FOR the first time in more than five years, South Australian business owners and operators are more confident about their future than our interstate counterparts.

Business confidence now tops the nation and business conditions are significantly improving.

Compared to a year ago when South Australian business confidence was lower than that in Tasmania, New South Wales and Queensland, we now sit on top of the ladder.

The September quarter Business SA — William Buck Survey of Business Expectations is painting the state’s transforming economy, and that includes small businesses growing, strengthening, and diversifying as we transition away from traditional manufacturing.

Businesses are more optimistic about the coming quarter than how they actually trended in September, which is a positive sign and reflects the changing mood across the state. That optimism about the coming quarter is reflected in a range of metrics including general business conditions, sales revenue, profitability and capital expenditure.

In each of those areas, businesses expect further improvements as we roll through the December quarter. With general business conditions, 29 per cent found they improved through to September, yet 35 per cent think they will be even better in December.

The same with sales revenue — 35 per cent experienced increases, yet 49 per cent expect an even better December. Twenty-eight per cent saw profitability rise, and an increased 33 per cent expect it to be even better by Christmas.

The wages story is interesting — labour costs rose for 32 per cent, but fewer businesses expected an increase next quarter. Wage growth is unquestioningly important to the broader economy, but we know it can be difficult for operators to wear unless they increase the cost of their goods or services or gain efficiencies.

Only 21 per cent of businesses thought they would put up prices to cope with labour costs and other pressures, which means they’re either going to wear the impost or increase sales to improve profitability.

Longer term wage pressure is on the horizon because there’s a shortage of skilled workers in many industries. Some employers just can’t find the right people. The great news, and potential cure, is the joint federal and state $202 million Skilling South Australia Fund, which aims to create 20,800 new apprentices.

There will also be growing pressure on small or family businesses, particularly as 45 per cent of respondents indicated they would activate succession strategies to either sell or hand down their business within five years. With such a high number of businesses changing hands, we will see a transformation of business ownership in South Australia in the next five years.

There are only two ways to grow your business — either organically or via the mergers and acquisitions pathway. With only 19 per cent of businesses indicating they’ll go onto the open market, businesses looking to grow must be proactive if they want to thrive. It’s time to draw up a target list and get out and meet with potential suitors. Most mergers and acquisitions don’t happen quickly — so starting conversations early is wise. While business conditions are ripe, it’s time to be proactive.