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Businesses downbeat over economic prospects: Report

Wednesday, 26 October 2011 | By Michelle Hammond
Two thirds of business owners do not expect an economic recovery in the next 12 months, new research reveals, suggesting start-ups need to review their cash flow plans for the year ahead.

 

The latest MYOB Business Monitor, for the month of October, shows Australian business owners are becoming increasingly pessimistic about an improvement in Australia’s economy.

 

The monitor is a nationwide survey of 1,000 Australian business owners, from sole traders to mid-sized companies, and representing major industry sectors.

 

The report reveals 68% of business owners do not expect an economic recovery in the next 12 months, while 42% expect the economic recovery to be more than 18 months away.

 

In March 2010, only 17% of business owners believed the economic recovery would take 18 months, confirming business confidence has taken a huge hit.

 

Business conditions are also poor, with 76% of the business owners surveyed reporting revenue at the same level or down on a year ago, with an average decrease of 27%.

 

Christmas expectations are particularly dismal, with 30% of businesses expecting lower sales, compared with only 14% last year.

 

Only 29% of the businesses surveyed expect an increase in sales in the Christmas quarter; a huge contrast to the 49% who expected an increase last year.

 

On a state by state basis, South Australia, Victoria and NSW expect more work than usual for the Christmas quarter, while resource-rich states WA and Queensland expect less work.

 

With regard to start-ups, which are businesses less than two years old, 44% expect more work than usual for the fourth quarter, compared to 23% that expect less.

 

For establishing businesses, which are those aged two to five years, only 28% expect more work than usual for the Christmas quarter, compared to 34% that expect less.

 

But longer-term revenue predictions are quite gloomy, with the majority of business owners (58%) expecting revenue to remain the same or reduce in the next 12 months.

 

MYOB chief executive Tim Reed says the findings “paint a stark picture” of the tough conditions faced by business owners over the past year.

“Queensland business owners have been particularly hard hit, with 50% of all business owners reporting revenue falls,” Reed says.

 

In light of a disappointing year, Reed says start-ups need to take action in preparation of 2012.

 

“We suggest business owners talk to their business advisors or accountants to review or create a cashflow plan, particularly managing purchases,” Reed says.

 

“Managing team leave carefully is also another area to look at as this can impact on both cash flows and bottom line results.”

 

“It is also important to be smart about marketing – getting online to reach more customers, if your business isn’t already using the internet, is a good idea.”