More than a third of New Zealand SMEs have improved the position of their business over the last 4 years and feel confident in the economy moving forward, but that has not increased the likelihood of them investing in or growing their business, a new survey has found.
The 2015 Westpac Grow New Zealand report, completed online by 1,200 SMEs ranging in size from $250,000 to $5 million in turnover, gives insights into local businesses views on the economy, future plans for their business, and their use of digital technology.
The results were then compared to the results of the 2011 Grow New Zealand report.
Growth up, tough times down, investing flat
Just over 30% of the SMEs surveyed said they have experienced positive growth, up 12% on 2011, while those who were experiencing tough times have dropped 6% to 20%.
However, the improved economic position did not change investment intentions with little to no change around expanding businesses, maintaining the size of the business, or looking to sell.
And although 42% of SMEs intend to invest in their business, fewer SMEs than 4 years ago are looking to invest in their business over the next 3 years by developing new products, increasing sales, increasing marketing, or hiring staff.
So why the reluctance to grow?
This lack of enthusiasm for growth appears to be based around lifestyle goals, with 31% of respondents saying the biggest block to growth was their desire to maintain work/life balance or retire – a 10% increase on 2011.
“The economy is going better than 2011 and prospects are good,” says Westpac Chief Executive David McLean, “but for many SMEs the improved conditions are the cream on the lifestyle cake rather than looking to grow or expand.
“Trying to encourage our SME owners to invest for growth and to be bold is important to the country given their role in our economy.”
A lack of understanding and investment in digital
While SMEs have adopted digital technologies, one third said digital technology has had no impact over the last 5 years, and 27% expected it to have no impact over the next 5 years.
This means that few SMEs appear to have restructured their business to suit the new world, and are also not confident about securing the right staff to capitalise on it.
“In the United States, productivity gains have been made by altering business structures to suit the new technological reality,” commented Westpac Chief Economist Dominick Stephens. “There doesn't seem to be as much pressure for New Zealand firms to adapting quite as quickly.”
Other findings on digital technology included that only:
- 10% of firms have hired new staff
- 14% have invested in education and training
- 11% have changed supplier
- 6% have changed a distribution process
- 8% have changed organisational structure
- 3% have laid off staff because of new digital technology
Results also showed the businesses are only using smartphones, tablets and social media in a rudimentary way, and 38% are unsure what is needed or how to obtain the right staff or training to use digital technologies.
For more information read the full report findings.