.3 per cent per year (compared with the national growth rate of 1.7 per cent per year).

New businesses are born in South Australia at the rate of about 15 per cent annually (compared with the national rate of about 17 per cent). Businesses die in South Australia at the rate of about 13 per cent annually (compared with the national rate of about 15 per cent). So, South Australia’s business growth rate (which is slightly slower than the national rate) comes from a lower birth rate, but a higher survival rate, than nationally (a bit like our population demographics compared with the national picture). Sixty-two per cent of businesses born in South Australia in 2003-04 survived to June 2006, compared with 58 per cent nationally. South Australian business operators are older than in any other State: thirty-seven per cent are more than 50 years old (compared with 31 per cent nationally). Perhaps related to their older age, only 61 per cent of South Australian business operators work full-time (the least in any State), compared with 67 per cent nationally.

Queensland has the highest rate of business growth among the States (like Queensland’s population demographics compared with the national picture). Queensland has the highest business birth rate (about 18.5 per cent annually) as well as the highest business death rate (about 15.5 per cent annually).

Business growth follows population growth because people create businesses. The faster population grows the more new businesses there will be. If South Australia is able to attract more migrants, more new businesses will be created in South Australia. The low rate of immigration to South Australia is reflected in the low proportion (25 per cent) of overseas-born business operators in South Australia. Nationally, about 30 per cent of all small business operators in Australia are born overseas , a bigger proportion than the (approximately) 20 per cent overseas-born in the population. Immigration is good not only for population growth, but also for business growth. In Western Australia, 39 per cent of business operators are born overseas! Again, seemingly related to South Australia’s older, slower-growing population and businesses, only 51 per cent of South Australian small businesses make use of the internet, compared with 56 per cent nationally (and 58 per cent in Queensland).

As might be expected, looking at birth rates among businesses of different sizes, the highest birth rate (18.4 per cent per year - about 220,000 businesses) is found in businesses in which only the principals are involved (about two thirds of all types of business births). Only half of these businesses survive more than three years, however.

The next highest birth rate is among firms with less than 5 employees (three quarters of whom survive more than three years), while the next highest birth rate is among businesses with 5-19 employees (more than 85 per cent of which survive more than three years). Births of small businesses (with 0-19 employees) account for 99 per cent of all business births.

Family and home based businesses

Demography and business evolution are further entwined in the substantial number of family businesses. While the definition of what constitutes a family business varies between studies, there can be no doubt that family businesses are an important class of businesses, especially small businesses, where it has been estimated that around 60 per cent of small businesses are family businesses. Many family businesses are not small, of course. It has been estimated that 27 per cent of firms listed on the ASX are family controlled, for example.

A major issue for family businesses is succession between generations. Between two thirds and three quarters of family businesses die or are sold out of the founding family during the first generation. Only 5-15 per cent continue to the third generation. However, given that half of all start-ups cease operation within three years, the survival track record of new family businesses is clearly superior to that of businesses in general.

As was noted at the beginning of this article, many small businesses (often also family businesses) are home based. Home based small businesses in South Australia account for 6.6 per cent of the national total (a bit less than South Australia’s share of Australia’s small businesses as a whole). Seventy-seven per cent of South Australia’s home-based small businesses have no employees (69 per cent nationally), 61 per cent use a computer (68 per cent nationally), and 51 per cent (the same share as all South Australian small businesses) have access to the internet (59 per cent nationally). Thirty-three per cent of South Australia’s home based small business operators are women (29 per cent nationally), while 38 per cent are over 50 years old (31 per cent nationally).

Confidence and motivation

Confidence is everything to a small business. Over the last seven years, confidence has increased greatly among Australian SMEs, although it has been on a slight downward trend over the past 21/2 years, with a sharp recovery in the past 6 months. South Australian SMEs are more confident than SMEs are nationally, but not as confident as those in Queensland and Western Australia. Small businesses are less confident than medium businesses at present. Nationally, SMEs’ perceptions of the economy have improved sharply in the last six months, but South Australian SMEs’ perceptions of the economy a year from now are the gloomiest of all the States. This is a somewhat worrying sign for South Australia’s economic outlook more broadly.

