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A fresh survey has revealed that less than one quarter of Australian business operators expect the domestic economy to improve within 12 months, with the manufacturing and wholesale sector least positive. Find out why.
The August 2013 MYOB Business Monitor Report, by accounting software provider MYOB, surveyed 1,022 SMEs one month prior to the election and revealed the business performance outlook and economic confidence of small to medium business operators (SMEs) has fallen in the past six months.
According to the study, Less than one quarter expect the domestic economy to improve within 12 months (23 per cent), down from 25 per cent in the March 2013 report. The proportion expecting an improvement to take one to two years also dropped to 35 per cent, down from 37 per cent.
Respondents who indicated that the recovery would take over two years, however, rose to 26 per cent, up from 22 per cent.
Businesses across the agriculture, forestry and fishing sector and the wholesale and manufacturing sector were least positive about revenue performance for this financial year, with 35 per cent of those in the wholesale and manufacturing sector expecting a revenue fall.
Overall, only one quarter of businesses - 25 per cent – are anticipating a revenue rise, down from 30 per cent six months ago. 22 per cent are expecting a fall (up from 19 per cent), 44 per cent are expecting revenue to be stable (up from 42 per cent) and 9 per cent weren’t sure (slightly down from 10 per cent).
Two fifths of respondents, however, reported steady revenue when asked to look back over the past year (40 per cent), a little more than those who saw revenue decline (39 per cent). The proportion who experienced a revenue rise was unchanged from the two prior reports (18 per cent).
Manufacturing and wholesale industry operators were hit hardest, with 54 per cent experiencing a revenue fall. This was closely followed by operators in agribusiness, forestry and fishing (53 per cent). The finance and insurance industry was the most likely to see a rise (30 per cent) while the ‘other industry’* category was the most likely to see steady revenue (50 per cent).
Of the mainland states, Victoria and Western Australia were most likely to see revenue rise (21 per cent and 20 per cent) followed by New South Wales (19 per cent). Western Australia was also the most likely to have steady revenue (43 per cent) and least likely to report a fall (34 per cent). South Australia was the most likely to see revenue fall (49 per cent).
Looking ahead, over one quarter of the small to medium business (SMEs) operators surveyed also reported more work/sales in their pipeline for the next three months than anticipated (28 per cent). 43 per cent reported an expected pipeline, and 27 per cent saw less work than expected. This was on par with the March 2013 report, at 30 per cent, 41 per cent and 28 per cent respectively.
In terms of intended investment of time and/or money across various business elements, the areas most likely to see an increase over the next 12 months were:
1. Customer retention strategies – 35 per cent
2. Customer acquisition strategies – 30 per cent
3. The number or variety of products or services offered by the business – 24 per cent
4. Prices and margins on the products or services sold – 23 per cent
5. Amount paid to employees – 20 per cent
Commenting on the study results, MYOB CEO Tim Reed said that although the political uncertainty has now passed, the market is still likely to experience a slow recovery.
“We hope to see a boost in SME confidence now the election verdict is in, but our research suggests it will be a slow road to significant improvement in the health of our economy and our business outlook,” he said.
“The financial confidence of the country’s small to medium business operators is closely linked to the health of our economy and it is telling us a clear story. They see factors at play such as record-low interest rates and although many welcome the upside, they recognise it as a sure sign the domestic economy is experiencing slowed growth.
“Political uncertainty in the lead up to the election was likely a strong influence too, with 26 per cent of SMEs saying they didn’t trust any political party more than the other to appropriately manage the economy. Another likely influencing factor is operators having a more realistic picture of their finances after financial-year end.”
Reed also expressed his concerns about Australian businesses not taking advantage of the new digital era and opportunities online to help bolster their businesses in a difficult trading environment.
“In an increasingly digital economy, it is disconcerting to see sales of products and services online decreasing in priority. However, this may be because business operators feel their current investment is just right – 61 per cent were keeping their investment steady over the next year and only 6 per cent were dropping investment back.
“Whatever the case, it pays to remember our research shows time and time again that SMEs with a business website are much more likely to increase their annual revenue than those who are not online. We have recently seen a financial chasm widen between the online-savvy and online-cautious businesses,” he said.
“Optimising the potential of an online sales environment can address many of the pressures and priorities identified by SMEs. It not only helps combat rising fuel prices for some, it enables all to take advantage of the time and resource efficiencies of being searchable, showcasing their wares and being paid via the web. More than half of consumers are researching online prior to making a purchase so establishing an online presence can help create new revenue streams, attract new customers, keep customers loyal and make your business more competitive.”