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Start-ups confident over future growth

Wednesday, 1 September 2010 | By Oliver Milman

Start-up businesses are far more optimistic about revenue growth over the next year than their larger counterparts, a new study has revealed.

 

A wide-ranging report by business software brand MYOB found that 59% of companies under two years old and 56% of businesses aged two to five years old expected revenue to increase over the coming year.

 

This is in marked contrast to businesses established more than 10 years ago, with only 33% of this segment anticipating revenue growth.

 

The last year saw 40% of start-ups experience revenue growth, compared to 26% of businesses more than 10- years old. However, these figures are influenced by the lower base that most start-ups grow from.

 

Tim Reed, CEO of MYOB, said the high levels of optimism of start-ups as compared to the more mature businesses has much to do with the fact that start-ups are using low-cost, flexible business models to drive their businesses.

 

“I think that’s a trend that we’ve seen in business for many years. When a business is a start-up, people start with that blank sheet of paper. They are more likely to adopt new technologies and they are more likely to adopt newer business practices.”

 

Examples of cost-saving strategies used by start-ups include flexible staffing arrangements; online marketplaces such as crowd sourcing websites; and cloud-based software, which is delivered via the web and is typically cheaper than traditional software packages.

 

Reed says MYOB’s new cloud software has been specifically aimed at the micro end of the market for this reason.

 

“We targetted that at start-ups and small businesses because we thought they’d be more likely to adopt that stuff. They approach things with an open mind.”

 

Although optimism abounds among start-ups, the MYOB study found that fewer small businesses reported revenues increases than their larger counterparts.

 

While 41% of firms with 20 to 199 employees enjoyed higher revenues over the last 12 months, just 37% of companies with one to four staff and 32% of sole traders said the same thing.

 

Despite this disparity, 50% of small businesses expected growth in the coming year, with 49% of micro businesses feeling the same.

 

An interesting, but perhaps expected, aspect of the survey revealed that 39% of businesses with a company website experienced revenue rises last year, compared with 32% of firms without a site.

 

Overall, MYOB’s research found that 74% of businesses reported revenue levels at the same or higher than a year ago. A further 47% expected the situation to improve over the next 12 months.

 

However, there was strong support for a reduction in red tape and better government support for start-ups.

 

Reed added: “These results clearly indicate that the engine room of the Australian economy has survived the GFC and is now picking up speed. Whoever forms government must look to support this momentum with some strong first-term business policies.”

 

“The MYOB Business Monitor indicates that around a third of businesses were dissatisfied with Federal Government support prior to the election. Two key areas of concern were highlighted ‐ having to deal with red tape and understanding how new legislation impacted their operations. Both were regarded by almost two thirds of businesses as having a significant impact on their business success.”