As I discovered 20 years ago when I was Director of the National Institute of Labour Studies Incorporated (a research business that was – and still is – part of Flinders University), operating a small business, is a dynamic, fulfilling and demanding activity. It is a wonderful commentary on the optimism and vitality of our fellow countrymen and women that so many are willing to become principals/CEOs of small businesses. Very hard work faces them for a start. On average, full-time business principals work about 50 hours a week, with about 5 per cent working more than 75 hours a week. They cannot afford to be surrounded by slackers, either. Every member of a small business comes into razor sharp focus to his and her fellow workers – both as a human being and as a contributor to the group’s collective survival and prosperity. The only way forward in a small business is for all involved to be committed and to do their utmost. It is impossible to run a successful small business by bureaucratic rules and regulations. Life in a small business is risky but real – a life of shared endeavours, joys and sorrows, triumphs and disasters. Small business people are great people and their lives are full of meaning.

Economists believe that businesses try to maximise their profits. I suppose that they do, in a way. But the uncertainties surrounding the outcomes of their actions are so great in a small business that it is never clear whether they are achieving this admirable objective, or not. Running a small business has more in common with fishing than making a lot of money. Most small businesses try to find a good fishing spot, bait their hooks as cunningly as possible, and hope the fish will bite.

Some people (like Gordon Gecko in the movie, Wall Street, for example) believe that successful business people are driven by greed. Nothing could be further from the truth. Greed is as destructive in business life as it is in life generally. Successful business people are usually frugal, brave and kind, rather than avaricious and grasping.

What drives small businesses on is not the desire to emulate Bill Gates or Kerry Packer, but the hope of making a productive contribution to our community that will be recognised and valued by their employees, customers, suppliers, collaborators, competitors and neighbours.

There is no better way to demonstrate this than to present the stories of a number of small businesses. Below I have assembled a collection of these stories, some from the businesses of friends and associates, some from businesses which provide me with services or in which I have invested, and some with which I have no connection at all.

Ten pen sketches of successful small businesses

Rathjen & Associates Pty Ltd

458 Fullarton Road

Myrtle Bank SA 5064

Tel: 8338 0277.

Rathjen & Associates Pty Ltd is a chartered accounting company. It acts for a wide range of different businesses, in particular a number of medical practitioners and other professionals. The company was formed ten years ago with the only director being James Rathjen, a chartered accountant and registered tax agent, now with over 25 years experience. Business turnover has increased by 58 per cent over the last 2 years.

The business is small. Only Mr Rathjen is employed by the company on a full-time basis. During busy periods, contract accountants are used to assist completion of work. Mr Rathjen believes that being smaller and offering a personalised service has assisted his business in satisfying his clients’ needs.

The reasons Mr Rathjen started his own business are to:

•be his own boss,

•become responsible for his own clients,

•enjoy greater flexibility in his work,

•enjoy greater personal satisfaction, and

•enjoy greater financial rewards.

Mr Rathjen believes that being his own boss has been very helpful in managing his family commitments due to the greater flexibility in his working hours that this permits. The main disadvantage in being a small business, which many small business owners experience, is that it is very difficult to have holidays for long periods due to clients’ needs.

He has worked in large accounting firms but prefers running his own small accounting business due to the greater flexibility he enjoys and the high level of personal satisfaction he obtains from assisting his own clients.

DW Bottom Line Pty Ltd.

PO Box 8345

Station Arcade Adelaide SA 5000

Tel: 0414 844 347

DW Bottom Line Pty Ltd is a transition strategy business set up by Ms Donny Walford in September 2006. After a successful career in banking and finance, human resources and executive recruitment, business representation, government and not-for-profit organisations, Ms Walford was confident she could improve the bottom line of most types of organisation. This was the impetus for her setting up her company, DW Bottom Line Pty Ltd.

