Small Businesses Back Themselves Despite Difficult Economy

Media Release: 14 April 2012

Small Businesses Back Themselves Despite Difficult Economy

• Confidence in short term economic recovery plummets among SMEs – lowest in 3 years
• However, growth expectations for businesses strong: 42% expect improved revenue
• Improving quarter ahead with 33% expecting more work in next 3 months

Confidence in a short-term economic recovery is the lowest it has been in years, but New Zealand business owners are still optimistic about their own prospects, a new study reports.

The MYOB Business Monitor, a regular survey of over 1000 small and medium sized business owners, found confidence in an economic recovery within the next 12 months is at the lowest level since the survey began in June 2009.

Just 21% of New Zealand’s business owners expect an economic recovery within the next 12 months – less than half of the 49% who expected a recovery within 12 months when asked in March 2010.

However, despite a lack of belief in the broader economy, business owners are backing their own operations to do well, with 42% of business owners expecting their revenue to have increased within a year’s time.

MYOB general manager Julian Smith says the results highlight that while New Zealand’s business owners are seeing a variety of pressures on the recovery – particularly as a result of turmoil in international markets and slowing growth among key trading partners – they continue to have confidence in their own operations.

“While New Zealand businesses are becoming increasingly pessimistic about the chances of an economic recovery over the next twelve months, it is very encouraging to see that they are confident their own operation is going to do well. This demonstrates – as we have seen right throughout the recession and recovery – that the New Zealand business community is resilient, and still looking to succeed despite a difficult environment.”

“The results of the MYOB Business Monitor have also been tracking very closely with wider developments, highlighting that the performance of small business is a good bellwether for wider economic conditions.”

New Zealand business owners are also significantly more optimistic about their own prospects than their Australian counterparts. Less than a third (30%) of businesses across the Tasman expect their revenue to increase over the coming year.

Australians have also lost confidence in their own chances of economic recovery, with just 19% of businesses expecting an economic recovery in the next 12 months.

Julian Smith says New Zealand businesses’ performance expectations are being driven by higher than usual levels of work or sales over the next quarter, with 33% of small businesses forecasting more work in their sales pipeline over the next 3 months than usual.

“Christchurch businesses are especially buoyant about the next 3 months, with 43% expecting more work — a sign that the city’s long awaited recovery might be picking up steam,” says Julian Smith.

Christchurch is well ahead of the other main centres, with 33% of Auckland businesses reporting more work and sales than usual in the pipeline. Fewer Wellington business owners are expecting a strong quarter, with just 21% reporting more than usual in the pipeline.

By sector, Manufacturing has the most in the pipeline, with 50% reporting more work than usual in expected in the next quarter. By contrast, only 24% of Agribusiness owners are expecting more work in the next 3 months. The Construction and Trades sector is also staging something of a rally, with 38% showing more work in the next quarter – although a notable segment (13%) are reporting a lot less work expected in the next three months.

“It’s very positive to see that some areas of our economy are real bright spots. Christchurch businesses, and those involved in Manufacturing, are proving to be a real growth area, and are looking to do well despite some challenging circumstances,” said Mr. Smith

“Overall too, we’re seeing a general improvement in business performance, as the proportion of businesses reporting higher revenue over the last year has been steadily increasing.”

34% of businesses grew their revenues in 2011 compared to just 28% in 2010. The proportion of businesses reporting losses has also fallen, from 38% in 2010 to just 29% today. Not surprisingly, business losses were worst in Christchurch over the last year, with 37% of businesses reporting a fall in revenue. This was compared to just 27% in Auckland and 29% in Wellington.

Mr. Smith said the survey also demonstrated the vital role that a business website could play in attracting new sales.

“One of the most important figures from this study is that 42% of small businesses that have a business website are reporting extra sales and work in the pipeline, compared to just 29% for those that don’t have a website,” said Mr. Smith.

Those with a business website have also enjoyed more revenue over the last year, with 42% of businesses with a website seeing their revenue rise, compared to only 29% for those without a website. 51% of businesses with a website expected to see revenue growth over the next year, compared to 37% of those without.

“Business websites are emerging as one of the key strategies for attracting new customers and finding new revenue streams when other areas of the economy might not be performing as well,” said Mr. Smith.

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