Business Radar 2024 Understanding the businesses that drive Australia's economy
The Business Radar report canvasses the trends, challenges and opportunities experienced by Australia’s middle market businesses. Independently commissioned, our most recent survey captured the sentiment of 142 owners and leaders across a range of growth stages, states and industries.
Here, you’ll read how business leaders feel about the current and future success of their businesses and what that could indicate for Australia’s economy.
We also deep dive into succession – are Australian middle market leaders planning for it or just seeing how it goes? And are they leaving themselves enough time to plan?
Key findings
- Confidence is steady and boosted by solid demand, but still being chipped away by increased costs.
- Australia’s middle market is thinking about succession planning but may not be leaving themselves enough time.
- Succession planning discussions are being put off – how to have the hard conversation.
Read on to learn how you can proactively address these challenges and ensure your business continues to thrive or access a PDF version here.
Business confidence
Are we on the up?
After some ups and downs, business confidence is refreshingly steady in our latest Business Radar report, with the slightest suggestion of an upward trend.
In our previous Business Radar survey, confidence continued to dip from the spikes of mid-2023. Still higher than pre-pandemic figures, the numbers seemed to present an adjustment back to normality rather than more troubling omens. Our latest report seems to confirm that assessment, with confidence levels barely moving since earlier in the year.
Demand benefits and cost worries hold steady
In the last Business Radar report, demand for products and services took the top spot of positive influencing factors – 43% naming it as their top influencing factor.
This is over double the number of respondents who placed it in their top three in September 2023.
Similarly, tech advancements and consumer preferences as positive influencing factors have held steady since the last report.
However, just as in the last survey, that rosy picture is marred by continuing increases in business costs. In fact the top four factors negatively impacting business confidence all still relate to cost: changing interest rates, inflation and increased labour and operating costs.
Higher demand, higher costs, better tech
In the last 12 months the factors most affecting business confidence have largely been shuffling around the top five.
Since late 2023, we’ve seen ESG initiatives and changing interest rates give way to increased demand for products and services and increasing operating costs.
Digging into the detail we can see that positive factors like increased demand (43%) or tech advancements (37%) slightly outweigh negative factors such as increased operating costs (42%) or inflation (34%).
Business leaders breathe easier
In the last Business Radar report, we expected to see a gentle decline in overall confidence levels as the year progressed and the market resettled after 2023’s bump. This report’s results offer a slightly different picture – not so much a steady decline, but steady as she goes.
It’s telling that these stable numbers appear across the board – a sign that business leaders are navigating the current business environment well after four years of uncertainty.
Download the full report to learn more about the trends and challenges affecting business leaders’ confidence.
Succession planning
Is there a succession plan in place?
Dig further, and the data suggests that some leaders may be underestimating the time and complexity involved in passing on the torch.
For example, when split by business turnover in the accompanying graph, these figures show larger businesses are propping up the averages.
Over two-thirds of businesses turning over more than $10m have a rough or formal plan.
Only 45% of businesses with under $10m turnover have the same – and a far higher proportion than the average believe they don’t need one at all (10% vs 4%).
In our full report we investigate how these figures are affected when segmented based on size, from less than 100 employees, 100 – 200 employees, and over 200 employees.
For many, change is coming soon – are they ready?
A surprisingly high percentage (27%) of businesses said they expect to change owners or senior leaders within the next 12 months. An even greater percentage of businesses turning over more than $10m expect a change sooner – one third are anticipating a change within 12 months and a further third in this group think that change is coming within the next three years.
However, Pitcher Partners sees a disconnect between these numbers and the respondents’ expected timings. Our experts suggest that succession planning normally takes between 5 to 10 years as part of a larger strategic plan, so we would have expected a far higher percentage of these businesses to have one formalised plan in place.
Succession outcomes
In general, Australian middle market businesses plan to pass their business on to someone they know – a family member, internal candidate or co-owner. Interestingly, smaller businesses are more likely to hand over to family (28%) while mid-sized businesses are more likely to hand over to an internal candidate (25%).
Despite these expectations, 43% of businesses don’t have even a rough plan in place to ensure a successful transition outcome.Having a discussion with a professional will help guide a business through the myriad of options, obstacles and potential traps throughout the succession process.