DW Bottom Line Transition Strategists™ work with Boards and key executives to set goals, and to plan and implement strategies to shift organisations from where they are now to where they want to be.

Leaders in every organisation are responding to an avalanche of change: changes in technology, changes in employee expectations, globalisation and climate change that change every facet of business strategy. Organisations must continually renew and transform to meet the challenges of tomorrow.

The essence of DW Bottom Line’s business is to help organisations to create opportunities from the need to change, to assist organisations and people to grow and develop by innovating. Ms Walford has established key alliances with Carnegie Management Group (CMG), Leapfrog Training and Active Operations Management (AOM) to assist her company to deliver its services to its clients.

DW Bottom Line’s focus is on three critical areas:

•human resources,

•strategic leadership development, and

•marketing and business development.

The business has shown steady growth in the last six months, which Ms Walford has managed by outsourcing the administration of her company to a number of reliable contractors and by utilising flexible arrangements inherent in her alliance partners. Future plans include employing dynamic, energetic people who are committed to the same values and principles as she is, namely, contributing to the State’s economic growth and developing the State’s capabilities.

Ms Walford attributes her success to her strong contact network that regularly refers business to her, and also to her varied background, skills and experience.

In her opinion, owning your own business is both exciting and challenging, while her greatest enjoyment is gained from working with diverse organisations and people to make a noticeable difference in their achievement. She also deeply enjoys the freedom and flexibility that comes from working for yourself.

SCM Advisory

POBox566

Glenside 5065 SA

Tel: 0411 042 130

SCM Advisory is a boutique supply chain consulting business offering both advisory and project implementation capabilities to governments, associations and firms.

Scott McKay started SCM in 2001 after sixteen years in finance and operations management roles across a range of industry sectors in Europe, China and Australia, when he saw a gap in the supply chain consulting arena for practical experience.

Based in Adelaide since 2005, SCM operates through a national support network of advisors who are former practitioners with significant operational experience and with a pragmatic approach to improving clients’ businesses.

SCM sees its special capability as its wealth of international practical experience across a range of sectors. This experience is brought together with established methodologies to help SCM’s clients to design solutions by analysing causes of suboptimal performance and helping to deliver improvements to profits and services.

SCM’s capabilities extend from strategic planning, financial, operational and project management, organisational change, and systems and infrastructure selection and implementation. It has undertaken projects in mining, the public sector, retail, industrial, agribusiness, distribution and infrastructure.

The majority of SCM’s work is now undertaken within South Australia. While SCM sees the defence and resource sectors as growth opportunities, mature sectors continue to present gains from new supply chain efficiencies.

Mr McKay finds that clients value a personal approach, especially of having a single point of contact throughout a relationship. Consequently, SCM focuses on maintaining personal relationships, creating value for clients and itself through building trust and loyalty, ensuring long-term profitable relationships and personal referrals.

H J Handley Chartered Accountants

6-8 Todd Street

Port Adelaide SA 5015

Tel: 8440 2440

H J Handley Chartered Accountants is a small family accounting firm with offices in Port Adelaide and Adelaide city. The firm consists of Mr Jim Handley and four staff, including Mr Handley’s son, Nick, who is completing his accounting degree. The family dimension of the firm is regarded as important by both Jim and Nick Handley. The business has existed since July 1991 and has operated from Port Adelaide for the last eight years.

Mr Handley has been a chartered accountant for 26 years and has worked for the majority of that time with small and medium businesses. Consequently, H J Handley Chartered Accountants has become a core party in the Todd Street Business Chambers small business incubator, because many small businesses do not have the resources to employ qualified accounting expertise.

H J Handley listens to and cares about its clients, devoting the necessary time and resources so that it can understand its clients’ problems. The firm also offers a range of services to train new business owners to become more self-sufficient.

The firm believes that it is important that all staff are up-to-date with tax law changes. It holds weekly staff meetings to discuss such changes, as well other matters that may affect the firm’s clients.

