Rural businesses target growth strategies
Thursday, 16 June 2016
Despite the challenging effects of the dairy downturn, businesses in rural New Zealand remain focused on growth strategies, with strong investment intentions for the coming year according a new report on the sector released on the eve of Fieldays.
The latest MYOB Colmar Brunton Business Monitor survey of 210 businesses from across rural New Zealand highlighted that over half (57 percent) acquired new machinery and equipment in the last year, a third (33 percent) invested in technology and just under a quarter (23 percent) spent money on employee training.
MYOB General Manager James Scollay says the sector’s record of investment over the last year highlights not only its resilience but also how strongly focused operators have focussed on up-skilling themselves and investing in productivity enhancements for their operations.
“Despite pressures on the sector, our primary industries and other rural-based businesses are have been focusing on new strategies, skills and technologies as a means of offsetting the worst of the commodities downturn,” says Scollay.
“Over the next year a large proportion are planning to broaden their investment in IT systems and processes or work with business advisers in order to streamline their operations and find new productivity benefits.
Although revenue in rural New Zealand was behind the national average in the last 12 months, the outlook is stronger for the coming year.
Just 30 percent of rural businesses reported revenue growth in the year to March 2016 compared to a national average of 37 percent, while 34 percent saw revenue fall (21 percent of all SMEs). Growth in businesses directly involved in the primary industries was even more constrained, with 26 percent seeing revenue increase in the previous 12 months and 43 percent reporting a fall.
However, in the year to March 2017, 31 percent of rural businesses and 29 percent of primary industry SMEs expect to see their revenue increase, while 28 and 33 percent respectively are forecasting a revenue decline.
Sector hard hit by dairy downturn
While a quarter of all New Zealand SMEs saw some effects from the dairy downturn, the impact was understandably strongest throughout rural New Zealand. Thirty four percent of rural-based enterprises reported an impact on revenue, along with 43 percent of primary sector businesses. SMEs in rural areas also saw consumer confidence take a significant hit (39 percent of rural businesses and 45 percent of primary industry businesses).
Technology holds the key
Despite being strongly dissatisfied with their Internet access, with nearly half of all rural businesses unhappy with the speed and cost of their connection and just 6 percent connected to ultra fast broadband, rural businesses are nonetheless convinced of the importance of technology for their business.
Over two thirds (67 percent) believe the rural broadband initiative would have a positive impact on their business – if they could get a connection.
Levels of online activity have also increased dramatically for rural businesses in the last 12 months, up from just 27 percent a year ago, to 42 percent. This is being driven by the benefits they are seeing in terms of more lead generation (60 percent), ease of doing business for customers (45 percent) and increased competitiveness (40 percent).
Scollay says the greater willingness to invest in and adopt new technology is beginning to pay real dividends for the rural sector, and is likely to help businesses engaged with the primary industries protect against some of the downside risks in the market.
“In nearly every aspect of rural life, technology has the power to transform business, improving efficiencies and productivity, opening access to new markets and trimming costs.
“In doing so, it can help protect rural industries against the fluctuations in the market and the environment.
“In our latest MYOB Business Monitor, it has been heartening to see more rural business operators embracing the potential of technology. For others, it may be time to take a look over the fence at the benefits and advantages your neighbours are enjoying,” he says.
To see the full MYOB Rural Business Monitor report, visit: www.myob.co.nz/ruralreport.