New Zealand's Best Source of Franchising Information Since 1992

Linkedin Twitter Googleplus Facebook

SMALL BUSINESSES PREDICTING BUMPER YEAR AHEAD

by Simon Lord,
last updated 29/09/2016

22 September - Revenue and optimism are on the increase among small businesses

More evidence of a pick-up in the New Zealand economy is apparent in the latest MYOB Colmar Brunton Business Monitor survey of more than 1,000 small-to-medium enterprises. The six-monthly survey reveals an increasing number of SMEs are experiencing improved trading conditions and there has been a huge turn-around in optimism about the year ahead.

When asked about their business’s revenue, 39 percent of respondents reported an increase in the last 12 months, up from 37 percent in March and 31 percent a year ago. Just 17 percent of SMEs saw revenue fall over the period, down from 21 percent in March and 25 percent in August 2015.

SME operators are even more bullish on the next 12 months, with 42 percent expecting their revenue to grow in the next year, while just 11 percent are forecasting a decline.

That performance has driven a remarkable turnaround in confidence about the state of the broader economy. A net positive 26 percent of businesses are now optimistic about the economy, up from a net negative 30 percent in August 2015.

Underpinning that confidence is another strong quarter expected up until Christmas. Thirty-seven percent of SMEs have more sales or orders in the pipeline until the end of the year; while fewer than half that number (15 percent) have seen sales fall off.

 

The survey reflects the positive mood of franchise businesses as seen in last month’s Franchising Confidence Index study.

MYOB NZ Head of SME, Ingrid Cronin-Knight, says improving conditions are being driven by growth in key sectors and the booming Auckland economy. http://www.franchise.co.nz/advisors/476-myob

‘We’re seeing a lot more confidence about the year ahead from small businesses right around the country,’ says Ms Cronin-Knight. ‘Many SMEs are seeing gradual improvements in their revenue as fears ease about the wider global economy, dairy sector optimism improves and consumer spending picks up.

‘SMEs are often the first parts of the economy to benefit from upturns given how important cashflow is to their operations. It’s great to see optimism growing out there.’

Auckland driving growth

Significant momentum in the Auckland market is driving a good deal of the growth, with close to half (46 percent) of all SME operators in the city reporting improved revenue in the last 12 months. Auckland business operators are expecting that trend to continue over the coming year, with 44 percent forecasting growth for 2017, off the back of a strong quarter for the end of 2016 during which 45 percent have more work or sales in the pipeline.

Improvements in the Wellington economy have consolidated over the last year, with over a third of SMEs (35 percent) again enjoying revenue growth, while Christchurch has fallen off the peaks reached during the height of the rebuild. Several other regions, most notably the Bay of Plenty, are also showing positive results (see Move to the Regions).

Centre/Region

Year to Sept 16 revenue up

Year to Mar 16 revenue up

Year to Sept 16 revenue down

Year to Mar 16 revenue down

Northland

39%

38%

19%

27%

Auckland

46%

39%

15%

18%

Waikato

27%

31%

19%

28%

Bay of Plenty

52%

30%

14%

24%

Hawkes Bay

43%

42%

17%

14%

Taranaki

20%

20%

37%

41%

Manawatu/Wanganui

30%

26%

20%

18%

Wellington

35%

35%

14%

22%

Christchurch

31%

34%

23%

23%

Otago/Southland

39%

47%

17%

14%

 

A diversified economy

The success of the local SME economy is reflecting the ability of a more diversified economy to weather international uncertainty, with growth across key sectors.

‘Businesses are a lot more resilient these days. They’re getting smarter about managing their operations to get through difficult times and are now set up for a successful year ahead,’ says Ms Cronin-Knight. ‘While the dairy sector has been doing it tough, it hasn’t led to the wider economy falling down. That’s extremely positive for the whole country and points to an increasingly diversified economy.’

As evidenced by the performance in Auckland, the construction sector has enjoyed a stellar year, with just under half (49 percent) of all construction and trades SMEs seeing revenue grow over the period and only 13 percent reporting a fall in income.