H J Handley regards itself as lucky because its staff have been very loyal, and turnover has been very small as a result. Mr Handley believes that it is important for the success of a firm that it develops a culture that breeds staff loyalty.

Mr Handley also believes that embracing new technology has enabled staff to increase their value to clients, for example by using the internet to communicate with clients and to transfer data between the firm and its clients.

An area of particular attention in the services that H J Handley provides its clients is the financing of business expansion. Many clients believe that they need to grow for their businesses to be successful. However, funding growth is a major issue and requires careful planning and constant management.

Mr Handley believes that the substantial development occurring in Port Adelaide is providing major opportunities for local businesses, which the firm is well positioned to support through the accounting services it provides.

Greatrex Sporting Goods

630 Port Road,

Beverley, S.A. 5009

Tel: 8445 7077

Greatrex Sporting Goods is a family business established in 1975 by former Australian baseballer Kevin Greatrex and his wife Judy, with the aim initially to supply quality and affordable baseball, softball and teeball equipment. Mr Greatrex had travelled extensively with the Australian baseball team and became aware of the deficiencies in product available in Australia.

Initially the business was run from home, but when stocks of goods became too high, the business moved to a warehouse and associated office at Beverley.

Greatrex Sporting Goods now has a baseball and softball retail store, provides baseball and softball coaching services, designs and manufactures baseball, softball, netball, cycling and other active sports team uniforms, and laser cuts logos for application to uniforms and various promotional objects.

Originally teachers, Mr and Mrs Greatrex used their organisational and communication skills and inquiring minds to build their business. They started with the intention to be wholesale suppliers, but the profile of baseball was relatively low and payments from stores were sometimes very slow. Consequently, they decided to move into specialty niche retailing as a better prospect.

As baseball teams needed high quality uniforms as well as equipment, Mr and Mrs Greatrex decided to invest in the necessary machinery, experienced staff and education to manufacture uniforms. Mrs Greatrex gained a thorough understanding of the industry by taking cutting and manufacturing courses and by visiting trade fairs and fabric mills. Subsequently, significant training in a wide range of computer programmes and business administration has been important.

Investment and good staff have been the keys to developing the business. Through investment in computerised garment pattern design systems, embroidery machinery, laser cutting and sublimation printing technology, niche marketing of custom made and in-house-decorated imported garments has been successful at a time when the textile industry is in decline.

Staff levels reached a high of 28 when all of the garment manufacturing was done in house. Currently there are eight staff, with some manufacturing contracted to small associated factories. Embroidery of inexpensive Chinese imports is now more frequent, rather than Australian-made uniforms.

Mr and Mrs Greatrex’s eldest son, Jay, has joined the family business and is responsible for the sublimation printing and embroidery departments. The Greatrex’s other three children also contribute to discussions of future developments, but each is following their own career.

Barker Wealth Management Pty Ltd

178 Fullarton Road

Dulwich SA 5065

Tel: 8364 3688

Barker Wealth Management (BWM) is an independent, boutique financial advisory business. Founded in 1987 by (the late) Dr Tony Barker and Mrs Peggy Barker, a unique husband and wife team with backgrounds in mathematical physics – they instilled scientific process and high moral ethics into their business, standing out in the then burgeoning and somewhat unstructured industry. It is a family business.

Today, with business growth spurred on by strong demand for superannuation and retirement planning, BWM adheres to those original principles, complemented by a strong commitment to clients, in order to best navigate the maze of complex rules affecting investments, superannuation, tax, and small businesses. Clients are mainly accepted from referrals, so as to maintain the company’s focus on superior service.

BWM was amongst the first in Australia to adopt a holistic approach to financial planning where career, family, health and inter-generational wealth planning are all considered. BWM stresses that due to the personal and confidential nature of financial guidance to individuals and companies, client trust is paramount and must be supported by unparalleled thoroughness and discipline in the financial planning process, to ensure an optimum outcome for each client’s situation.

