Small Business in Australia consolidate revenue improvements after steady year

25 Sep 2014

Declining revenue down to lowest level in five years

One quarter confident of short-term economic improvement

Significant turnaround in manufacturing sector

Australia’s SME sector is consolidating the gains of the last 12 months, with one of the highest revenue performances in the last three years and those experiencing revenue declines falling to a five year low, according to the latest research from Australia’s leading accounting software provider.

The September 2014 MYOB Business Monitor Report highlights a relatively stable level of revenue growth among local SMEs and a continuation of the downward trend in falling revenue. Under a third (31%) reported a decrease in annual revenue in the 12 months to August 2014, and 21% reported an increase. A further 42% reported a steady level of revenue over the past 12 months.

Looking ahead to 2015, almost a third of business operators (32%) expect to see revenue increase in the next 12 months, though down slightly from 34% in the March survey. A reduced number of businesses also expect revenue to decline in the year to August 2015, down from 22% in March to 18% in the latest survey.

Business confidence also remains relatively steady, with 24% of SME operators expecting the economy to improve in the next year – up slightly from 23% a year ago.

Most improved was the business pipeline, with 36% of business operators reporting more work or sales booked in the next 12 months. This figure has trended steadily up over the last year, from 28% in August 2013, and 33% in the March 2014 Business Monitor.

MYOB CEO Tim Reed says, “We are very pleased to see the latest revenue results for Australia’s SMEs continuing to move in the right direction. Although the latest Business Monitor reflects that running a small business in the current economic environment is not easy, many local operators are beginning to see their hard work pay dividends.

“This survey again reinforces how resilient our SME community is and underscores how important they are to the economy as a whole. It is particularly heartening to see many more businesses looking forward to an improved end to the year, and confident about what 2015 will bring.

“It’s also pleasing to see the manufacturing sector, which has had a pretty tough road to travel in recent years, showing renewed vigour.”

Manufacturing has seen a significant turn around in the last six months, with the proportion of businesses seeing revenue decline falling from 43% in the March Monitor to 32% in the latest survey. Those experiencing revenue gains rose to 29% – the highest level across the sectors. A quarter of businesses in the retail and hospitality sector were likely to see revenue gains, though 38% in the industry reported a fall.

Just 14% of businesses in the agriculture, forestry and fishing reported increasing revenue, down from 26% in March. The finance and insurance industry has also fallen off the highs it saw in March, when 33% reported revenue gains. Only 20% of businesses in the sector saw revenue increase in the latest Monitor, though 64% reported a steady revenue performance.

In the next 12 months, the finance and insurance industry is expecting the highest revenue growth levels (36%), with manufacturing and wholesale (35%) and agribusiness (34%) also expecting solid improvements.

Of the mainland states, SMEs based in Western Australia (23%) and Queensland (23%) were most likely to see revenue rise. However, the environment in Queensland is currently the most volatile for business, with 41% reporting a revenue fall.

In the year ahead, 37% of business operators in Queensland expect revenue to improve, followed by those in Victoria (35%) and New South Wales (32%).

Fuel and attracting new customers the leading concerns

Pain at the pump remains the major pressure for a third of SMEs – reflecting a consistent concern about the cost of fuel since March 2011. Other key pressures include attracting new customers (32% – up from 26% in the last wave of the Monitor), cash flow (30%), profitability and price margins (28%) and the timing of customer payments – another rising concern, up from 20% to 27%.

Of the industries, operators in agriculture, forestry and fishing felt the most pressure from fuel prices (59%). Operators in manufacturing and wholesale felt the most pressure from attracting new customers and competitive activity.

Businesses remain focused on keeping or acquiring customers

The key areas of increased investment for SME operators for the next 12 months are:

  1. Customer retention strategies – 27%
  2. Customer acquisition strategies – 26%
  3. Prices and margins on the products or services sold – 25%

The number or variety of products or services offered by the business – 26%

The top three priorities have been relatively consistent over the last three years, through six consecutive waves of the Business Monitor.

“There’s some encouraging news in this latest MYOB Business Monitor,” says Mr Reed. “But it is worth highlighting the continued challenges facing the SME sector.”

“Small businesses are having to work hard for every customer and every sale, while feeling the squeeze from both external pressures like the cost of fuel and the high dollar and market conditions, including competition, margins and cash flow. There are still more small businesses reporting declining revenue than seeing revenue grow. In this environment, where the revenue outlook is improving but is not yet strong, we need to remain focused on doing everything we can to support our SME community.”

For MYOB product information, research results, business tips, discussions, client service and more visit the MYOB website, or its The Pulse Blog, LinkedIn, Twitter, Facebook and YouTube.

-ends-

For further comment or other information please contact:

Naomi Beames, MYOB Public Relations and Corporate Affairs Manager

P: 02 9089 9039 / M: 427 223 841/ E: naomi.beames@myob.com

Mitchell Hunt, Haystac Public Affairs Senior Account Manager

P: 02 8094 7739 / M: 0428 224 961 / E: myob@haystac.com.au

About the MYOB Business Monitor

Established in 2004, the MYOB Business Monitor is a national survey of small and medium business owners and managers, commissioned to independent market research firm Colmar Brunton. The most recent study ran in January and February 2014, surveying 1,032 Australian operators from sole traders to mid-sized companies, representing the major industry sectors. The Monitor researches business performance and attitudes around areas such as profitability, cash flow, pipeline work, technology usage and government. Note: the weighting of MYOB client and non-client respondents is reflective of overall market proportions.

About MYOB

Established in 1991, MYOB is Australia’s leading accounting software provider. It makes life easier for approx. 1.2 million businesses across Australia and New Zealand by simplifying accounting, payroll, tax, CRM, websites, job costing, practice management, inventory and more. MYOB also provides ongoing client support via many channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and spends more than AU$35 million annually on research and development. For more information, visit myob.com.au.