More than a third of New Zealand SMEs have improved the position of their business over the last four years and feel confident in the economy moving forward, but that has not increased the likelihood of them investing in or growing their business.
These are among the findings of the 2015 Westpac Grow New Zealand survey and provide a comparison to the results of the 2011 Grow New Zealand survey. This year, nearly 1200 SMEs ranging in size from $250,000 to $5 million in turnover were surveyed online about the economy, future plans for their business, and their use of digital technology.
Just over 30% 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 there being 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 four years ago are looking to invest in their business over the next three years by developing new products, increasing sales, increasing marketing or hiring staff.
Westpac Chief Executive David McLean observed that the lifestyle mentality many SME owners have toward their business was a key driver behind the lack of enthusiasm for growth. Underlining this, 31% said 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, but for many SMEs the improved conditions are the cream on the lifestyle cake rather than looking to grow or expand,” Mr McLean said. “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.”
While SMEs have adopted digital technologies, few appear to have restructured their businesses to suit the new world. They were asked about the impact of digital technology on their business over the last five years and in the short term future. The lack of impact over the last five years is surprising while they 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."
Nearly one third said digital technology has had no impact over the last five years and 27% expected it to have no impact over the next five years. 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
They are also only using smartphones, tablets and social media in a rudimentary way while 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.