Consequently, emphasis is placed on ensuring its 12 staff are committed to BWM values and philosophy. A balance of life experiences and age supported by strong technical qualifications ensures a winning team. Recently, BWM won the Securitor Financial Group Practice of the Year Award.

BWM also has a philosophy of technological innovation in its operational systems in order to maximise efficiency without compromising its “high touch” service to its clients.

Looking to the future, BWM is focused on developing its younger advisers to eventually take on stewardship of the business. In particular, Mrs Barker’s daughter Catherine and son-in-law Will Henwood, returned from successful careers in the USA to join the business in 2003. Will’s background ranges from working with top accountancy firms in the US to a leading e-commerce company based in Silicon Valley. Catherine was a CEO for orchestras, including the Boston Philharmonic Orchestra

Educational Aids School Supplies

7-9 Davis Street

Wingfield SA 5013

Tel: 8347 2066

Educational Aids (Aust) Pty. Ltd was founded in 1953. It now has an annual turnover of $1.5 million.

Mr. Sidney Wainwright, the founder, was active in school affairs as the member of a School Council, and agreed to make equipment for the school’s classrooms. The first designs were suggested by teachers, laying the foundations for its long term liaison with educational professionals.

Production increased rapidly as other schools learned of the product range and placed orders. Educational Aids (Aust) Pty. Ltd. now supplies a wide range of school needs, specialising in mathematics for students of all levels. For many decades, Educational Aids (Aust) Pty. Ltd. has now been a respected manufacturer of some of Australia’s best-known wood-crafted aids.

Investment in computer technology for the production of educational aids was attempted, but was not successful. However, this investment led the company into new fields of contract wood products routering, and kitchen carcass and profile door construction, with further expansion occurring into two-pack coating.

Mr Mark Wainwright (3rd generation member of the Wainwright family business) has now taken over control of the business, with the intention of growing both its educational side and its new manufacturing direction. He is also looking for imported products that will compliment and expand the educational supply side of the business.

Mark’s father, Mr. Bob Wainwright, attributes much of the company’s success to its close liaison with educationalists. The firm frequently consults end users about its products and often becomes involved with classroom teachers in developing new items.

The skilled staff at Educational Aids (Aust) Pty. Ltd. discuss needs and possible solutions, and create prototypes for testing in the actual classroom. The firm is also willing to become involved with experimental work, aware that not all trials succeed but that a long-term development program is essential to maintain progress.

Educational Aids (Aust) Pty. Ltd. is a responsible and proud corporate citizen. It has long been a supporter of the Primary Mathematics Association, sponsoring publications, supplying prizes for contests and providing materials for workshops and seminars.

LabTech Systems Ltd

7/114 Rundle Street

Kent Town SA 5067

Tel: 8362 2698

LabTech Systems is an ASX-listed medical technology development company incorporated in Adelaide in 2003. The company’s current focus is on commercialising its patented laboratory equipment, MicroStreak®. It has recently won an AusIndustry Commercial Ready Grant of $2.14 million to progress this technology. It has a market capitalisation of $25 million. Its Managing Director is Lusia Guthrie.

MicroStreak® automates the preparation of specimens on standard agar plates for microbiology testing in pathology and industry. The technology is novel and provides superior results compared to traditional methods. A market opportunity exists to take advantage of the lack of process automation in microbiology laboratories globally.

Notwithstanding that the MicroStreak® invention came out of South Australia, and Adelaide hosts the company’s corporate office and legal, IP and regulatory advisors, Ms Guthrie considers LabTech Systems to be an “Australian” company rather than a “South Australian” company. Early support from investors came out of Adelaide and Sydney before spreading to Melbourne. Melbourne is also home to Invetech Pty Ltd, LabTech System’s engineering arm, as well as the company’s corporate advisory, media relations and marketing support.

Part of LabTech Systems’ success can be attributed to its having clear strategies for the business, the product and the market. However, the other key to success has been to have a degree of flexibility, reviewing and revising strategies to take advantage of opportunities. For example, the discovery in the USA and UK that MicroStreak® needs only slight modifications to be usable in overseas labs (which have an urgent need for this sort of automation) led to an acceleration of the product development and associated capital raising program.

