Outgrowing SME: What you need to know about becoming a large enterprise

The shift from a small to medium enterprise (SME) to a large company is a challenging one, and requires careful consideration and planning.

In this article, LDB partner Luke Henry explains some of the key elements to consider, and reinforces why it is so important to seek expert advice in the process.

Defining SMEs versus large enterprises

While there are different definitions out there, the Australian Securities and Investments Commission (ASIC) defines a proprietary company as being “large” if, at the end of the financial year, the company and any entities it controls meets two of the below three criteria:

• A consolidated revenue of $25 million or more
• Consolidated gross assets of $12.5 million or more, and
• 50 or more employees.

A “small” company has revenue, assets and a staff of less than these benchmarks.

Here are some key things to consider when making the shift from an SME to a large company:

The right people for the job

To successfully become a large enterprise, small-to-medium businesses need to leverage people in a better fashion and delegate decision-making to those who are appropriately qualified. They need high-calibre people who can grow various parts of the business.

Assess the business plan

Careful analysis of the business plan should be undertaken to determine the correct path for the business, in terms of the growth it wants to achieve. Prudent financial management is also imperative, in order to ensure it has the working capital to grow.

Cash flow planning

Profit is only one part of the solution – the key to successfully becoming a large enterprise is cash flow. Any business that is growing needs cash flow to get it off the ground and drive it into that period where it starts creating profit and delivers returns to the shareholders.

Tax implications

Many business owners make the transition to a larger enterprise with the objective of being able to eventually sell the business. Having the right advice early on to structure the business for an eventual sale can have a significant improvement on the tax implications of a business exit.

Seek expert advice

Business and finance experts at LDB bring extensive experience to the table. Having advised a whole range of different business owners across various industries, LDB’s team have a unique perspective on the way in which businesses operate. We can offer advice that essentially eases the process of business growth as much as possible.

A lot of business owners are intuitive in the way they run their business and they’ve obviously got a good handle on their industry, but they may not necessarily have strong financial skills. They can leverage our skillset to ensure significant decisions are made with consideration of the financial implications.

For advice about becoming a large enterprise, please get in touch with LDB by calling (03) 9875 2900 or filling in the contact form below.