|
|
Small Business Hot Spots - Growth Areas for small business in the next 5 years |
|
|
|
|
As featured on Sky Business News and in the Australian Financial Review
|
|
|
|
- Key Points Summary
|
|
- Our Changing Population
|
|
- Business & Employment Impacts of the Service Sector "Revolution"
|
|
- Where Are We Going? The Next Big Thing
|
|
- Secrets For Success
|
|
- Useful Resources
|
|
|
- Download the extract from the Australian Financial Review 
|
|
|
|
|
|
|
|
Key Points Summary
|
|
|
|
A key driver of Australia’s economic growth during the 1990s was the enthusiasm shown by businesses and governments both large and small for outsourcing.
|
|
|
|
But how real is the Services Revolution? Does it represent real businesses with real jobs? Or is it simply a mechanism for ‘churning’ with nothing to show but froth and bubble?
|
|
|
|
This package draws on recent analytical work by Strategic Economic Solutions to ask:
|
|
|
- What impact has the growth of services had on business formation and job creation?
- Will the trend continue?
- If not, what is The Next Big Thing?
- What are the business hot spots for the next 5 years?
- And what are the characteristics required for small businesses to succeed in these areas?
|
|
|
|
Back to top
|
|
|
|
|
|
|
Our Changing Population
|
|
|
|
Our changing population profile is driving major changes in what we buy. The chart shows Australia’s population profile by age over the last 2 Census - 1996 and 2001. Our population is ageing - as the 2001 line moves us 5 years on to the right from 1996.
|
|
|
|
National Population Trends
|
|
|
|
|
But notice the critical dip between 60 and 70. We’ve seen relatively low numbers of Australians move into retirement in the last few years. The real rush is just about to hit us - about 150,000 new retirees per year. They are a fascinating and potentially lucrative new market - for the right services - and we look at their spending and income patterns later.
|
|
|
|
Also notice the dip in the number of young kids under 4, and the dip in young adults 20-35. These dips are having a profound impact on non-metropolitan areas.
|
|
|
|
The next chart shows the population profile for Gunnedah, a typical rural centre.
|
|
|
|
Regional Population Trends (Gunnedah)
|
|
|
|
|
The big feature is the deep dip around people in their late teens and twenties - young people leaving town for education, work and life experiences. In itself that’s not a problem, we need our young people to get new skills and interests. The problem emerges when people don’t move back into regional areas - the dip gets deeper and wider.
|
|
|
|
Without people moving back in their early thirties, regional areas are missing the key drivers of future business growth. It’s a double whammy, regional areas are losing population to start with, then losing new business opportunities further down the track. This needs some creative thinking and energetic action to overcome - but many towns and regions in Australia are doing it.
|
|
|
|
Back to top
|
|
|
|
|
|
|
Business & Employment Impacts of the Service Sector "Revolution"
|
|
|
|
The kind of work Australian’s do has also changed dramatically in the last decade. The next chart shows the number of people employed in the main industry groups in Victoria in 1992 and 2002.
|
|
|
|
Long Term Employment Trends (Victoria 1992 to 2002)
|
|
|
|
|
The outstanding feature is the enormous growth in the number of people working in Property and Business Services - and 90% of these are in the Business Services part. This industry sector has underpinned business formation and employment growth in Australia for the last decade. It includes businesses like accountants, lawyers, IT professionals, graphic designers, marketing consultants, and business advisers. It’s employment almost doubled in Victoria over the decade, and the story is similar in other states.
|
|
|
|
Other growth areas were of course construction, retail and a range of other services - and it is these other services that we look at in detail later on.
|
|
|
|
Back to top
|
|
|
|
|
|
|
Where are We Going? The Next Big Thing ...
|
|
|
|
Some of the key business growth trends have been:
|
|
|
- Over 96% of business in Australia are small businesses (with less than 20 employees).
- The fastest growing parts of the Australian economy are the service industries:
- The fastest growing service businesses are in IT and communications;
- But there has also been strong growth in personal and recreational services;
- Health services; and
- Retail
|
|
Economists are great at looking backwards, but what of the future? The National Institute for Economic and Industry Research publishes forecasts every year with the Australian Local Government Association. These State of the Regions forecasts are built on a huge database about Australians and our economy. Looking over the horizon, the National Institute forecasts:
|
|
|
- GDP forecasts of 2 to 3% pa to 2004 then 4%
- GDP growth of 2.5 to 3.0% needed to increase employment
- So full-time equivalent employment likely to hold or fall to 2004
- Measured unemployment to remain at 6 to 7.5% to 2004
- Exit of leading edge of baby boomers post 2006 to reduce unemployment
- Strong growth in services to continue:
- Especially personal and ‘lifestyle’
- Retail growth to continue
- Business services ‘outsourcing’ driven growth to moderate
|
|
This means that our economy will become increasingly driven by knowledge-based business and the industries they represent. Flexibility, adaptability and innovative application of technical skills are keys to future business success. Successful entrepreneurs will be those who have a clear ambition to “build a business” rather than buy themselves a job. They will be able to match technical skills and reputation with business building skills.
|
|
|
|
On the other side of the labour market, the growth of skills-based part time and ‘portfolio’ work patterns will continue:
|
|
|
- The old “jobs for life” myth is long gone
- There are still 3 times as many full-time workers as part-time, but this varies a lot by industry!
