New survey finds SMEs tentatively positive

A new survey of New Zealand SMEs is providing a barometer as to how businesses are faring in the new economic environment, as the country recovers from its second lockdown and faces a confirmed recession.

The findings of the survey of 549 businesses by EFTPOS provider Smartpay New Zealand indicates some key trends across hospitality, retail, health, beauty and fitness business owners.

The major findings include:

• Before the Level 4 lockdown in late March, business confidence was strong, with four in 10 SMEs tracking better than the same period in 2019;
• Noticeable friction on costs between SMEs and key suppliers:
  • 13.5% of respondents said landlords were not willing to negotiate lease agreements (such as discounts or rent-free periods) while SMEs were forced to close;
  • 45% said suppliers were not budging on their fees/costs to SMEs even during lockdown closures;
  • 56% said suppliers have raised their charges/fees since March 2020;
• Four in 10 (41%) of respondents remain positive despite the lockdown pressures and increasing-fee trend, saying their prospects are good as long as New Zealand remains at Level 2.5 or below, but one in 10 (11%) says the outlook for their business is poor and the lockdowns have had a very damaging effect;
• For three-quarters of SMEs (76%), the biggest challenge SMEs faced was decreased revenue due to not being permitted to operate during Levels 3 and 4, which impacts the balance sheet at year-end.

Smartpay notes positive signs of new business growth, with a good volume of new transaction terminals distributed over recent months. Smartpay CEO Marty Pomeroy (pictured) says, “It is reassuring to see this tentative positivity off the back of a post-lockdown rise in trading for SME businesses – we expect that to continue as long as we avoid another lockdown. However, we have observed a trend towards suppliers either not budging on costs or raising fees for SMEs, which make up 97% of all New Zealand businesses. We would question why suppliers would be raising fees in a recession, when their revenues should stay consistent as long as businesses keep trading as they currently are.

“New Zealand is such a small market that all businesses are breathing the same air and are part of the same ecosystem, so if businesses start to fail because of the compounding effect of fee increases on larger economic pressures, everybody loses. Those suppliers will struggle to replace the revenue because new businesses won’t be starting up and surviving ones aren’t expanding. There is really an opportunity right now for suppliers to support their SME colleagues by maintaining consistent pricing.”

The Auckland Business Chamber recently raised its concerns about the impact of price increases on its members, many of which are SMEs. Pomeroy says, “Smartpay is acutely aware of these pressures because we operate at the intersection of business and technology as a key supplier of electronic payment services, so we are working directly with our clients to help ease stressors where we can. Many respondents noted the mental strain being in ‘crisis mode’ has had on them as owners. We would like to challenge all suppliers to collaborate with SMEs to ensure survival and success, particularly with many owners being fearful of persistent economic uncertainty and lockdowns.

“The detailed qualitative responses to the survey indicate that businesses are open to all forms of support from their suppliers, whether financial or in kind. We recently donated three months’ worth of radio advertising to a number of our customers to help them build and grow their businesses post lockdown.”