The lifecycle of your business MYOB State of Startups Report

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1 The lifecycle of your business MYOB State of Startups Report

2 The lifecycle of your business MYOB New Zealand: a great place to start a business. Aotearoa is a hotbed of startup activity. With more than 65,000 new ventures entering the market in 2017 alone, and more enterprises launching than closing for the last five years*, there s no better place to start a business than right here in New Zealand. But even in a country such as ours where the environment for starting a business is one of the best in the world and the creativity knows no bounds taking an idea from startup to fully-fledged enterprise is no easy task. In fact, it could involve up to a decade of set-backs, risk-taking and reinvestment especially if you want it to be successful. But every business must start somewhere. And if you re willing to put in the time and make the sacrifices, the rewards can be outstanding. You just need to know where to start. *StatsNZ, Business Demography Statistics, February

3 The lifecycle of your business MYOB 3 Introduction In New Zealand, entrepreneurialism is almost second nature. With more than 300,000 sole traders and more than 200,000 employers across the country within a comparably small population of just over 4.6 million people, business ownership is something many of us aspire to, and often achieve, in our lifetime. This is because New Zealand has the support networks, local talent and government initiatives to help entrepreneurs achieve their goals relatively quickly, easily and cheaply. In fact, through a number of simple procedures you can form a company here in less than five hours via an online application. Compare this to the likes of Switzerland, where it can take over 10 days and up to 6 separate procedures to do the same (World Bank 2018), and it s easy to see why entrepreneurs from all over the world choose to launch their ventures here. New Zealand is also one of the easiest places to manage a business once it s up and running. The World Bank s annual Doing Business report which grades over 190 economies every year has named New Zealand the easiest place in which to do business for the past three years in a row. But no matter what the market conditions, economic activity or geographic locale of your business, the ease of setting up a business here belies the complexity of transforming it from early stage venture to established success however you define it. Instead, it demands persistence, ingenuity and an ability to solve unique problems over the course of a business lifecycle. The lifecycle of your business. From software firms to social enterprises, every startup in New Zealand undergoes its own unique cycle and faces its own individual challenges over the course of its life. While some enjoy short stints failing fast and selling up, others endure longer lifespans, taking several years, or even decades to evolve into established and reliable brands known within a niche community or on the global stage. But no matter where you are on the journey, or how long it takes you to achieve your goals, knowing where your business sits on the spectrum can help you to better understand the process, know what to expect at each stage, outlast competitors and most importantly, overcome key challenges for the future. Because starting a business from scratch, or transforming an established enterprise for the future, isn t easy. Nor is it straightforward. It s instead a slow and often trying journey one that takes time, sacrifice, investment and cooperation with likeminded and passionate people. So to support growing enterprises in Aotearoa, and champion their achievements, MYOB is providing an in-depth look at the lifecycle of business in New Zealand. By exploring small business performance, entrepreneurial goals, startup challenges and funding pressures, we hope to inform Kiwi entrepreneurs on what it takes to start a business here and provide the resources they need for a successful future. Starting up Whether it s an after-work side hustle, a city-wide social enterprise or a large global organisation, every business starts with an idea an a-ha moment or bespoke solution to a common problem. This is the beginning of the business lifecycle, and it s where startups flourish. But this phase can also be the most challenging and time-consuming too especially if you re an entrepreneur going it alone, or it s your first time in business. Carolyn Luey MYOB New Zealand General Manager

4 The lifecycle of your business MYOB 5 Increasing investment over the next 12 months: 39% digital marketing spend Startups Years 0-2 How do you compare? Newly emerging entrepreneurial ventures, or startups, are the future of business in New Zealand. Without them, the local business community would stagnate and our small economy would decline. Fortunately, startups in New Zealand continue to perform well every year. 54% expect their revenue to be up in 12 months time 50% have more work on over the next 3 months compared to usual 44% reported an increase in revenue from last year Performance and challenges According to the latest MYOB Business Monitor of more than 1000 SMEs, almost half (44 per cent) of all startups said their revenue had increased since While first year growth no doubt reflects the initial establishment phase, a further 54 per cent said they expect their revenue to be up again in 12 months time, and exactly half said they had more work on than usual. They re also growing. Over the next 12 months, over a third (35 per cent) expect to increase the number of products or services they provide, and almost a fifth (16 per cent) expect to take on more staff. Despite this however, young businesses say they still struggle to attract customers, keep up with competitors and manage their cashflow. According to the MYOB Business Monitor, a quarter of startups said staying ahead of the competition put extreme or a lot of pressure on their business. And over a fifth (21 per cent and 23 per cent respectively) said the same about the costs associated with attracting customers, and being able to manage their cashflow. 16% employee count Staying ahead of the competition Cashflow 7% Cost of attracting customers 5% Late payments from customers 5% Access to finance/funding/overdraft 28% print marketing spend 35% product/service count or variety How much pressure will each of the following put on your business over the next 12 months? 6% 19% 42% 17% 11% 5% 16% 40% 16% 18% 16% 45% 18% 12% 15% 29% 21% 24% 7% 11% 28% 19% 24% 11% 4% 6% 3% Extreme Quite a lot Some Hardly any None Don t know

