SMB Growth Expectations Spell Consulting Opportunity for CPAs

In good news for CPAs providing consulting services to small and midsized businesses (SMBs), that market sector is bullish about its near term prospects but is failing to tap into key areas that could further spur growth, according to a nationwide survey of SMBs conducted by accounting and consulting services giant RSM McGladrey.


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In the survey of more than 1,000 top executives at SMBs in manufacturing or distribution, 58 percent said they believe their companies are “thriving and growing”, and only 4 percent said that business is “declining.” But these companies are also missing out on key growth and revenue enhancing opportunities in tax planning and several other areas in which many CPAs offer specialized consulting, such as staffing services, going global, and accessing grants and other incentives from government agencies.

“The strength of small and midsized companies is their ability to innovate, but many of these organizations are overlooking important ways to ensure their businesses continue to thrive in the future,” says Tom Murphy, executive vice president of RSM McGladrey’s manufacturing and wholesale distribution practice.

Tax planning is one of the areas where SMBs most sorely need help, according to the survey. Among distribution companies, just 9 percent use research and development (R&D) tax credits, 6 percent use the domestic manufacturers’ deduction (DMD), and 9 percent use international tax incentives. Among manufacturers, 61 percent use R&D credits, 36 percent use international incentives, 64 percent use the DMD, and just 65 percent use state and local tax credits.

RSM further found that the manufacturing and distribution SMBs “are not enthusiastically responding to globalization,” and many view the global economy "as more of a challenge than an opportunity.” Half of the survey participants expect no revenue growth in this area, and only 25 percent said that globalization has helped them lower costs, while more than 40 percent said it has forced them to lower selling prices.

Among other things, the SMBs are missing out on is exporting or supplying to the major multi-national companies, according to Murphy. Also, only 10 percent or less of manufacturers and distributors surveyed make use of the many state and federal small business assistance programs available to them.

Despite projecting strong growth, many in both sectors lack sophistication in recruiting staff. The survey found that 43 percent of the SMBs surveyed “seek their main source of skilled labor in the general marketplace rather than mining technical, community and vocational schools for employees.”

The SMBs’ generally rosy predictions for future growth belie the fact that “many organizations are missing key opportunities to grow and prosper,” RSM concluded.

Similar SMB studies also show a general bullishness, but, unlike the RSM report, did not detect the market’s underlying inefficiencies.

The National Federation of Independent Business' monthly optimism index has fluctuated between 98 and 101.5 since the beginning of the year, according to an Associated Press story that also reported that banking company National City Corp. says that Midwestern small business owners “were feeling optimistic in May because of expansion plans by major corporations; that helped mute their anxiety about gas prices.”

JC

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