Also continuing to show growth is the manufacturing industry. 46 percent of SMEs in the sector showed improved revenue in the year to September 2016, while 12 percent saw a fall. The professional services sector also saw solid growth (43 percent) over the year.

Similar growth is expected into 2017 in each of these sectors (construction and trades, 40 percent; manufacturing and wholesale, 44 percent; business, property and professional, 45 percent). However, operators in the retail and hospitality industry, in which growth in the 2016 year was more finely balanced between those reporting revenue rises (32 percent) and falls (28 percent), are expecting to outstrip them all next year, with 49 percent expecting to see improved performance in 2017.

Sector growth stimulating more employment

While jobs growth is likely to remain at a modest 12 percent of all SMEs, those sectors experiencing higher revenue performance are more likely to be employing over the next 12 months. 21 percent of businesses in the construction sector and 20 percent of manufacturers intend to take on more staff in the year to September 2017.  ‘While this should increase sales levels in many franchised outlets in, for example, the food and beverage sector, high employment rates usually mean that franchisors have to work harder to attract suitable new franchisees,’ comments Simon Lord, the editor of Franchise New Zealand.

The construction sector is also more likely to be improving wage rates, with 25 percent planning to pay staff more over the next 12 months, compared to 22 percent across all SMEs.

Some inflationary pressures might be seen towards the end of the year, as 29 percent of SMEs plan to increase their prices and a growing number (28 percent) plan to make investments in plant and equipment.

Growth pressures ratcheting up

While SMEs across the board are enjoying growth, a flourishing economy is stimulating key pressures. A fifth of all business operators are concerned about cashflow in the year ahead, while 19 percent are worried about competitive activity and 18 percent are coming under increasing pressure from late customer payments.

Getting paid on time is of particular concern in the construction industry, with 27 percent expecting the timing of customer payments will put them under extreme or quite a lot of pressure in the next year. This is also becoming a major problem for the manufacturing industry (23 percent), along with the effects of fluctuating exchange rates (also 23 percent).

‘Cashflow is so important to SMEs. It is essential that business owners have a clear view of how their operation is tracking when it comes to payments and there are great online tools that can help improve debtor management. For any businesses that are struggling, we suggest talking to their advisors about what systems they can put in place to better manage cashflow,’ says Ms Cronin-Knight.

About the MYOB Business Monitor

The MYOB Business Monitor is a national survey of 1,000+ New Zealand small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. This most recent survey ran in August/September 2016.

Free

Shadow

Send for your free copy of our printed magazine, New Zealand's most respected,
comprehensive
guide.

featured

Wide_span_sheds_logo_tile Sba_tile_2014 Goodwinturnerlogotile 2385_fran_acc_fnz_web_tile_fo Franchisenz_july_2017 Freelisting Westpac_tile_ad_2016 Dominoslogotile Nsme189586-0916-webtile-288x288px-white Jim_s_building_inspections_logo_tile_web
Jim_s_building_inspections_logo_tile_web Wide_span_sheds_logo_tile Sba_tile_2014 Goodwinturnerlogotile 2385_fran_acc_fnz_web_tile_fo Franchisenz_july_2017 Freelisting Westpac_tile_ad_2016 Dominoslogotile Nsme189586-0916-webtile-288x288px-white
Nsme189586-0916-webtile-288x288px-white Jim_s_building_inspections_logo_tile_web Wide_span_sheds_logo_tile Sba_tile_2014 Goodwinturnerlogotile 2385_fran_acc_fnz_web_tile_fo Franchisenz_july_2017 Freelisting Westpac_tile_ad_2016 Dominoslogotile
Dominoslogotile Nsme189586-0916-webtile-288x288px-white Jim_s_building_inspections_logo_tile_web Wide_span_sheds_logo_tile Sba_tile_2014 Goodwinturnerlogotile 2385_fran_acc_fnz_web_tile_fo Franchisenz_july_2017 Freelisting Westpac_tile_ad_2016

PUTTING PEOPLE in BUSINESS