BUSINESS VOLATILITYWhat is business volatility and how it can impact your business

SNAP SHOT OF BUSINESSES OPERATING IN AUSTRALIA

• By June 2015 there were over 2 million businesses operating in Australia, across 490+ industries.

• In the 12 months leading up to June 2015, over 260,000 business exited the Australian economy, an exit rate of 12.4%.

• In the same time frame, by June 2015 over 280,000 businesses entered the economy, an entry rate of 13.4%.

The economy as a whole and the industries that comprise them are constantly changing.

Source: Australian Bureau of Statistics, 2014, Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014, Businesses by Main State by Industry Class by Employment Size Ranges, access by 12/04/16, http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8165.0Jun%202010%20to%20Jun%202014?OpenDocument.

BUSINESS ENTRIES & EXITS BY NUMBER OF EMPLOYEES

0 2 4 6 8 10 12 14 16

0

1-4

5-19

20-199

200+

%

Source: Australian Bureau of Statistics, 2014, Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014, Summary of Findings access by 12/04/16, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/8165.0Main+Features1Jun%202011%20to%20Jun%202015?OpenDocument

Entry Rate

Exit Rate

WHAT IS BUSINESS VOLATILITY?

Business Volatility is calculated by adding the business entry

rate to the business exit rate of an industry over the course

of one year. A volatile industry may have many entries (start-

ups) and/or exits (business failures, selling a business or

merger/acquisitions). In either case, high levels of entries

and exits may create uncertain or volatile trading conditions

for an operating business within that industry.

““

BUSINESS VOLATILITY = BUSINESS ENTRY RATE + BUSINESS EXIT RATE

VISUALISING BUSINESS VOLATILITY

BUSINESS IN 2014 BUSINESS IN 2015

In 2014, the total number of trading

businesses within an industry

Businesses that exited the industry by 2015

New businesses

entering the industry by

2015

VISUALISING BUSINESS VOLATILITY

BUSINESS IN 2015 VOLATILITY AS A PERCENTAGE

Business Volatility expressed as - business entries plus exits as a percentage of all businesses within an industry

Example If the Business Entry Rate = 20% & the Business Exit Rate = 20%.Then the Business Volatility Index of the industry is 40 points.

HOW BUSINESS VOLATILITY IMPACTS YOUR BUSINESS?

• Business entries to an industry need customers. Entries can steal your current customers, or customers new to the market.

Action: Engage in activities to protect market share.

• Business exits (failures) can no longer serve their customers. Customers will seek out new providers.

Action: Engage in activities to acquire customers.

Customer retention & growth strategies

Customer acquisition strategies

BUSINESS VOLATILITY: SALES & MARKETING INVESTMENTS

Sales and marketing work in concert to acquire, grow and retain customers.

As volatility increases, investments in sales and marketing can help retain your current customers and attract new customers.

The net result of sales and marketing investments helps counter and capitalise on volatile market conditions.

THE APTICO BUSINESS VOLATILITY PROJECT

• The project undertaken reviewed 496 industries covering 2 million businesses across Australia, using data published by the Australian Bureau of Statistics as of March 2016.

• The completion of the project saw 496 individual industry reports published on the project URL, as of April 2016.

• Each report calculates the Business Volatility Index for each industry, its movement from last year and the number of trading businesses within that industry stratified by number of employees.

All reports are free to download from the Aptico website. To access visithttp://aptico.com.au/industry-reports/business-volatility

NEED ASSISTANCE?

Aptico can helpAptico specialises in helping small to medium sized business become more stable in the face of volatile market conditions. If you are invested in your business, and are looking to optimise those investments, Aptico can help. For a no obligation free consultation, call today on:

07 3040 7306or via email info@aptico.com.au