New research released today by MYOB, Australia’s largest business management solutions provider, shows the economic confidence of small to medium business operators has not improved over the past few months nor has their revenue situation.
The July 2012 MYOB Business Monitor found fewer than one fifth (19%) of the 1,004 business owners and managers surveyed nationally expected the domestic economy to improve within 12 months. This is unchanged from the March 2012 report, which revealed the lowest percentage recorded since the March 2009 report (16%).
In the latest study, almost one quarter (24%) believed any improvement was more than two years away.
Only 18% reported an increase in revenue in the past 12 months, which was a slight decline on the 20% who said so in the prior report. More than twice that number (41%) said revenue fell, compared to 38% in the prior report. 37% experienced steady revenue and 4% didn’t know. Business operators in the Traditionals generation were least likely to experience an increase, at 13% (49% saw a fall), while Generation Y were the most likely, at 28% (34% saw a fall).
Those in the construction and trade industries were hit hardest – 52% experienced a revenue loss in the past 12 months. They were closely followed by transport, postal and warehousing operators at 49%. The business, professional and property services industry was the most likely to see a rise (21%), closely followed by manufacturing and wholesale (20%).
MYOB CEO Tim Reed says, “Fewer than one in five small to medium business operators have enjoyed revenue growth in the past year, while more than two in five have seen their revenue fall. It is little wonder the vast majority can’t see our economy improving any time soon – two in three believe any improvement is at least one year away.
“The new financial year is an ideal time for business owners to boost their potential for success by seeking smarter, more cost-effective ways of running their business. The $6,500 instant tax write-off for new assets, for example, can assist in the investment of new equipment that improves business productivity and cash flow. Another good way to improve cash flow is by attracting more prospective customers through a website that is included in major search engines.
“With the carbon tax introduction, there are tangible advantages for those who also take a proactive approach to reducing energy and material consumption, and lowering production costs.”
Revenue expectations, pipeline and growth activities
On a positive note, almost one third (29%) of business operators anticipated their revenue to rise in the next 12 months – more than the 22% who expected it to fall. 43% saw it being stable and 7% were unsure. 29% had more activity in their pipeline in the next three months than they would usually expect, but for 43% it was the same and for 27% it was less.
With activity across various business elements, the areas that will see the largest increase over this year were:
- Customer retention strategies – 37%
- Customer acquisition strategies – 35%
- The number or variety of products or services offered by the business – 27%
- Prices and margins on the products/services sold – 27%
- The amount paid to employees – 26%
Mr Reed says, “One big surprise was that more than half the business operators we surveyed – 55% – will keep their prices and margins the same this year. In fact, 13% will drop them. With the carbon tax set to impact the cost of goods and services for most if not all, one in two won’t pass that on to customers.
“This indicates that many will simply cop carbon tax related cost increases on the chin. I encourage business owners to consider whether this is the best course of action when they’re planning how to attract and keep customers – frequently, good service rates above price in a customer’s mind. Service can allow a business to put their prices up and customers understand the need for these moves.”
Marketing and IT spending
For 61%, the value of their spending on marketing and advertising activities will remain the same, 19% will beef it up and 12% will reduce their investment. A similar trend appeared with the investment in IT systems and processes (66%, 16% and 8%, respectively).
Reed encourages business operators to consider taking a calculated risk to boost their profile and productivity, and possibly gain a competitive advantage.
“With a relatively small proportion of business owners and managers planning to increase their marketing and advertising spend this year, those who do could very well see a spike in customers that flows through to sales. In tough times it can be tempting to cut back on brand building activities but take a step back and consider whether that really is the right move. Chances are, your competitors won’t be,” he says.
“The same goes for your technology spend. Are there investments you can make this year that will result in time saved, improved team engagement and more productive processes? Right now many cloud based solutions avoid the need to spend money upfront but bring immediate benefit.
“Over 30,000 of our clients have embraced MYOB Live cloud solutions in the past 12 months, allowing their business to take advantage of great tools that provide them with the freedom to work anywhere, anytime.”
Top pressure points
Fuel prices are expected to cause the most pain in the next year, ranking first and well ahead of all the pressure points surveyed for the third consecutive MYOB Business Monitor. Cash flow remained in position at second, while price margin and profitability overtook interest rates to reach third place. Interest rates dropped to fourth, equal with attracting new customers, which rose one place from the prior report.
More than one quarter of business operators have borrowed money in the last 12 months
Today’s Reserve Bank of Australia cash rate decision will be of great interest to the 26% of business operators who borrowed money in the last 12 months to spend on or in their business. The types of businesses most likely to have done so were small sized (6-19 employees) and those in agriculture, forestry and fishing, with 42% of respondents apiece.
Almost one in two (44%) said the reason they borrowed was to help keep their business going, to ensure its survival. 30% borrowed to grow their products or services or operational levels of the business and 24% did so to maintain their current operational levels or products or services.