More than half of small businesses are planning on increasing their service and product fees to cope with rising costs, a new survey shows.
The latest research from small business accounting firm MYOB showed that 44 per cent of SMEs were responding to inflationary pressures and a range of increasing costs.
The SMEs cited; the minimum wage rise, increased shipping costs, losses from Covid-19 or product increases from suppliers, which had pushed them into planning their services price hike in the next six months.
The survey was polled in the fourth quarter (October until December 2021).
MYOB head of customer serviceJo Tozer said for local businesses confidence in the economy over the last 12 months had been heavily influenced by Covid-19.
“Our return to ‘normal’ in the second quarter (April to June) saw confidence increase, before declining rapidly again in the third quarter (July to September) due to the Delta variant hitting our shores and the impact of the subsequent lockdown restrictions.
“For many SMEs, this year’s outbreak of Covid-19 has brought increased uncertainty as we learn how to live with the virus, rather than eradicate it.
“This, in turn, led to the biggest decline in economic confidence that we’d seen in our MYOB SME surveys since the 2008 global financial crisis.
“For local SMEs, not only have many had to regularly restructure and refocus, they’ve also had to deal with a constantly changing economic environment, and manage unprecedented levels of uncertainty,” Tozer said.
About 40 per cent of the respondent said that they believed the economy will decline in the first quarter of the next 12 months, while 34 per cent said it would improve.
For the fourth quarter of 2022, 55 per cent said the economy will decline while 24 per cent said it would improve.
Local factors impacting confidence
The spread of Covid-19 and the vaccine rollout were some of the biggest issues New Zealanders faced in 2021, making it the top two factors having the biggest impact on SMEs’ level of confidence on the economy, Tozer said.
High median house prices have also impacted local SMEs due to some consumers’ limited ability to spend, and the high prices have made it harder for SMEs to find skilled employees in their area. Covid-19 was also the top international factor impacting SMEs’ level of confidence, the survey showed.
The outlook of the economy for the first quarter of the next year; 59 per cent of the respondent said the pandemic was the reason that would impact their economic confidence, while only 29 per cent said low interest rates was the reason to worry.
Revenue performance in 2021
Over a quarter (26 per cent) of SMEs had said their revenue was up on a year ago in the early third quarter during the time of our polling – the highest of all quarters for local SMEs.
But with Covid-19 lockdowns and restrictions soon to follow in August and then occupying most of the fourth quarter, it was no surprise that nearly half (48 per cent) of respondents in the fourth quarter reported that their revenue was down on a year ago.
Revenue predictions for 12 months’ time
For a majority of 2021, most SMEs were positive that their revenue would be up or about the same in 12 months’ time, compared to the present time. However, in the fourth quarter, nearly a third (31 per cent) of SMEs expected their revenue to be down in 12 months’ time – reflecting the difficulties of navigating a business during a time of high uncertainty.
Work in the pipeline
The second quarter proved to be a good quarter for business, with nearly two in five (39 per cent) SMEs saying they had more work in the pipeline in the next three months, compared to what they would usually expect.
“Perhaps responsible for increased revenue predictions we saw in early third quarter, this was a significant improvement from first quarter – increasing by 14 per cent points,” Tozer said.
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