5 The lifecycle of your business MYOB 7 The business of being in business According to the MYOB Business Monitor, more than half (55 per cent) of the startup founders in New Zealand launched a business with no prior experience. However, this appears to be the norm in Aotearoa. Kiwi founders aren t as averse to risk as others are elsewhere, and people here tend to prioritise lifestyle over everything else. In fact, the desire for a balanced lifestyle is so great in New Zealand that more startup founders launch businesses here for the change in lifestyle than to make money. The research by MYOB suggests almost half (42 per cent) of New Zealand s startup owners launched a venture for the associated flexibility, while just 36 per cent indicated it was because they wanted to make enough money to live on. Working hard While New Zealand s entrepreneurs start out with little experience, they certainly work hard to build on success. More than half (57 per cent and 52 per cent respectively) said their businesses were successful as a result of work ethic and positive networking, while just 23 per cent believed they were successful because of their unique product or service. Contrary to the belief that timing can make or break a business, just a quarter (24 per cent) of startups said the right timing had anything to do with their business success. What were the main reasons you started your own business? 42% I needed flexibility in a role to do what I want, when I want 36% I wanted to make enough money to live on 35% I started my business because I m passionate about what I do To what do you attribute your business success? 57% 52% 27% 24% 23% Work ethic Positive networking Strong local market The right timing Unique product or service

6 The lifecycle of your business MYOB 9 CASE STUDY: STARTUP Running the startup marathon In November 2017, Christchurch-based entrepreneur and then university student, Damon Ross launched Fair Work NZ an online legal platform for New Zealand workers. We tell employees if they re being treated fairly in the workplace by giving them a case assessment, Damon says. Then, if they choose to take action, we generate the required documents and pass the information onto lawyers. It all started in November last year, when Damon read a report about the number of Kiwis who are mistreated by employers in the workplace. Despite going live in May, I don t like to use the word launch because the project is still very much in a beta stage, he says. I m constantly taking the website down, changing things, and putting it back up only to do it all over again. Despite this, Damon says the easiest part of the startup journey has been the system design and development work something he thought would be the most challenging. I wanted to know where the bottlenecks were in the legal process once you decide to take action, and how easy it would be to address those bottlenecks if there was an online solution, he says. Because I hate things that aren t efficient if there s a solution, I ll find it. Damon was just finishing a semester at the University of Canterbury when he came up with the idea, so decided to take the project to the University s Centre for Entrepreneurship, where he received a grant to validate the service and develop the product. The first thing I had to do was find out if the problem actually existed which meant going out and talking to legal representatives and those seeking legal help for workplace harassment, he says. From there, given my background is in product management, and not law, I had to do a lot of research to try and understand the processes in New Zealand s legal system. From November through to May, Damon spent nearly 10 hours a day sometimes more validating the idea with real people and developing the online service. Pursuing the idea turned out to be the hardest part of the process. It requires so much time and takes over your entire life. Even when you re not working on it, you re always thinking about ways to improve it. He says it can be stressful knowing you re the only one working on the business especially if you start to have doubts about what you re doing and where you re going. As a solo entrepreneur, you re in charge of absolutely everything, he says. If something goes wrong, it s entirely on you. So at times you start to wonder if you re on the right track, or if you re just tilting at windmills, chasing exotic fantasies. Damon says he s contemplated throwing in the towel a few times, but knows he s worked too hard to give it up. It s a constant struggle, but you have to set boundaries, he says. For example, I ve promised to try and exhaust every possible party, person and resource before giving up. If there s still no interest from third-parties after all that, I ll call it a day. However, having captured the attention of several Christchurch-based law firms, Damon won t be quitting any time soon. We had a woman use the Fair Work NZ app a few weeks ago after being turned down by a number of law firms, Damon says. The app said she had a reasonably strong case, so we put her in contact with a lawyer, and together they re pursuing the case. That s the sort of thing Damon says keeps the project alive and moving forward. Once you realise your product or service has value and is making a difference in people s lives nothing can stop you, he says. It just takes a lot of effort to get it up and running. At the start of the process, you have to pursue your idea with no validation at all but the faster you can get your product in front of someone, the better. For those thinking about starting a business, or currently on the startup journey, Damon says to keep your mind and body fit, because the road is long and winding. Starting a business is like a marathon, he says. So you need to find a problem you re interested in and passionate to solve. Without the motivation, you ll really struggle to overcome the challenges that pop up at every turn.

