Business Monitor Report - Business Software & Solutions · business website Only have social media Have both a website and social media Of the investments most likely to stay the

December 2019

Business Monitor Report

The Federal Election of 2019 was a wild ride for all Australians. But as MYOB’s December 2019 Business Monitor Report shows, nowhere was that greater felt than among the small business community.

Ten years of benchmarking the highs and lows of Australian small business operators twice a year has given us fascinating insight to how the daily lives of these individuals have changed over time. Within the last five years, there has been no greater inflection point than the Federal Election of May 2019.

The previous edition of Business Monitor research was conducted just before the election, and the outcomes were striking. Expectations for revenue hit a five-year low, as did forecasting for the Australian economy. The numbers from the latest pulse check, which surveyed 1013 Australian small business operators, show a very different story; expectations for an improved economy rose by five percentage points, while hopes for greater revenue rose by three points.

As 2019 concludes overall businesses are feeling less pressure on business sticking points such as cashflow, utilities and customer retention, and there’s less sense that new custom is essential for small business to survive.

It’s always the case that an election creates uncertainty. The numbers in this report show anxiety is subsiding and post-election positivity is in full swing, which is great news for Australian businesses. Blake Collins

General Manager of Partners for MYOB

2

30%36%

44% 22%

49% 29%

Federal Election

The biggest catalyst for uncertainty in 2019 was undoubtedly the Federal Election. When we last conducted a temperature check on the market in May 2019, prime election time, nearly half (45%) of respondents said they expected the economy to decline in the coming 12 months. As demonstrated by the diagram below, this stands out as a key moment in what has been an otherwise stable 12 months.

In December 2019, we see concerns for the economy have dropped, with 39% reporting they expect it to decline. There has also been an increase in the number of small businesses who expect the economy to improve, moving from 23% in May 2019 to 28% in December 2019.

Where small business owners live also has a bearing on whether they expect the economy to improve. Respondents from Victoria and New South Wales are more likely to expect the economy to improve (30%) above the national average of 28%, while Queensland is feeling less positive at 24%. The numbers reflect the ongoing impact of severe drought and natural events in 2019.

There are nuances to how positive small business owners are feeling when you explore the December 2019 findings by generation. In fact, positivity appears to decline as the age of the business owner increases, with 46% of Traditionalists (aged 70+) believing the economy will decline, versus just 15% of Generation Z (aged 18-24). Equally, Generation Z is most likely to expect the economy to improve in the coming year at 40%.

The Economy

In the next 12 months, will Australia’s economy decline or improve?

Decline

Decline

Decline

Decline

Improve

Improve

Improve

Improve

41%

35%

42%

47%37%

52%

36%

14%

30%

30%

24%

25%28%

10%

31%

64%

The effect of natural disasters can also be felt when you drill into location density. Small businesses in rural locations are most likely to expect the economy decline at 49%, which is a sentiment echoed by those in regional locations by a marginally lesser degree (44%). Metro based small businesses are least likely to anticipate an economy decline at 36%.

Metro

Regional

Rural

Gen Z (18-24)

Gen Y (25-39)

Gen X (40-54)

Baby Boomers (55-69)

Traditonalists (70+)

15%

30%

40%

48%

46% 35%

23%

23%

36%

40%

December 2019

20

30

40

50

May 2019

January 2019

3

Revenue

While the economy forecasts have been in turmoil this year, businesses report revenue across the last 12 months has been steady. Small businesses were more likely to report revenue has been down and a quarter (25%) of respondents stated revenue had gone up, the same as six months ago in May 2019.

When forecasting revenue for the year ahead, business operators are feeling positive. Thirty-one per cent report revenue will be up (versus 25% last year) and 23% say revenue will be down (versus 31% last year). This also reflects the sense of a much steadier ship for small business in a post-election environment.

Is your revenue up or down on a year ago?

How do you expect revenue to perform in 12 months time compared to now?

Taking a deeper dive into the reasons the last year has been successful or otherwise for our respondents, we found healthy and increasing customer relationships were key drivers for revenue increase, while the economic climate was most responsible for any revenue downturn.

