Nearly half of firms borrowed money last year to stay afloat: MYOB

Almost half of Australian business operators borrowed money to stay afloat in the last 12 months, with just a quarter of them borrowing money to spend on their business, new MYOB research shows.

The findings come from the July 2012 MYOB Business Monitor, which is based on a nationwide survey of 1,004 business owners and managers.

According to the survey, only 26% of business operators borrowed money in the last 12 months to spend on or in their business.

Meanwhile, almost one in two (44%) said the reason they borrowed money was to keep their business going in a bid to ensure its survival.

The reliance on loans could be the result of disappointing revenue results. The research reveals only 18% of the businesses surveyed reported an increase in revenue in the past 12 months.

This was a slight decline on the 20% who reported an increase in the previous report. In contrast, more than twice that number (41%) said revenue fell, compared to 38% in the previous report.

Those in the construction and trade industries were hit hardest – 52% experienced a revenue loss in the past 12 months.

They were closely followed by transport, postal and warehousing operators, at 49%.

MYOB chief executive Tim Reed says less than one in five small to medium business operators enjoyed revenue growth in the past year, while more than two in five saw revenue fall.

“It is little wonder the vast majority can’t see our economy improving anytime soon – two in three believe any improvement is at least one year away,” Reed says.

“The new financial year is an ideal time for business owners to boost their potential for success by seeking smarter, more cost-effective ways of running their business.”

“With the carbon tax… there are tangible advantages for those who also take a proactive approach to reducing energy and material consumption, and lowering production costs.”

Looking forward, 29% of business operators anticipate their revenue to rise in the next 12 months, which is more than the 22% who expect it to fall.

The same percentage (29%) of business operators have more activity in the pipeline in the next three months than they would usually expect. However, 43% have the same and 27% have less.

“One big surprise was that more than half the business operators we surveyed – 55% – will keep their prices and margins the same this year. In fact, 13% will drop them,” Reed says.

“With the carbon tax set to impact the cost of goods and services for most, if not all, one in two won’t pass that on.”

“This indicates that many will simply cop carbon tax-related cost increases on the chin.”

“I encourage business owners to consider whether this is the best course of action when they’re planning how to attract and keep customers.”

“Frequently, good service rates above price in a customer’s mind. Service can allow a business to put their prices up, and customers understand the need for these moves.”

This article first appeared on StartupSmart.