7 The lifecycle of your business MYOB 11 Growing for the future Tips for startups Define an objective Prior to launch day, startups need to determine what it is they want to achieve and how they plan to get there within their means. Without a plan of attack, executing an idea or creating a prototype can prove extremely difficult. This starts with an in-depth look at your consumers, customers and clients. Because knowing your target market and the problems they face will help you provide a solution they ll buy into again and again. Validate your idea Taking an idea from paper to reality can be difficult too, but it s a crucial first step towards startup validation and growth. With a physical product or a working prototype of your service or software, you ll be able to test it out on real customers conducting surveys and asking for feedback wherever you go. You might realise your business isn t as viable as you once thought, or discover a new approach to enhance the service you re offering your customers During the middle stages of the business lifecycle, small startups and early stage ventures evolve incredibly fast, especially in a place like Aotearoa where the ecosystem fosters rapid development. Within a few years, a young business in New Zealand can be two, or even three times its original size both in revenue and employee count. Some can even outgrow their established competitors within the first two years. For the entrepreneurs that can scale at a reasonable and realistic pace, this growth phase can be the most exhilarating, rewarding and transformative part of the journey, and can set you up for a sustainable future. Secure investment The beginning of the business lifecycle is expensive and almost always costs more than anticipated. This is where investors come in. While you want to use as much of your own savings and business revenue as possible (if you re already turning a profit), you ll need investors to back up your big ideas and sustain a healthy cashflow. Practice your pitch, join networks and use your skills of negotiation to secure funding both locally and overseas. 03

8 The lifecycle of your business MYOB 13 Increasing investment over the next 12 months: Growing businesses Years 2-5 How do you compare? 10% print marketing spend 11% employee count 21% digital marketing spend 23% product/service count or variety Growing businesses provide the impetus for economic growth by creating new employment opportunities and disrupting aging industries and businesses forcing established enterprises to change the way they operate or sell up shop. 41% reported an increase in revenue from last year 38% expect their revenue to be up in 12 months time 34% have more work on over the next 3 months compared to usual Performance and challenges These businesses are strong performers. However, they re less confident than Kiwi startups. According to the research by MYOB, over two fifths (41 per cent) of growing businesses said their revenue had increased over the previous 12 months. A similar number (38 per cent) expect their business revenue to be up this time next year too. However, this is 16 percentage points less than businesses between 0 and 2 years old. Businesses at this stage are also trying to do more with less a pattern seen frequently in growing Kiwi enterprises. Between now and 2019, just over one tenth (11 per cent) expect to increase the number of full-time employees in their business, despite more than a third (34 per cent) reporting an increase in workload. New Zealand s growing businesses also experience similar challenges to early stage ventures from managing cashflow and staying ahead of the competition. However, as they spend greater time in the market, they also struggle with late payments from their customers. Almost a quarter (23 per cent) report feeling extreme/quite a lot of pressure from late payments, and 24 per cent said the same about the health of their cashflow. However, the pressure of the costs associated with attracting customers is felt less keenly than in the startup stage. How much pressure will each of the following put on your business over the next 12 months? Cashflow 7% 17% 40% 20% 12% 4% Staying ahead of the competition 5% 18% 40% 18% 13% 6% Late payments from customers 6% 16% 31% 26% 10% 11% Access to finance/funding/overdraft 5% 18% 24% 18% 25% 10% Cost of attracting customers 5% 11% 42% 19% 14% 9% Extreme Quite a lot Some Hardly any None Don t know

