With the country's economy growing slower than expected, most business start-ups in Lithuania are taking the advantage of the situation in the domestic market. While the country's largest companies are estimating the consequences of Russia's embargo, our business start-ups are planning to further increase their sales volumes within the coming six months and recruit new employees to satisfy the growing demand.
Such trends were revealed by the "Business start-up barometer" market survey ordered by DNB bank that interviewed 1000 Lithuanian business start-ups operating in the market for 12-24 months.
According to Šarūnas Nedzinskas, Management Board Member and Executive Vice President at DNB bank, although the economy growth was subdued this year, the growing occupancy, salaries and individual purchasing power enabled the business start-ups in Lithuania to make use of the situation in the domestic market. The survey showed that 3 out of 4 business start-ups sell most of their products in the country's market.
"Business start-ups are becoming an important factor for the overall economy growth which will be negatively effected next year by the poorer prospects of Lithuania's largest foreign trade partners and, according to the forecast, the decreasing domestic demand. Therefore, next year's business growth should be planned with caution," - says Š. Nedzinskas.
The survey also showed that 44 per cent of the business start-ups have intentions to increase the number of staff within the coming six months. The number of employees is going to remain stable in every second company, while only 3 per cent of the companies are planning to dismiss some of their staff members.
The optimistic sentiments also result from the changes in sales volumes: more than half (56 per cent) of the business start-ups are planning to increase their sales volumes within the coming six months, while only every tenth company said that the sales should be decreasing.
Most companies enjoyed profits
This year almost two thirds (64 per cent) of the business start-ups said that they were generating profits. Every fourth company did not generate any profit but was not loss-making, and only 7 per cent admitted to be generating a loss.
And also, every second businessman (59 per cent) said to have achieved the set goals in part, while every third businessman claimed to have fully achieved the goals. One out of ten companies failed to achieve the goals. The most common goals specified in the survey were to attract a required circle of customers and to generate profits.
"A similar number of companies that are generating profits and implementing their goals has been recorded for two years running. We see that the successful operation of start-ups is not an accidental but continuous phenomenon“, - says Š. Nedzinskas.
As for the most important factor to determine business success, most of the respondents named their team, good knowledge of the business specifics, and the entrepreneurship of their owners and employees. Those businessmen who failed to reach their goals said that this mainly resulted from a too optimistic approach, working capital deficit as well as the state politics and infrastructure which is not business friendly.
The "Business start-up barometer" showed that most business start-ups in Lithuania employ up to 5 staff members (77 per cent). This year the amount of companies with 1-2 employees increased from 38 per cent to 47 per cent as compared to the year 2013. According to Š. Nedzinskas, in most cases companies with 1-2 employees are established to test the business idea in practice. The employees of such companies are also owners who would consider to recruit more staff in case the business idea proves to be successful and the company starts expanding.
Business start-ups focused on Vilnius
Compared to the survey conducted last year, this year the share of companies based in the regions increased from 18 to 23 per cent, while the overall share of the 5 largest cities went down to 72 per cent.
Although the share of companies in the regions was increasing, Vilnius remained to be the centre for business start-ups with 46 per cent of the overall business start-ups established in the capital city. Business start-ups in Vilnius are distinguished from other cities also in terms of their business specifics, i.e. companies in the capital city tend to engage in professional and technical activities and do not choose industrial sectors very often.
And also, unlike in other towns, more businessmen of younger age (19-29) with a university degree are based in the capital city. The businessmen in Vilnius are more optimistic: 61 per cent of Vilnius undertakings are planning to increase their sales within the coming six months, while in other locations they account for 52 per cent.
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