Why has revenue increased this year? Why has revenue decreased this year?

Increased consumer demand 27%

Better customer relationships 14%

New product/service 10%

Improving product/service 10%

Current economic climate 8%

More competitive offering 7%

More online investment 6%

Investment in marketing 6%

Expansion to new location 5%

Other 7%

Current economic climate 30%

Decreased consumer demand 19%

Competitor activity 12%

Loss of key customer(s) 10%

External events 9%

Reduction in product/service 7%

Reduced physical presence 3%

Reduced marketing investment 1%

Other 10%

27%

14%

10%10%

8%

7%

6%

6%5%

7%

30%

19%12%

10%

9%

7%

3%1%

10%

25%

31%

28%

33% 23%

26%

23%

25%

26% 27%

29%

31%

Revenue up

Revenue will be up

Revenue down

Revenue will be down

December 2019

December 2019

May 2019

May 2019

January 2019

January 2019

4

26% 30%

33%27%

38%21%

22% 34%

In line with how revenue has performed this year, profitability has been equally stable and moving upward. 33% of December 2019 respondents stated they made more profit last year, while 30% of small businesses said they had made more profit when surveyed in May 2019.

Positivity reins once again among younger small business operators, with 66% of Gen Z businesses reporting they had made more profit in the last 12 months, versus just 23% of the Baby Boomer generation. However, this could correlate to the length of time the operator has been in business.

Shifting their focus to the next 12 months, the outlook of small business profitability is favourable. 38% of respondents said they expected profitability to increase (versus 33% reported increase from the last 12 months) and 21% said they anticipated profit to decline (versus 27% who reported less profits in the previous 12 months).

Generation Z continue their rosy outlook into the year ahead and are the most likely to expect more profits this year at 63%. The anticipation of more profit declines with each generation.

December 2019

December 2019

May 2019

May 2019

How has profitability changed the last 12 months?

How do you expect profitability to change in the next 12 months?

3%

18%

29%

34%

37% 30%

23%

29%

44%

66%Gen Z (18-24)

Gen Y (25-39)

Gen X (40-54)

Baby Boomers (55-69)

Traditonalists (70+)

4%

13%

21%

30%

27% 23%

32%

49%

33%

63%Gen Z (18-24)

Gen Y (25-39)

Gen X (40-54)

Baby Boomers (55-69)

Traditonalists (70+)

Less

Less

More

More

Less

Less

More

More

Profitability

5

Business Pressure Points

Fuel price has been a perennial pressure for small business and tops the charts as the number one cause of small business stress once again. Cost of utilities continues to create problems; however, it has reduced by 4 points compared to May 2019, suggesting small businesses are exploring ways to streamline these costs.

Overall, small businesses are feeling less pressure compared to six months ago. Almost every point of tension has reduced, except for fuel prices (up 1%) and exchange rates (up 1%). The biggest decline in pressure has been on cashflow, where pressure has reduced by 4 points.

December 2019

May 2019

Fuel prices

Cost of utilities eg. electricity

Price margins and profitability

Attracting new customers

Competitive activity

Late payments from customers

Cashflow

Time spent on tax compliance

Interest rates

Retaining existing customers

Cost of online technologies

Updating hardware/equipment

Access to finance

Exchange rates

Updating IT systems

41%

36%

33%

32%

32%

31%

31%

26%

25%

24%

24%

23%

20%

20%

18% 19%

19%

23%

24%

25%

28%

28%

27%

35%

33%

33%

34%

33%

40%

40%

6

34%

36%

37%

24%

23%26%

18%

17%16%

17%

22%17%

Business Investment

While marketing investment is likely to decline in the next 12 months, small businesses are investing more in elements that will improve experiences for their current customers. Customer retention strategies will receive an investment injection (24%) while 22% are increasing the variety of products and services they have on offer.

While the likelihood of finding a small business online is reasonably stable, having no online presence is a downward trend. Small business operators advising they have no online visibility at all has decreased 2 points compared to our report six months prior in May 2019 (36%), which reduced 1 point more from January 2019 (37%).

