The Money.com.au study on business financial security

September 2020

Business financial security

About the study

Money.com.au commissioned a survey of an independent panel of 261 Australian business owners. The survey sought to understand whether the length of time a business has operated impacts their level of financial security. The survey also uncovered businesses’ ability to forecast profits, whether they still experience cash flow issues, and whether they still see ups and downs in revenue.

Money.com.au surveyed business owners across a range of organisational sizes: micro-businesses (1-10 employees), SMEs (11-50 employees), medium (51-200 employees) and large (more than 200 employees). Respondents also represented various lengths of time their businesses have operated: young businesses (less than five years in operation) and established (more than five years).

Financial security study

Does business financial security really grow with time?

The survey reveals that 61 per cent of established business owners that have been operating for at least five years are at a stage where they are able to pay themselves comfortably. This is slightly more than the 56 per cent of owners of businesses younger than five years old who said the same.

Which States have a higher proportion of comfortably paid business owners?

Across the States, a higher proportion of business owners in Western Australia (72 per cent) pay themselves comfortably, compared with 54 per cent of SA business owners and an equal 57 per cent of those based in NSW and the ACT.

Is your business at a stage where you are paying yourself comfortably?

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Salaries

Are business owners paying themselves similar salaries to CEOs of the same-sized business?

Among business owners overall, more than half (51 per cent) said they are not paying themselves similar to a CEO of the same-sized company, while a third (30 per cent) are unsure if their salary is similar.

The fairly equal proportion of owners of established and young businesses are not paying themselves similar salaries to their counterparts: 59 per cent of established business owners admitting this compared with 53 per cent of owners of young businesses.

Across the States, a higher proportion (71 per cent) of ACT business owners said they do not pay themselves a similar salary to CEOs of the same-sized company, compared with 49 per cent of those in NSW, and 43 per cent in Victoria.

Are you paying yourself similar to what a CEO would earn in a business of the same size?

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How much profit do Australian businesses make?

The survey revealed that one quarter (26 per cent) of Australian businesses make 5-10 per cent profit on revenue, while 22 per cent make 10-20 per cent profit on revenue. An equal 15 per cent make less than 5 per cent profit on revenue.

Profit stages

What do business profits look like at different stages of operation?

Twice the amount of established businesses make significant profits: 20 per cent make more than 30 per cent profit on revenue, compared with 10 per cent of young businesses who make the same level of profit.

Of concern, just over a quarter (29 per cent) of ACT businesses make no profit, compared with an equal 13 per cent of WA and NSW businesses, and just 10 per cent of those in Victoria.

How much profit is your business making?

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Cash flow issues

Are businesses experiencing cash flow issues?

The survey found that 49 per cent of businesses in the survey do not have cash flow issues. However, more than half (51 per cent) of business owners admit they experience minor or serious cash flow issues.

A higher proportion of established businesses do not experience cash flow issues, with more than half (53 per cent) of established business owners citing this. In contrast, two-thirds (64 per cent) of young businesses admit they experience cash flow issues. Fourteen (14) per cent say the issue is serious.

The survey also found that the larger the business, the more likely they are to avoid cash flow issues. This is true for more than half (55 per cent) of large businesses, compared with 47 per cent of medium-sized business, and 44 per cent of small businesses.

Cash flow issues

Is your business at a stage where you are not experiencing serious cash flow issues?

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Across the States, a higher proportion (71 per cent) of ACT businesses do not experience cash flow issues, compared with 51 per cent of Victorian businesses, and 46 per cent of NSW businesses.

Is your business at a stage where you are not experiencing serious cash flow issues?

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Can business owners project the next 12 months of profits accurately?

The survey found that just 58 per cent of business owners overall said they can forecast profits over the next 12 months with reasonable accuracy.

Established and young businesses are on an even playing field when it comes to their ability to project profits: 58 per cent of established businesses and 49 per cent of young businesses can forecast their profits over the next 12 months with reasonable accuracy. 

Across the States, a higher proportion of Queensland business owners (66 per cent) and WA business owners (63 per cent) can forecast profits with reasonable accuracy. This compares with 49 per cent of those in NSW and 43 per cent in the ACT.

Profit forecast

Can your business forecast its profits over the next 12 months with reasonable accuracy?

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Do businesses experience significant ups and downs in revenue?

Respondents were also asked if their business is still experiencing significant ups and downs in revenue, and whether revenue differs significantly between months, quarters or years. A third (31 per cent) said they experience significant ups and downs in revenue between quarters, while 26 per cent of business owners admit their revenue differs significantly between months.

A similar proportion of owners of established and young businesses said they experience significant ups and downs in revenue: 35 per cent of established businesses and 34 per cent of young businesses.

The smaller the business, the more likely revenue differs significantly between quarters. For instance, 41 per cent of small business owners admit their revenue differs significantly between quarters, compared with 28 per cent of medium business owners and 19 per cent of large business owners.

Is your business still experiencing significant ups and downs in revenue?

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Across the States, 71 per cent of ACT business owners are not experiencing ups and downs in revenue, compared with 55 per cent of South Australian business owners, 41 per cent of those in NSW, and 36 per cent of Victorians.

Is your business still experiencing significant ups and downs in revenue?

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