- Most part-timers are happy with what they’ve got - just 25% of part-time workers want more hours (especially older women 35-44 and younger men 15-19)
|
|
This high-skill knowledge-based growth will cause problems in some parts of the labour market, as high skills requirements in growing businesses may exclude young people who can’t yet demonstrate the right track record. Employers will need to be mindful of this possible problem and be willing to nurture young employees’ skills and talents.
|
|
|
|
There will also be problems in establishing and growing these high-skill knowledge-based businesses outside the metropolitan areas - where demand for services will be lower and the numbers of skilled workers will also be lower. We are concerned that knowledge-based growth has the potential to dramatically intensify regional and socio-economic differences as go-ahead regions go further ahead and the other slip further behind.
|
|
|
|
In this social and economic environment, the Next Big Thing is clear.
|
|
|
|
The big growth areas are in highly personal, highly skilled, one-to-one services.
|
|
|
|
Individuals and households will do what businesses have done and ‘outsource’ what used to be core activities. These are things like:
|
|
|
- Household services
- Gardening, cleaning, cooking, design, pet care
- Child and aged care
- Household services
- Gardening, cleaning, cooking, design, pet care
- Health and recreation
- Personal fitness, massage, pro-health, counselling, learning, travel
- Knowledge brokers
- Finance & mortgage brokers, coaching, IT/web
|
|
There has already been massive growth in these fields - especially in terms of new business formation
|
|
|
|
This growth in business formation is built on increasing expenditure in these fields - money that is not looking for a place to be spent.
|
|
|
|
There has been rapid growth in household expenditure in these fields
|
|
|
- from $86 pw in 1994 to $117 pw in 2001
(in 2001 dollars)
- Forecast to keep rising by $150 per household per year over the next 5 years
|
|
|
|
That may not sound much, but an extra $150 per household per year quickly adds up.
|
|
|
|
Who wants to be a millionaire?
.
|
|
|
- On these forecasts, a couple of suburbs with 7,000 households (around 15,000 residents) will be looking to spend $1million more each year on these services over the next 5 years. Successful entrepreneurs will read just what it is that people are looking to buy - and provide the quality services they are looking for.
|
|
|
|
Back to top
|
|
|
|
|
|
|
Secrets For Success - Five Tips for Growing a Successful Personal Services Business
|
|
|
|
|
- Don’t compete on price
- Add value - be the best, not the cheapest
- Don’t be afraid of competition
- Watch and learn from new and older players
- Don’t just satisfy your customers
- Amaze and entertain your customers
- Don’t just train your staff
- Engage and empower staff - build people who can replace you as your business grows
- Don’t waste time and money building brand awareness
- Know, understand and woo your high value customers - word of mouth is king in personal services
|
|
Grow your business beyond yourself. If you want a business rather than a job - start working on your staff and business systems to encourage growth.
|
|
|
|
Understanding your market and its emerging trends will provide the platform for business growth. A key emerging market segment is the over 60’s market, and there are a lot of myths about this group that need exploding!
|
|
|
- Firstly, we have an active aging population where people are not looking to turn up their toes at 65
- According to a comprehensive study by The Australia Institute, most retirees will remain active for 20+ years. The Institute found that in contrast to the image of a growing pool of helpless retirees living off a shrinking pool of workers, the opposite is true:
- A tiny 7% of people over 65 live in residential care facilities - and just half those require help with daily living
- A huge 2/3 of people over 80 live independently; and
- Our retirees provide seed funding, financial backing, and business, personal and childcare support for younger Australians - without which their business activities would struggle.
|
|
But we need to be realistic about the over-60s as well, with many caught in the gap after an adequate aged pension and before super-based self-funded retirement.
|
|
|
|
A valuable study by NATSEM and the AMP, titled Live Long and Prosper, found that retirement incomes will be tight for many:
|
- The current wealth of average 50 - 64 year olds is:
- Average savings (excluding the family home) $58,000
- Average super $56,000 (equivalent to an annuity of $100 pw)
- Most will access the Age Pension
|
|
|
|
Unfortunately, wealth in this age group is very unequally distributed - 60% of wealth is owned by top 25% of the age group.
|
|
|
|
This age group provides a fascinating new market for a range of interesting, valuable and highly personal services. Older people have time, and many also have money.
|
|
|
|
And all of us, no matter what age, are all looking for skilled, trustworthy people to help us navigate through life, and interesting, creative, high quality learning experiences.
|
|
|
|
Combined with the trend of all Australians to buy into everyday life a more complex and valuable set of highly personal services, this is The Next Big (Small Business) Thing!
|
|
|
|
Back to top
|
|
|
|
|
|
|
Useful Resources
|
|
|
|
|
|
|
|
|
Back to top
|
|
|
|
|
|
