According to the latest MYOB Business Monitor, the outlook for revenue growth for Australian startups in the next 12 months is weaker than in 2013. And the biggest pressure point for startups was found to be fuel prices.
It should, however, be noted that the terms ‘startup’ and ‘SME’ were both used in the announcement and appeared to refer to the same thing. This suggests that the study does not clearly differentiate between small and medium enterprises and startups, which is a problem on its own because although startups are usually small-sized businesses, not all small businesses are startups. SMEs and startups have different pain points, so a study about business confidence and pain points needs to consider variables carefully.
Nevertheless, in the report, 63 percent of ‘startups’ recorded rising or steady revenue in the 12 months to August 2014. Specifically, 23 percent reported a revenue increase (down from 24 percent); 27 percent reported a revenue decline (down from 34 percent), and 40 percent reported steady revenue (up from 29 percent).
Although this indicates steady business performance in 2014, confidence in revenue growth for the year ahead is significantly lower than figures from a year ago. Only 26 percent of startups expected revenue to rise in the 12 months to August 2015 (down from 38 percent) and confidence toward a steady revenue also decreased, with 27 percent of startups expecting a steady revenue in the coming 12 months, compared to 35 percent a year ago.
MYOB CEO Tim Reed said, “It’s discouraging to see a ‘grey cloud’ hovering over this dynamic, eager group’s confidence levels in the year ahead.”
“It’s critical for government and industry to inject practical, strategic policy to help lift this aspiring group in their quest to foster innovation and to keep the flame of entrepreneurialism burning.
“It is my hope that the recent announcement by the government to remove the upfront tax on stock options is supported by all parties and passes the parliament quickly; these figures show that start-ups need this sort of flexibility now more than ever.”
Interestingly, fuel prices was ranked as the foremost ‘pain point’ for startups, followed by cashflow, attracting new customers, price margins and profitability, and competitive activity. For the remainder of this year, startups intend to increase their investment in marketing and advertising as well as increasing the number or variety of products and services.
“There is some correlation between the pain points affecting startups and the investment strategies to which they intend to give a greater focus. For instance, increasing customer acquisition and retention strategies can help minimise the pressure of attracting new customers,” said Reed.
He added that despite cashflow being one of the top three pain points for startups, 59 percent intended to keep their investment in a business advisor (such as an accountant) and that 24 percent are planning to increase their investment in working with a business advisor.
“We strongly encourage all businesses that are struggling with their cashflow to work closely with a business advisor who can help identify business ‘hotspots’ and the solutions to help address these issues,” said Reed.
Top 5 business pressures for startups in 2015:
- Fuel prices – and more than 1 in 3 (36 percent) were reporting ‘high levels of pressure’
- Cashflow – and 1 in 3 (33 percent) were reporting ‘high levels of pressure’
- Attracting new customers – and in 1 in 3 (33 percent) were reporting ‘high levels of pressure’
- Price margins and profitability – and nearly 1 in 4 (24 percent) were reporting ‘high levels of pressure’
- Competitive activity and nearly 1 in 5 (21 percent) were reporting ‘high levels of pressure’
Top 5 areas of increased investment for startups in 2014:
- Customer acquisition strategies
- Customer retention strategies
- The dollar value of spending on marketing and advertising their business online
- The number or variety of products and services
- The sale of products and services online.