9 The lifecycle of your business MYOB 15 Growing up in New Zealand It s widely recognised that New Zealand is one of the greatest places in the world to start and grow a business. However, there are some key things business owners can do to improve the sustainability and profitability of their ventures. One of the most popular ways to grow a business is to network. A third (33 per cent) of growing businesses (those aged between two and five years) plan to do more networking this year, while only about one-in-ten will enter a new market, invest in technology or invest in marketing. While startups are more likely to network in order to sustain their growth (41 per cent compared to 33 per cent of growing businesses), businesses that are exiting the early stage of the lifecycle are more likely to develop a new product or service and employ staff. Almost a fifth (17 per cent) of growing businesses will develop a new product or service over the course of 2018, while just 13 per cent of startups will do the same. However, startups are more likely to invest in marketing with a quarter planning to do so this year. Help for investment In addition to their own efforts, these businesses want to see tax reduced in order to help them grow. Two out of five growing businesses believe a reduction in tax and improvements in market conditions will help their business grow this year, while just 6 per cent believe R&D credits will do the same. One-in-ten believe growth will happen to their business no matter what happens. Which of the following external influences, if any, will help your business grow? Which of the following strategies, if any, do you plan to implement to help grow your business this year? 43% 38% 22% Reducing tax Improving market conditions Improvements in consumer confidence 33% 17% 14% 12% 21% 10% Streamlining/reducing red tape We don t need anything to change it will happen anyway Do more networking Develop a new product Employ more skilled staff Enter a new market 6% R&D credits 11% 10% 8% Invest in marketing Invest in technology We don t need to do anything to grow it will happen anyway

10 The lifecycle of your business MYOB 17 CASE STUDY: GROWING BUSINESS Starting from scratch As an IT consultant, technologist and father, Auckland-based tech entrepreneur and business owner Vijesh Nangia knows a thing or two about technology and its potential to change the lives of children in New Zealand. In the very near future, personal robots, self-driving cars and remote control household appliances will be the norm, not the exception, Vijesh says. So it s crucial every child in New Zealand knows coding as a life skill, as it is the language of technology. This will equip the next generation with the ability to create and innovate technology not just use it. However, Vijesh says this is something kids in Aotearoa miss out on because the ICT skills taught in classrooms here follows a system limited by the age of the student, rather than their ability. I asked some teachers what they were teaching in terms of technology, Vijesh says. And they told me they were ahead because their students had access to ipads. With more than 25 years experience in the tech industry, Vijesh says he knows it takes more than ipad, laptop or smartphone competency to be successful. That s when I knew I needed to do something to help kids understand, use and create opportunities with new technology, he says. So in 2015, Vijesh launched SCRATCHPAD a technology centre for kids from 5 years of age to learn about coding, robotics, 3D design and printing and even electronics from industry professionals. All of our programs are customised to suit the skills of the individual not just their age, he says. So we host a number of different classes from after school to weekend sessions, school holiday programs to virtual sessions, right through to parent-child sessions and even coding for mums. And while Vijesh owns and manages other businesses including a strategic IT consultancy firm with big-name clients like Vodafone, Fletcher Building, NZME and Sky TV he knew launching SCRATCHPAD wouldn t be easy. In the beginning, we really struggled to get our message across to parents because it was such a new concept, he says. They thought we wanted to teach their kids how to use an application or play a computer game, but we actually wanted to teach them a life skill, and equip them with the ability to create an application or recode a game from scratch. However, like most things, word eventually spread like wildfire, and by the end of 2016 Vijesh found himself in a meeting with business consultancy firm Franchise Consultants. We were gaining momentum, but we didn t know what the best business model would be going forward, he says. So we met with Franchise Consultants to explore our options. Based on the company s financials, structure and popularity, he was told that building a franchise would be the best way to scale his business quickly. From there, things moved really fast, Vijesh says. We launched our pilot franchise in September 2017, and within 8 months the Botany centre went cashflowpositive which we were very pleased with. As a result, there s now an Albany-based centre opening in October, another Auckland-based centre opening in 2019, and discussions to open centres in other parts of the country. Today we employ about 13 people 8 of whom are full-time, he says. And have an advisory board comprising professionals from the education, technology, marketing and commercial banking sectors. While SCRATCHPAD is no doubt successful, Vijesh says building the brand into something larger still has its challenges. In business, challenges never really go away they just change, he says. While we don t face a perception problem like we did in the early stages, we do face the risk of scaling too fast. We re only a young business so we still have to prove ourselves. Vijesh acknowledges that starting a business from scratch takes a lot of hard-work, cooperation and commitment from like minded people. Countless people have helped us get SCRATCHPAD up and running, he says. For a business like ours, you can t do it all alone. I m still learning things every day, and I m more than happy to admit that I m not great at everything.