LabTech Systems employs three permanent staff members, an expert board and a team of regular consultants. It out sources specialised services as required. The company is able in this way to work with individuals and companies that are at the top of their field. Notwithstanding, Ms Guthrie considers the company’s consultants and contractors as part of the LabTech Systems team, and feels that they are equally excited by MicroStreak’s® journey.

Ms Guthrie says that the key lesson she has learned is that nothing is achieved without taking some significant risks, backing yourself and what you know, and finding the money and the people to help you do it.

Thornton Group (Australia) Pty Ltd

60 Greenhill Road

Wayville SA 5034

Tel: 8271 5144

Thornton Group is a financial planning business. It manages approximately $400million of client funds, mainly in superannuation; its turnover has reached $4million per annum; and it employs 22 people, which takes it just out of the small business league into the ranks of medium businesses.

Thornton Group has built its business as a boutique player specialising in self-managed super for high net worth individuals. Although it has had its own license for more than 10 years, it is a relatively young, vibrant company that focuses on strategic advice, rather than simply offering investment products.

The company operates in a niche market and provide a niche service offering. Its primary aim is to meet the short and long-term needs and goals of its clients. It has built its business and its reputation by offering its clients very specific, tailored solutions. It does not offer off-the-shelf or ‘nearly-there’ packages.

Thornton Group has developed a highly disciplined approach to researching investments. Possessing its own Australian Financial Services Licence gives it the flexibility to recommend products based solely on investment merit – regardless of industry popularity, financial incentives or ownership.

Its main point of difference is providing an integrated service including strategic advice, investment advice and administration.

Thornton Group’s services include:

•corporate superannuation;

•strategic advice and financial planning;

•risk insurance;

•salary packaging;

•retirement planning; and

•self managed superannuation administration.

The company looks at legislative changes and proactively advises its clients how it may be able to improve their financial standing.

Thornton Group has built a stable and harmonious working environment into which it selectively recruits staff based on their character and the complementary skills that they can bring to the business.

Dadanco Pty Ltd

PO Box 288

Hindmarsh SA 5007

Tel: 8346 3588

Dadanco was set up in 1995 by University of Adelaide Engineering Professor, Sam Luxton, and his Serbian PhD student, Vladimir Petrovic, in an attempt to commercialise a new air conditioning technology. Dadanco has an annual turnover of $7-8 million and employs 25 people, two of whom are in Sydney. Dr Petrovic is now Managing Director and CEO of the company, as well as having become an Australian citizen.

Dadanco’s technology has many operational and cost advantages. It can reduce the CO2 emissions associated with the air-conditioning of large buildings by 25 per cent, for example, which makes it very attractive to the Green Buildings market. Because the technology can be retrofitted to many old buildings, it could make a useful contribution in the fight against global warming, as well as saving electricity. Demand for Dadanco’s technology is expected to increase rapidly because of global concerns about CO2 emissions.

Dadanco has its own niche market within the commercial property sector, therefore - revitalising existing buildings with the world’s most energy efficient and environmentally friendly solution. Dadanco’s air conditioning system – Active Chilled Beams – has been instrumental in many buildings achieving 5 star green classification.

Since its inception, Dadanco has successfully supplied air conditioning solutions not only at the University of Adelaide, the University of South Australia, the State Library, the Santos building, the Australian Credit Union and the Holden Hill Police Station but to more than 160 buildings world wide, including in NZ, Singapore, India, Sweden, the UK and the USA.

Conclusion

These ten, successful, small-to-medium, South Australian businesses are highly varied in what they do, but there are commonalities as well.

•They tend to specialise on particular market niches.

•They tend to place heavy emphasis on technology.

•They tend to emphasise customer service.

•They tend to emphasise the value of well-trained, highly motivated staff.

