9 May 2013 How can an SME avoid business failure? Some useful tips to guide you.

By Alistair Jaque, Partner and Kelly Marshall, Solicitor

In Brief

Two recent surveys of SME business owners and their advisers revealed some key reasons why businesses fail.

Reasons for failure

According to a CCH survey, SME owners believe that most business failures are a result of poor cost management, whilst many of their advisers believe that failure is often due to a poorly-designed business model.  Both agree that inexperienced management is a key factor, but a significant number of SME owners also believe that some business failures are unavoidable as the causes are out of their control.

The survey also confirmed that an SME's accountant is its most trusted adviser for the continued success and growth of its business.  Financial advisers are also highly regarded.

A recent PwC Report highlighted that the key to business success is careful planning and formulating a long term business plan.  This demonstrates that the initial emphasis should be on how the SME is formed and managed to provide the SME with the greatest ability to capitalise on its business plan.

The results of both the CCH Survey and the PwC Report correspond with our experiences with SMEs.

Poorly designed business models and inadequate protection of assets, such as technology and intellectual property, can severely impede the success of a business by eroding its margins.

If these issues are not addressed at an early stage, this often results in additional expenditure required to restructure the business or transfer assets to other entities, which are easily preventable with advanced planning.

Useful tips for business success

Both the CCH Survey and PwC Report emphasise that investing in your business early by seeking the right advice from experienced professionals will ultimately save costs and ensure that you can focus on realising the true potential of your business.

As a starting point, you should check whether your business is structured to maximise tax benefits and to provide for an ultimate exit.  You should also check that you can identify and protect your technology and intellectual property, and take advantage of generous research and development grants which are currently available.

If you would like to know more, see our complimentary Practical Guide for SMEs or contact:

Alistair Jaque, Partner  |  Phone: +61 2 9233 5544  |  Email:
Kelly Marshall, Associate  |  Phone: +61 2 9233 5544  |  Email:

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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