11 The lifecycle of your business MYOB 19 Maturing for success Tips for growing businesses 01 Be smart Not every idea is worth investing in, nor is every customer or client worth retaining if it means using up vital resources or going back on your purpose. During this phase, you need to be realistic about your goals and invest in your team, build infrastructure and establish management processes that will see you through the journey. As mature-aged businesses begin to lose their new to market status to younger startups, they can also lose the value that comes with being a game-changer or disrupter in the industry. Revenue can also plateau at this stage especially if a business becomes too comfortable in its current market position. However, with the right investment and planning, this phase can also be incredibly transformative. While they lack the agility they had as a startup, and the grit they had as a growing business, matureaged enterprises do have the benefit of established reputations and loyal customers. Think long-term Think about where you want your business to be in five, ten or even twenty years time and work towards achieving this every day. Keep this in your business plan and use it to direct the choices you make about your business. This includes thinking about things like exit strategies and succession planning. Accept a decline is on the horizon Growing businesses are some of the most confident because they re constantly achieving their goals and attracting new customers. However, a car driving at 100 km/h has to run out of fuel eventually. As you enter the maturing phase of the lifecycle, be aware that a decline in business, sales or productivity is very likely. However, this doesn t necessarily mean your brand is dying or your employees are on their way out. It could mean you ve reached a point of comfort and security a point where growth isn t needed or desired

12 The lifecycle of your business MYOB 21 Maturing businesses Years 5-10 Increasing investment over the next 12 months: 11% print marketing spend digital 17% marketing spend 20% product/service count or variety How do you compare? What maturing businesses lack in novelty, they often gain in reputation. While business owner confidence can dip during this phase, revenue can soar if they continue to innovate. 36% expect their revenue to be up in 12 months time 33% reported an increase in revenue from last year 33% have more work on over the next 3 months compared to usual Performance and challenges According to the MYOB Business Monitor, just one third of mature-aged businesses saw an increase in revenue over the last 12 months. This explains why younger businesses are often more confident than mature-aged ones. In fact, just 36 per cent of mature-aged businesses expect their revenue to be greater in 12 months time compared to over half (54 per cent) of startups and almost two fifths (38 per cent) of growing businesses. Mature-aged businesses also tend to take on less staff either because they ve reached their peak, are comfortable in their current position, or are planning to downsize. Just 10 per cent expect to increase full-time employees between now and early 2019, despite a fifth planning to increase their number of products or services. Mature-aged businesses also spend less on marketing. Only 17 per cent of these businesses expect to increase digital marketing spend, and even less (11 per cent) said the same about print marketing. In contrast, 39 per cent of startups and 21 per cent of growing businesses expect to increase the amount they spend on digital marketing over the next 12 months. Maturing businesses do not feel as much pressure from things like late payments as growing businesses, and are confident in their ability to access finance and funding. Just 12 per cent of these businesses feel extreme/quite a lot of pressure from access to funding, and only 14 per cent said the same about suffering from late payments. However, a fifth (18 per cent) of these enterprises continue to feel extreme pressure from competitors. As growing enterprises and new ventures enter the market, mature-aged businesses might benefit from an entrepreneurial mindset and agile business processes especially if they want to effectively compete with new and existing competitors. 10% employee count How much pressure will each of the following put on your business over the next 12 months? Staying ahead of the competition 6% 11% 28% 23% 24% 8% Cashflow 5% 12% 30% 27% 20% 6% Cost of attracting customers 4% 2% 13% 29% 23% 22% 9% Late payments from customers 11% 26% 22% 32% 7% Access to finance/funding/overdraft 4% 8% 19% 19% 32% 18% Extreme Quite a lot Some Hardly any None Don t know