Replacing leaders internally often stems from organic growth and cultural alignment within the business. However, this might require revising remuneration and profit-sharing agreements during the transition to equity succession. While internal candidates understand the company culture, outsiders can introduce fresh energy and skills needed for advancement. Identifying these skill gaps with modern leadership is essential and may take years of preparation rather than responding hastily to retirement or another trigger event.
One clear outlier is businesses with over 200 employees, 22% of these surveyed leaders or owners expect to be succeeded by an external candidate. This starkly contrasts with their smaller counterparts – 4% of businesses with fewer than 100 employees expect to hand over to an external party, and 8% of businesses with 100-200 employees. Pitcher Partners Perth Executive Director Robert Prince speaks to why this pattern exists in the quote to the right. We further unpack the considerations that should be made when deciding who to pass the reins too in our full report.
Case Study – Akubra
Akubra, the iconic Australian brand, had seen five generations of family ownership and internal leadership succession, with support from a six member board. One regular topic of conversation was – what does the future look like and what does succession mean to Akubra?
The family recognised the need for fresh ideas and additional infrastructure to sustain the Akubra legacy. It was important they found someone who would protect the company, support longstanding staff, create jobs, and invest in its future, ensuring the growth of Australian manufacturing.
With guidance from Pitcher Partners, Akubra established a solid framework and plan to be in a position to seize the right opportunity, which came at the end of last year bringing together two iconic brands – RM Williams and Akubra.
Grant Parish, Partner, Pitcher Partners Sydney
The pressures of productivity
Productivity shifts
In our survey of middle market businesses from early 2024, we found a surprising overall increase in reported productivity.
Almost two thirds of the middle market businesses reported that, by comparison, their business operations were more productive than two years prior.
While the snapshot canvassed over 150 businesses across industries, sizes and states, the sample did have some bias towards those industries most likely to see overall productivity growth, according to the Australian Bureau of Statistics.
Despite the generally positive view on productivity gains, middle market business leaders are still worried.
- What are driving these concerns?
- What factors have most impacted businesses productivity.
- The key areas of prioritisation to improve productivity.
- What the middle market can do to move the needle.
Productivity panics
Despite the generally positive view on productivity gains, our middle market business leaders are worried. 52% are extremely or very concerned about the levels of productivity in their business, although larger businesses are less so (33% are not concerned vs 22% overall). So, what’s driving these concerns?
We asked leaders to name the internal factors that most impact their productivity, and labour issues are looming large. They see difficulty attracting and retaining talent as the greatest challenge to productivity (30%), with employee burnout and engagement issues taking two more of the top five spots. These labour issues are likely amplified by labour market shortages and skills gaps, identified as the key external factors impacting productivity
A nuanced view from those with productivity gains
For those who’d seen no productivity gains, labour was top of mind: difficulty attracting and retaining talent and employee burnout. Respondents agreed that major external factors included skills shortages and complacency in Australian society. Institutional training gaps were also a top factor (24%), echoing recent comments from Productivity Commissioner Catherine de Fontenay.
Businesses reporting productivity gains also agreed the skilled labour shortage was a factor (34%). However, this group seems to have a more nuanced view. They’re concerned with getting more from existing employees and see innovation as important as labour issues. 27% named both declining employee engagement and the absence of employee training programmes as influencing factors.
Respondents agreed that a lack of focus on innovation and limited investment in tech was impacting productivity.
Business insights
Mind your Ps: processes, platforms and people
People will always form the core of business productivity, especially those in service industries. Motivating, engaging, and supporting are key. However, these will only take you so far.
Once your team is working at its peak, your productivity gains are capped. Pushing beyond this can often be counterproductive – you burn through goodwill, minimising future efficiency, engagement and retention.
The answer is to build systems, processes and technology around your people to help them work smarter. These innovations don’t even need to be ground-breaking – they just have to help your people do more with less.
Meet our middle market businesses
This report defines middle market businesses as typically employing 20–200 people with annual revenue of $2–$500 million. While their operating models, sizes and industries vary widely, these businesses can be categorised into four lifecycle stages.
Our experts