Perhaps what we see in these companies is how to build on economic rock in this age of global competition – do what you can be very good at, in a focussed way, for a market that will place significant value on what you can do for it. This may not be a very big market, but it will be a secure market with revenues and profits that are sufficiently robust to keep a small team of people relatively-securely employed, and well-enough remunerated over a long-enough period of time.

References

 I wish to record my thanks to the following people and organisations for their assistance in the writing of this article: Peggy Barker, Eastside Business Enterprise Centre, Western Area Business Enterprise Centre, Judy Greatrex, Dean Guse, Lusia Guthrie, Jim Handley, Mike Hawkins, Lynette Hay, Scott McKay, Samantha Murray, Vladimir Petrovic, Jim Rathjen, Phil Sims, Graham Smoker, Bob Wainwright, Mark Wainwright, Graham Wakeling, Ian Webber and Duncan Wiech.

In 2004, there were 856,000 home based small businesses in Australia (Australian Bureau of Statistics, Characteristics of Small Business: Australia, 2004, Canberra, 28 April 2005, cat. No. 8127, table 3.1, p.73). In 2001, there were 7.103 million dwellings according to the Census. Allowing for growth in the housing stock over three years, the total number of dwellings probably would have reached about 7.5 million in 2004. Hence, there are about 1.1 home based businesses for every 10 dwellings in Australia.

2 See ABS, Year Book Australia 2002, Canberra, 25 January 2002, cat. no. 1301.0, table 13.8.

3 It is reasonable to take the Australian Bureau of Statistics’ overall business counts as being essentially a count of SMEs because SMEs account for more 99.7 per cent of all the firms being counted.

4 See ABS, Counts of Australian Businesses, including Entries and Exits, June 2003-June 2006, Canberra, 26 February 2007, cat. no. 8165, table 1, p.8.

5 See ABS, Year Book Australia 2007, Canberra, 24 January 2007, cat. no. 1301.0, table 13.1.

6 ABS, Counts of Australian Businesses, including Entries and Exits, June 2003-June 2006, Canberra, 26 February 2007, cat. no. 8165, table 4, p.10.

7 ABS, Counts of Australian Businesses, including Entries and Exits, June 2003-June 2006, Canberra, 26 February, 2007, cat. no. 8165, tables 5 and 6, p.11.

8 ABS, Characteristics of Small Business: Australia, 2004, Canberra, 28 April 2005, cat. no. 8127, tables 1.1-1.3, pp.9-25.

9 ABS, Characteristics of Small Business: Australia, 2004, Canberra, 28 April 2005, cat. no. 8127, p.8.

10ABS, Characteristics of Small Business: Australia, 2004, Canberra, 28 April 2005, cat. no. 8127, table 2.5, pp.63-69.

11ABS, Counts of Australian Businesses, including Entries and Exits, June 2003-June 2006, Canberra, 26 February 2007, cat. no. 8165, tables 10-12, pp.14-15.

12 About 500 large businesses (employing 200 or more people) are born annually. About 350 large firms also die annually. Only 80 per cent of large businesses survive more than three years after they are born.

13 I am grateful for the input here of Philip Sims, Chairman of the SA Chapter of Family Business Australia.

14 Hockey, J., “Comment: National Small Business Survey Results”, National Business Bulletin, January 2003, p.53.

15 Mroczkowski, N., “Using Accounts to Delineate Listed Firms in Australian Capital markets 2002”, Proceedings of the AAAA Conference, Nagoya, Japan, October 2002.

16 Smyrnios, K., C. Romano and G. Tomenski, The Australian Family and Private Business Survey, Monash University, 1997.

17 ABS, Characteristics of Small Business: Australia, 2004, Canberra, 28 April 2005, cat. no. 8127, tables 3.1-3.3, pp.73-94.

18 Sensis Business Index – Small and Medium Enterprises, February 2007, p.6.

19 Sensis Business Index – Small and Medium Enterprises, February 2007, p.7.

20 Sensis Business Index – Small and Medium Enterprises, February 2007, p.8.