13 The lifecycle of your business MYOB 23 Reflecting on the past to prepare for the future It s crucial for maturing businesses to set new goals as they go about achieving old ones, because enterprises that work towards something new every day are less likely to experience a decline, and more likely to prosper. However, the 2018 MYOB Business Monitor reveals that four out of five maturing businesses (those aged between five and 10 years) believe they ve already achieved all or some of their goals since launching. By the maturing stage of the business lifecycle, just 9 per cent of mature-aged businesses have not achieved all of their goals. While a fail-fast mentality might help to drive progress in a startup, it s not necessarily appropriate or sustainable for late-stage growing businesses and maturing enterprises. To succeed, maturing businesses must think about what s right for their operation, and put processes in place to achieve their long-term goals in a realistic timeframe. It s also important to set new goals for the future. New Zealand s maturing businesses, while only in the middle phase of the lifecycle, aren t planning for the future either which can take their focus away from achieving these long-term goals. Over half (51 per cent) of New Zealand s maturing businesses haven t thought about an exit strategy, while just one-in-ten plan on passing their enterprise on to a family member, an investor or competitor. However, thinking about the future at this stage is crucial for long-term stability as it keeps your business focused on achieving an end-goal. Since starting your own business, have you achieved your business goals? Yes No 62% I have achieved some of my goals 9% I have not achieved my goals 20% I have achieved all of my goals 8% I don t have any business goals When the time comes, how do you plan to exit your business? 51% 11% 10% 10% 3% Haven t thought about it Sell to investors Sell to competitor Pass to family Sell to staff

14 The lifecycle of your business MYOB 25 Tips for maturing businesses It s the perfect time to reinvest By this stage of the business lifecycle, a business should have enough resources to reinvest in things like technology, marketing and labour for further growth and product development. It s also the right time to think about investing in third party services or products, and employing people to manage certain aspects of your business. You can t do everything on your own and you re no longer a startup, so working long, unpaid hours isn t as sustainable or as worthwhile as it used to be. Think about where you started and where you want go It s common for maturing businesses to lose sight of their original goals, or to stay fixated on old ones for too long. By this point, a business should be developing new products and services to meet the needs of their market. And this often means restructuring the business model and stripping away old products or services that no longer bring in new customers. Keep transforming for the future As startups and growing businesses begin to mature into established enterprises, serial entrepreneurs often move on, sell up, or shut-down because they ve accomplished what they set out to, or are bored with the industry. However, the maturing stage of the lifecycle is the perfect time to transform a business for the future. You ve got the people, investment, reputation and infrastructure to make an impactful disruption on your industry so go for it The end? By the tenth year of the business lifecycle, established enterprises have the ability to use their positive brand reputation, market expertise and customer relationships to grow indefinitely. And with a strong market position, they can also compete with emerging startups and growing enterprises without as much risk some even acquiring or merging with their competitors to dominate a niche market. However, unlike younger enterprises, established businesses particularly larger ones do lack the agility to change direction quickly when market trends change suddenly or demand for their products drop. So, while they can move incredibly fast in one direction and stronghold their competitors as a result they risk losing market share if they execute enterprise-wide transformation too fast or incorrectly.

15 The lifecycle of your business MYOB 27 Established businesses Years 10+ Increasing investment over the next 12 months: 11% digital marketing spend How do you compare? As a business enters the final stages of the lifecycle, it will need to make some major decisions about its future. While some will choose to sell up, pass on to family or stay comfortably where they are for the foreseeable future, others will choose to transform for new beginnings. 4% employee count 8% print marketing spend 11% product/service count or variety Performance and challenges 34% expect their revenue to be up in 12 months time 32% reported an increase in revenue from last year 27% have more work on over the next 3 months compared to usual The MYOB Business Monitor reveals established businesses in New Zealand are confident in their ability to turn a profit, but are unlikely to reinvest for future growth. Almost a third (32 per cent) of these businesses reported an increase in revenue since 2017, while a similar number (34 per cent) expect to see their sales and revenue be up again in 12 months time. However, just 27 per cent said they have more work on than usual, compared to 33 per cent of maturing businesses and 34 per cent of growing ones. While established businesses are the least likely to report an increase in revenue, their stage in the lifecycle suggests they re comfortable enough in their current market position to stay where they are. In fact, almost half (47 per cent) of these businesses said their revenue was about the same this year as it was 12 months ago. Over the next 12 months, New Zealand s established businesses are also less likely to increase the size of their teams than maturing and growing businesses, and aren t likely to invest in developing new products or services. Just 4 per cent of these businesses said they expect to increase employee count between now and 2019, while only around one-in-ten (11 per cent and 8 per cent respectively) will increase their product count and marketing spend. This is because established businesses know where their strengths (and weaknesses) lie, and have the industry experience to achieve objectives in less time and with less money than burgeoning startups or growing enterprises. And while investment in growth isn t necessarily a priority for these businesses, they are confident in their ability to overcome some common challenges especially those experienced by their younger counterparts. Given their age and revenue size, it s not surprising just 7 per cent of established businesses said access to finance would put pressure on their operation over the next 12 months. Similarly, just 15 per cent said they would feel pressure from cashflow management. Being able to stay ahead of the competition isn t as big an issue at this stage in the lifecycle either, with just 14 per cent expecting to feel extreme pressure from competitors. A similar number expect to feel the same level of pressure from the costs associated with attracting new customers which explains why these businesses are the least likely to invest in marketing.

