New Zealand's start-ups expecting strong growth this year

04 Jul 2013

Start-ups work longer and for less financial reward than more established SMEs, yet are far more confident about their revenue performance this year, according to a special MYOB Business Monitor start-up report released today.

The report, based on the recent Business Monitor survey conducted by Colmar Brunton, compares the attitude, performance and expectations of New Zealand businesses less than two years old with that of their peers.

In the year to February 2013, start-up businesses experienced less revenue volatility than SMEs on the whole. Perhaps unsurprisingly, given their length of time in business, start-ups were significantly less likely to report a fall in annual revenue - only 12% reported this, compared to the overall SME average of 27%. Slightly fewer start-ups experienced revenue gains in this time, with 30% compared to 32% overall. 34% of start-ups experienced steady revenue, compared to 38% overall.

CEO Tim Reed says, “Starting a business is one of the most challenging and rewarding milestones an individual can achieve. To help new businesses succeed, it’s important we understand the challenges they face, and apply greater focus to making it easier to start and build a business. We should also loudly celebrate start-up and small business success.

“New Zealand may be one of the best places in the world1 to start a new business, but few new ventures succeed without a wide range of community, industry and government support.”

Start-ups more confident about year ahead

According to the report, start-up business owners and managers were far more confident of financial performance expectations for 2013 than their more established counterparts. 53% expected revenue to increase, compared to 41% of SMEs on average. They were also less likely to predict a fall, with just 8% forecasting this, while an average of 12% of SMEs expected revenue to be down. 31% expected steady revenue, compared to 42% of all SMEs. The remainder were not yet sure what to expect.

Start-up operators started the year strongly, with 46% reporting more work than usual for their February to April 2013 pipeline. 14% reported less than usual. Again, start-ups outperformed the whole SME group in this measure; on average, one third (33%) of SMEs reported more pipeline work and 19% reported less.

Attracting new customers a top pressure for start-ups

Start-up business operators believe their biggest challenge over the year is attracting new customers. Nearly three quarters (71%) report this as a pressure for their operation, with over one quarter (27%) expecting this pressure to be ‘quite a lot’ (21%) or ‘extreme’ (6%).

Rising fuel prices was also a major challenge for start-ups. Pain at the pump will be significant for many, with 63% reporting this as a pressure and 33% expecting it to place quite a lot of (22%) or extreme (11%) pressure on them. Competitive activity, price margins and profitability, and cash flow all ranked equally in third place, with 60% of start-ups saying they anticipate these pressures throughout 2013.

Kelly Wilkings, owner and directorof For The Love of Food, started her own catering business because she was “sick of other people getting the credit for her great work”. Ms Wilkings has high hopes for her catering business, but since opening the business she’s come across a few challenges.

“My biggest challenge was setting up supply chains with no prior history – I really had to break into the industry in that sense. My second challenge was maintaining confidence and knowing that I’m good enough. I’ve been very lucky that I have a great support system,” she says.

New business owners work longer hours & sacrifice holidays

Start-up respondents also reported working longer hours - their mean working week was 42.4 hours, compared to 38.3 hours for SMEs overall. More than half (54%) of start-up operators work more than 40 hours a week in their business, 38% work between 40 and 60 hours per week, and 15% work more than 60 hours per week.

Taking on a heavy workload is just one of the sacrifices new business owners tend to make. To support their investment, 58% of start-ups juggled running their new operation with another job or work outside their business. 40% had delayed investment in new equipment and technology, while more than one-quarter (26%) had postponed or cancelled sustainability measures in the business.

Highlighting further the challenges of running a business, nearly one third (31%) of start-up operators had not taken holidays since starting their business and 29% had worked extra hours in it over the last year. Having said that, they were still more likely than others to take leave – 44% of SMEs overall had not taken any holidays at all.

Keri-Anne Dilworth, owner of Dilworth Photography, started her business because she was struggling to find a job that suited her family life. Along with enjoying the rewards of being her own boss, Ms Dilworth has had to sacrifice time spent with family and friends and put off investment in equipment to support her business.

In summer, Ms Dilworth usually spends up to 45 hours per week working in the business, while in winter she only spends 10 to 15 hours. She says, “In summer I am shooting every Saturday but I try to have one weekend off a month.”

MYOB CEO Tim Reed says, “At MYOB we actively support, recognise and celebrate the journey of start-ups and the contribution they make to the local economy. We urge the government and larger businesses to strengthen their focus as we look to strengthen ours.”

“This community is a vital and dynamic business force for New Zealand. Many are on their way to becoming tomorrow’s business leaders and influencers. Start-ups represent the next generation of employers, suppliers, innovators and investors in economic growth and development. And even though not every start-up succeeds, each plays a role in enriching the business environment, creating demand, testing ideas and supporting the livelihoods of many other New Zealanders.”

Download the MYOB Business Monitor - Start-ups - Special Report (PDF 1.11MB)

For MYOB product information, research results, business tips, discussions, customer service and more visit the MYOB Business Monitor webpage, The Pulse blog, MYOB Twitter, MYOB Facebook or MYOB YouTube.

1 World Bank Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises

-ENDS-

For further information or immediate comment, please contact:

Kristy Sheppard

MYOB

Tel: 09 925 3560

Mob: +61 407 450 860

Email: kristy.sheppard@myob.com

Gerard Blank

The Agency Communications Limited

Tel: 03 341 5841

Mob: 0275 243 629

Email: gerard@theagencynz.co.nz

About MYOB New Zealand

Established in 1991, MYOB is New Zealand's largest business management solutions provider. It makes life easier for approx. 1.2 million businesses across New Zealand and Australia, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory and more. MYOB provides ongoing support via many client service 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 now spends more than NZ$35 million annually on research and development. In 2013, MYOB expanded its offerings with the acquisition of accounting solutions provider BankLink. For more information, visit myob.co.nz.

About the MYOB business monitor

The MYOB Business Monitor is a national survey of 1,000+ New Zealand small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. It has run since 2009, commissioned to independent market research firm Colmar Brunton. This most recent survey ran late January/early February 2013. The Monitor researches business performance and attitudes in areas such as profitability, cash flow, pipeline, technology usage and the government. The weighting of respondents by both geographical location and sector is based on overall market proportions as established by Statistics New Zealand and is drawn from an independent survey group, which includes both MYOB clients and non-clients.