Mid-market businesses strong in face of economic downturn

Despite ongoing economic challenges hammering businesses, new insights show that our mid-market enterprises continue to demonstrate resilience, with many reporting strong performances and profitability over the past 12 months.

According to the latest MYOB Mid-market Snapshot – a survey of more than 500 local mid-sized business leaders and decision-makers – more than two-thirds (69%) of those polled describe their overall business performance to date in 2022 as ‘better than expected’, with over a third (36%) saying it is ‘much better than expected’.

In a stark contrast to what has been reported amongst New Zealand’s small businesses, returns for mid-market businesses with between 20-500 employees, have been stronger this year.

At the time of polling, more than two-thirds said they have experienced an increase in revenue in the calendar year to date (compared with this time in 2021), while 63% have seen their profitability increase this year. Just 18% report a year-on-year fall in revenue, while 23% have seen a decrease in profitability over the year compared to 2021.

Looking at which sectors have fared the best so far, the highest proportion of mid-sized businesses reporting revenue increases were in the business, property and professional services industry (77%), construction and trades (75%), and the manufacturing and wholesale industry (72%).

MYOB spokesperson, Jo Tozer, explains that while the local mid-market often flies under the radar because of the size of the sector compared to others, strong performances from mid-sized businesses and their contribution to the economy should be commended.

“From our latest insights and conversations with our customers, it’s evident that many mid-market businesses have proven to be incredibly resilient, despite the enormous disruptions and challenges that have been felt across the economy this year,” says Jo.

“In comparison to our recent snapshots of smaller businesses, where revenue and confidence have been consistently down, the mid-market entered this year with higher levels of confidence and work in the pipeline, and we’ve seen this promising outlook continue throughout the year.

“There are more than 13,000 mid-sized businesses in New Zealand and the continued success of this sector is extremely important – particularly given their growth ambitions and employing power as we head into another challenging year.”

Inflation piling on the pressure

Despite efforts to bring inflation under control, more than three quarters (78%) of mid-market business leaders say they plan to increase prices in the short term (the next 3 to 6 months).

The key reasons* for their decision to increase prices include:
*Option to select more than one reason

Increasing production costs (goods, raw materials etc) – 58%
Increasing supply costs (freight, shipping etc) – 41%
Increasing operational costs – 40%
Skills shortage putting pressure on wages and salaries – 39%
Increase in minimum wage – 36%

“Unfortunately, the mid-market is not immune to inflationary pressure, and most are looking to increase their prices in the near term to offset rising costs of production, supply, and operations,” says Jo Tozer.

“This is going to continue to have an impact on local consumers. For example, with 89% of mid-sized businesses operating in the construction and trades sector planning to increase prices in the near term, homeowners are likely to see added expense. The cost of locally made goods may also continue to increase, with 85% of mid-market manufacturing and wholesale businesses planning price rises.”

Recession looming large for mid-market

On top of rising costs, another cloud looming over New Zealand’s mid-market is the prospect of a recession. MYOB’s snapshot showed that almost 9 out of 10 (88%) mid-market business leaders and decision makers are concerned about the possibility of a global recession.

According to those surveyed, the predicted key impacts of a global recession on their business include: decreased demand for the goods or services they offer (38%), reduced cashflow (26%) and difficulty obtaining loans or financing (18%).

“With a stronger possibility of recession on the horizon, businesses are rightly concerned about the impact on both customer demand and their access to finance. Many will also be considering the potential flow-on effects in terms of what this means for their growth strategies,” explains Jo.

“However, given the toughness they have demonstrated throughout the pandemic and the performance most mid-market operators have experienced over the last year, hopefully many will have built up reserves to help insulate their business against the worst impacts of what’s to come.”