Survey finds most SMEs shun professional advice
SMALL business owners are prone to a "lone wolf" approach in decision-making, according to new research.
The vast majority are more likely to trust their own instincts over advice from family, friends, their business partner and even professional advisers.
The research revealed what SMEs (small-to-medium enterprises) see as the reasons for small business failure. The inability to manage or anticipate rising costs is seen as the main reason, followed by inexperienced management, a bad business model and lack of access to capital.
The findings are based on a survey of more than 1000 Australian owners of small-to-medium enterprises commissioned by accounting software provider CCH, a unit of global information services group Wolters Kluwer.
With ABS data showing that more than half of small businesses in Australia do not survive beyond their first four years, the CCH survey revealed a cavalier attitude among SME owners toward the value of professional business advice.
Only 26% of respondents considered the failure to seek professional advice to be a factor in business failure, while 70% trusted their "gut instinct" over any professional advice.
When pressed on which external adviser they trusted most, SME operators nominated their accountant ahead of their financial planner, business partner or lawyer. They were least likely to turn to their family and friends for financial and business advice.
The CEO of Wolters Kluwer Asia Pacific, Russell Evans, said the findings suggested SME operators guarded independence of decision-making closely, but could be too willing to back their own instincts ahead of sound professional advice.
"It's not surprising a small business owner will micromanage, especially in the early stages of their business life, but this should not be at the expense of being open to advice from trusted professionals," Mr Evans said.
In contrast to the response from SME owners, a separate CCH survey of more than 210 accountants servicing small businesses ranked bad business models as the main reason that SMEs fail.
This view is backed up by ASIC data on 5600 business failures in 2011-12.
The data shows poor strategic management to be the most common cause of failure (19%), with another 15% of failures attributed to poor financial control.