Sharemarket turmoil

I am sure that most smart entrepreneurs will have spent the weekend thinking about how their business will withstand the inevitable drop in consumer and business confidence that we are going to see in the next few months as a result of the sharemarket turmoil.
While a recession in Australia looks extremely unlikely, the spending strike we've seen in the last 12 months will deepen as consumers retreat further into their shells.
That points to a tough few months. New customers may be harder to find, deals are likely to get harder to close and clients could reduce their typical spend. Cashflow is a particular danger at times like this and business owners and managers should be extra vigilant about late payers.
But while the confidence of business and household consumers is likely to take a beating, this is not the time for entrepreneurs and their teams to retreat into their shells.
The reason? Australian SMEs come into this rough patch much better placed than they entered the GFC.
Here are 10 reasons why:

• The lesson of the GFC – too much debt kills – has been well-learned by SMEs, who have trimmed their borrowings and scaled back financing requirements in recent years. This will give SMEs flexibility and options if the economy slows further.
• SMEs appear to be running reasonably lean – another learning of the GFC. While skills shortages are affecting some businesses, SMEs have been cautious about hiring. This should mean overheads are relatively low.
• Australian SMEs delivered strong growth during the GFC and over the last two years. In 2009, for example, our Smart50 list delivered average growth of 91% and created 900 jobs.
• While households are not spending, they are actually reasonably well placed to do so. Thanks to a savings spree, household balance sheets are in much better shape than during the GFC.
• The RBA upgraded its growth forecast for 2011-12 by a quarter 0.25% to 4.5% on Friday. The first half of calendar 2012 should see the economy accelerate.
• Australia's unemployment rate is at 5% and is unlikely to rise very far. Remember, in the US they are dealing with unemployment above 9%.
• Australia does not have the sovereign debt issues of the US or Europe. Our debt is tiny compared with these nations, so the sort of austerity measures likely in the northern hemisphere won't be seen here.
• Australia's Federal Budget is in good shape. If the Government needs to stimulate the economy (and it probably won't) it has lots of scope to do so.
• Australia is perfectly positioned to ride the continued growth in China and other parts of Asia. While the mining sector is the biggest beneficiary of this, we're much better off tied to Asia than Europe or America right now.
• Australian SME entrepreneurs are smart, nimble and flexible. We have the capabilities and skills to adjust to the changing needs of markets and customers and have proven this time and time again.

This last point is very important. SME business leaders have shown they can deal with turmoil and grow their business.
Consumer confidence might be sinking, but entrepreneurs have good reason to be confident in their ability to deal with this challenge.