16 The lifecycle of your business MYOB 29 Realising entrepreneurial goals As a business gets older, it s also likely to reach some key business milestones like acquiring office space, selling a certain number of products, retaining important clients, or turning a sizeable profit. How much pressure will each of the following put on your business over the next 12 months? The MYOB Business Monitor suggests enterprise owners with businesses aged ten years or older will have accomplished some or all of their goals especially the ones they set out to achieve in the beginning. In fact, a quarter of established enterprise owners believe they ve achieved all of their goals since launching, while just 8 per cent said they had not achieved any of their business objectives. Owners of growing businesses (those aged between five and ten years) said similar, with a fifth (20 per cent) believing they d achieved all of their goals, while just 9 per cent said they had not. Well over half (62 per cent) said they had achieved at least some of their goals. Cashflow 4% 11% 34% 23% 23% 5% Late payments from customers 2% 13% 28% 21% 21% 15% Staying ahead of the competition 2% 12% 33% 20% 22% 11% Cost of attracting customers 1% 11% 28% 21% 22% 17% Access to finance/funding/overdraft Since starting your own business, have you achieved your business goals? Yes 62% I have achieved some of my goals 25% I have achieved all of my goals No 8% I have not achieved my goals 2% 5% 23% 20% 34% 16% Extreme Quite a lot Some Hardly any None Don t know

17 The lifecycle of your business MYOB 31 CASE STUDY: ESTABLISHED BUSINESS Opening for the first time in 1986, Martin says the company was initially set up to provide financial support services to local Gold Band taxi operators. Change is the only constant For more than 30 years, Gold Band Finance has provided secure investment and flexible financial products to people and businesses across New Zealand. Today, the Canterbury-based business is one of only two privately-owned, Reserve Bank licensed, non-bank deposit takers in Christchurch. For many years, Gold Band has been lending funds to New Zealanders and New Zealand businesses at competitive rates, says Chief Executive Martin Brennan. While times have certainly changed, our philosophy has remained true to our values of steady growth, stability and security. In the mid 80s, banks didn t want to know taxi operators, he says. So some owner operators stepped in to help local drivers get up and running. Today however, the company is more than that, and offers a wide range of products for individuals and businesses wanting to borrow and invest money many of whom have been with the company since the beginning. Our success has always depended on a loyal and trusted customer base working alongside clients to understand their needs, financial challenges and goals. Having operated in the finance industry for more than three decades, Martin says the company has been through quite a lot from technological disruption and changes in government policy and additional regulations, to the global financial crisis (GFC) and even the Christchurch earthquakes. Change is the only constant, he says. While the core model of what Gold Band does is the same people invest money and people borrow money everything else around it has changed. The good news is that we ve been able to overcome those changes and challenges when a number of our competitors couldn t. The GFC is one change Martin says was particularly challenging for Gold Band Finance given the impact it had on the finance and lending industry in New Zealand. We re really proud to still have traded through that period and still be here stronger than before, he says. Thanks to a group of loyal investors, a quality loan book and dependable staff, we were able to make it through what was a pretty difficult time for everyone in the industry. And while the GFC left its mark, Martin says it was something Gold Band was able to overcome in a relatively short amount of time compared to the constant changes associated with new technology. Technology is a constant struggle, he says. And in its time, Gold Band has had to transition from paper to computer-based systems, adopt the internet, invest in social media, and integrate various software it never stops. Now the challenge lies in how we balance advanced technology solutions with clients who want to talk to real people. Because real people are crucial, Martin says especially if you want to sustain a successful business. Today, leaders must invest in their people, and ensure their team is collectively buying into a unique vision. If your team doesn t have a vision they believe in, every aspect of their job will be harder than it needs to be, he says. It s about getting people to feel like they re a part of something, and letting them own the brand s values on their own terms. In a congested and often ambiguous industry, Martin says Gold Band s vision is to ensure their customers continue to trust them. Everyone knows someone with an opinion on investing or lending, he says. So how do we get people to trust Gold Band over a competitor? The answer lies in how we promote our story, our reputable history, and our vision for the future. However, this is something Martin says aging businesses can struggle with. I strongly believe the maturity cycle is not a death march, he says. It s simply a signal to start the lifecycle over again. Because institutional wisdom only has value if it takes into account a changing market, industry and society. And according to Martin, this starts by acknowledging that you don t necessarily have all the answers. You can t just ignore technology, social media, young consumers or changing communities, he says. You need to be humble and adjust and change to your environment because you don t have as much power as you think you do. To survive, he says to take advantage of the people, resources and mentors at your disposal, and to let others guide you when you don t know the way. I rely on good accountants, good lawyers, good marketers and good IT specialists because I know my business doesn t have all of the skills it needs to do everything. New Zealand is a community, so those who think they know it all and can do it all on their own simply won t last 10, 20 or even 30 years.

