Growth among New Zealand’s small businesses has levelled off in the last six months with the economy entering a more stable phase, according to a nationwide survey of small business operators.
Thirty-two per cent of SMEs saw revenue increase in the 12 months to February – down from a five-year high of 39 per cent in September – according to the latest MYOB Business Monitor. More SME operators are reporting stable revenue, however, up from 38 per cent to 44 per cent in the latest survey of over 1,000 business owners and operators from around the country, conducted by Colmar Brunton.
MYOB New Zealand General Manager James Scollay says the latest survey shows that the SME economy has reached a point of more manageable growth.
“While we’ve come off the highs reached through mid-2014, the level of stability we are seeing off the back of that period is encouraging,” says Mr Scollay. “Rather than the brakes going on, the SME economy looks to be settling into a period of sustained growth – especially when you take into account businesses’ projections for growth this year as well as the work they have on in this quarter.”
According to the March MYOB Business Monitor, 40 per cent of SME operators expect their revenues to increase in the next 12 months, while a further 43 per cent are projecting stable revenues. Just 11 per cent are expecting revenues to fall in 2015. In the current quarter, 37 per cent of SMEs are reporting more work or sales in the pipeline, while 13 per cent are seeing less.
Regions settling back
While the widespread effects of the rebuild continue to push Christchurch SMEs to the top of the growth table, revenue increases in the city have fallen off somewhat in the last 6 months. Forty-six per cent of SME operators in Christchurch report growing revenue in the last 12 months, down from 51 per cent in the September Monitor. Auckland businesses are only slightly off the pace they set last year, down from 38 per cent to 36 per cent in the current survey, while the proportion seeing revenue falling has dropped from 24 per cent to 20 per cent. Wellington remains below the national average, with just 23 per cent of SME operators reporting increasing revenue, and 20 per cent seeing revenue fall.
Throughout the regions, growth has also settled back from the highs achieved last year. Areas like Northland, however, are reporting high levels of stability – with 70 per cent of business operators in the region saying their revenue performance is the same as last year.
Centre/Region Year to February 15 – revenue up Year to February 15 -revenue down
Northland 13% 17%
Auckland 36% 20%
Waikato 28% 18%
Bay of Plenty 37% 24%
Hawkes Bay 26% 31%
Manawatu/Wanganui 24% 11%
Wellington 23% 20%
Christchurch 46% 21%
Otago/Southland 31% 24%
Farming taking a hit, manufacturing slowing
The twin effects of falling commodity prices and drought conditions through a large part of the country are weighing on local farmers, with a larger proportion of SME operators in the primary sector seeing revenue fall (31 per cent) than gain (26 per cent).
Manufacturing is also slowing, with 28 per cent of local operators showing an improved revenue performance in the year to February, compared to 43 per cent in September.
More goods are moving, though, with the logistics sector reporting a large jump from 24 per cent reporting an annual revenue increase last year, to 33% in the latest survey. The construction sector has also maintained its level of growth, at 35 per cent.
Fuel off the pressure list
For the first time in five years, the rising cost of fuel is no longer a key concern of local SMEs. The plunge of global fuel prices has seen fuel slip from the leading concern in the previous Monitor, at 26 per cent, to now sit at just 12 per cent. The pressures forecast for the coming year are more related to managing growth in an increasingly competitive environment.
Pressures on SMEs in next 12 months
1. Cash flow – 23%
2. Margins and profitability – 22%
3. Competition / attracting new customers – 21%
SMEs still hiring – and paying more
In a sign of continued confidence, over a fifth (21 per cent) of SME operators will look to increase the amount they pay their staff in the next year, while 7 per cent will take on more full time employees and 11 per cent will increase their part-time roster.
“This is the continuation of a golden run for New Zealand’s SME community,” says James Scollay.
“Kiwi business owners can be pretty proud of what they have achieved over the last couple of years – especially as the global economy has shown continued uncertainty and the local environment has not been without its pressures.”
“But while enjoying stability, local SMEs are concerned about key growth pressures, like cash flow and profitability. The key to managing these is robust management information and expert advice – so we encourage SMEs to invest in good business systems and build a strong relationship with their accountant.”