How do you expect these investments to change in the coming 12 months?

Which best describes your business’ online presence?

Online Presence

Decrease Stay the same Increase

Number of full-time employees 9% 69% 12%

Number of part-time/casual employees 9% 64% 16%

Amount employees are paid 7% 60% 23%

Variety of products/services offered 7% 64% 22%

Working with business advisers (e.g. Accountant) 9% 64% 18%

Sale of products/services online 9% 55% 21%

Sale of products/services offline 12% 57% 19%

Prices and margins on products/services 14% 54% 25%

Customer retention strategies 6% 59% 24%

Customer acquisition strategies 7% 55% 21%

IT system investment 11% 59% 20%

Spend on online marketing 12% 57% 20%

Spend on offline marketing (e.g. radio, print) 13% 60% 16%

On the reverse, small businesses are five points more likely to have both a website and social media presence compared to six months ago, which shows small businesses are more online and in more diverse ways.

December 2019 May 2019 January 2019

Don’t have an online presence

Only have a business website

Only have social media

Have both a website and social media

Of the investments most likely to stay the same, the number of full-time employees came out on top, suggesting maintaining the status quo is the priority.

7

15%

22%

33%

46%

54%41%

28%

23%

20%

11%

22%

26%16%

11%

12%22%

23%

24%

19%

17%

Breaking down the findings by age, we find younger small business operators are more likely to be online. Only 15% of Gen Z operators have no online presence, while 54% of Traditionalists do not.

When asked what they find most beneficial about being online, 37% of small businesses said having a website generated more customer enquiries and leads, 36% said a website made it easier for customers to do business with them and 41% said having a social media presence increased opportunities for customer interaction.

Facebook continues to be the most popular social channel for small business (84%). While Instagram is the next most used platform, there is a clear gap of 44 points in use between these two applications (40%). Twitter is on the decline, while Snapchat and Pinterest remain the least popular social options for small business.

Don’t have an online presence

Only have a business website

Only have social media

Have both a website and social media

Gen Z (18-24) Baby Boomers (55-69)Gen Y (25-39) Traditionalists (70+)Gen X (40-54)

Which social media sites do you use to connect with your customers?

Facebook Instagram LinkedIn YouTube Twitter Snapchat Pinterest

December 2019 May 2019 January 2019

86%

38%24%

23%

20%

8%5%11%8%

10% 7%

20%

18%

27%

25%

40%

29%

27%

40%

86%

84%

8

31 2

What to expect from 2020

Our research suggests that post the election turmoil, we’ve moved to a more settled climate for small business to operate in next year.

In its tenth year, the MYOB Business Monitor dissects key factors affecting small business. Topics include financial stability, business pressure points and online engagement.

This report presents the summary findings for key indicators from the MYOB Business Monitor comprising a national sample of 1013 business owners, managers and directors (operators), conducted from October 24th to November 22nd 2019.

The businesses participating in the online survey were both non-employing and employing businesses. All data has been weighted by industry type, location and number of employees, which are in line with the Australian Bureau of Statistics (ABS - Counts of Australian businesses, including entries and exits - 8165.0).

About the MYOB Business Monitor Report

myob.com

A steady ship Business satisfaction around current customer demand seems strong and therefore the key strategy in play is ensuring the best possible experience for the customer base they already have. This could lead to interesting retention tactics, from deeper personalisation to new product and service territories.

The rise of e-invoicing It’s encouraging to see cashflow is less of a current concern for small business. Measures like the Federal Government’s commitment to e-invoicing and its promise to pay small business within five days (and the likely ripple effect of adoption this will cause) will undoubtedly support small business in their quest to get paid in good time.

Generation P(ositive) In almost every area of our Business Monitor Report, Gens Z and Y shine through as the most optimistic about the year ahead. If their positivity plays out, it seems likely a good year for young business where proactivity will foster success.

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Here are a few key predictions we’d like to make for 2020.