18 The lifecycle of your business MYOB 33 Conclusion In business, difference drives success. And just like the products you sell, the services you provide and the people you employ, the lifecycle of your business will differ greatly to that of your competitors. Tips for established businesses Be strategic You ve achieved a majority of your early-stage growth goals, so now it s time to be patient and watch your business grow. You re not as flexible as you used to be, so move carefully when making enterprise-wide transformational decisions. But this doesn t mean you can t make changes. If you become too comfortable and complacent, you risk losing your competitive edge. There s always room for growth Being established doesn t mean you can t innovate, explore or grow. In fact, with solid, secure and diverse revenue streams and loyal customers the established phase is the perfect time to launch a separate department within your organisation for R&D. With new people and new ideas, you ll be able to develop unique products and explore alternative markets without the risks of diving in head first. Downsizing isn t necessarily a bad thing Businesses downsize for a number of different reasons. Some scale back their operations as they age to prepare for an inevitable decline or succession, while others reduce their product offerings to focus on something new. With solid and established foundations, older businesses have the ability to cut back without losing everything they ve worked so hard for. So taking the time to refresh, reenergise and regenerate your business and its people isn t necessarily a bad thing it could instead lead to new and profitable opportunities While you might follow the four key stages chronologically over a ten year timeframe, or jump ahead in a few short years, others will deviate between the growth and maturity phases, only to realise their businesses were never viable in the first place. Some may even sell their businesses in the first year to pursue something new altogether. But no matter what you do, what your differences are, or how long it takes you to achieve your business goals, knowing how to navigate the stages of the lifecycle from startup and growth, to maturity and establishment will help you to anticipate future challenges and foresee opportunities for success. About MYOB MYOB is a leading provider of online business management solutions. MYOB makes business life easier for approximately 1.2 million businesses across Australia and New Zealand by simplifying accounting, payroll, tax, practice management, CRM, job costing, inventory and more. MYOB operates across three core segments Clients and Partners (business solutions to SMEs and Advisers); Enterprise Solutions (larger businesses) and Payment Solutions. We also provide ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. We are committed to ongoing innovation, particularly through our Connected Practice Strategy and through the development of the MYOB Platform. For more information, visit myob.co.nz or on Twitter. About the MYOB Business Monitor The MYOB Business Monitor survey of over 1,000 small to medium sized businesses across New Zealand examines the current performance of the SME sector as well as the pressures it faces. This most recent survey ran in February/March Carried out by Colmar Brunton, the survey sample includes responses from 107 startups (those aged 0-2 years), 137 growing businesses (those aged 2-5 years), 185 maturing businesses (those aged 5-10 years) and 389 established businesses (those aged 10 years or more).

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