Start-ups expecting strong growth

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.

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 world to start a new business, but few new ventures succeed without a wide range of community, industry and government support.”

 

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.

 

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 cashflow all ranked equally in third place, with 60% of start-ups saying they anticipate these pressures throughout 2013. 

Kelly Wilkings, owner and director of 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.

 

Start-up respondents also reported working longer hours – their mean working week was 42.4hours, compared to 38.3hours 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.”

For full details, download the MYOB Business Monitor Start-up Special Report 2013 at www.myob.co.nz