Westpac: small businesses confidence has plunged amid economic uncertainty
Craig MacLugash is feeling a bit dispirited.
The owner and manager of Total Property Worx, in Auckland, built his business up over the past seven years from a one-man operation to a team of tradespeople covering construction, plumbing, maintenance and roofing.
But lately it has become a lot harder to find the right staff. It is hard to find fluent English speakers and some of the people he has hired have over-promised and under-delivered in terms of their abilities.
That means he is having to turn business away and is facing some big decisions about the way forward.
A new survey shows it is a sentiment shared by many small business owners.
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Confidence among small business owners has plummeted and they are putting their heads down to plan their futures amid challenges in the economy.
According to the latest Westpac Business Growth Monitor, which surveyed 500 small business, the confidence of medium size SME businesses fell almost 20 per cent from the last quarter.
Confidence was measured in relation to the economy, growth plans, intention to create jobs and need for funding.
Westpac head of specialists commercial Steve Atkinson said businesses were planning their futures carefully.
"There are a lot of factors now in play that businesses don't have control over – the Chinese economy, uncertainty in Europe, the US elections and closer to home the dairy downturn," he said.
"Businesses are starting to put the dots together and trace these uncertainties back to their own businesses and their own future."
Fifty-two per cent expected revenue to increase over the next six months, while 31 per cent expected no growth or a decline.
The intention to hire staff increased from 8 per cent in the last quarter to 13 per cent but fewer businesses were looking to commit to large loans and businesses were looking at how to self-fund more.
Almost 40 per cent anticipated growth in the economy and 34 per cent felt the economy was unstable.
Construction was the most confident in the economy over the next six months, at 65 per cent, and primary sectors were the least confident at 16 per cent.
From the last quarter, there was a 6 per cent increase to 67 per cent in the number of businesses that had a plan in place to achieve their growth goal.
Atkinson said small business owners were not traditionally great succession planners but there was an increase in retirement planning, with 12 per cent of owners (up from 10 per cent) surveyed looking to exit their business in the next two years.
"This all comes back to the importance of planning.
"SMEs can be extremely vulnerable to wider economic factors, so business should always plan to prosper throughout the economic cycles and be thinking about their retirement from the get-go.
"It's about being prepared for all economic conditions and all stages in life," he said.
Of those looking to borrow in the next six months, 31 per cent were looking for loans of more than $50,000, compared to 45 per cent in the last quarter.
"This is hardly surprising in an economy linked so heavily to the primary sector, but overall we're being kept on a relatively even keel by buoyed confidence in construction, trade, transport and tourism, where businesses are hiring more," Atkinson said.
Small businesses are defined by the monitor as businesses with less than $5 million turnover and medium size businesses are those with 10 or more employees.
MacLugash said he was sure he would be able to turn things around in time. "If I can get a couple of key employees in the right places, that would do it."
Another option is to scale down the operation a bit until the right staff turn up. "If I have to restructure, I'll restructure. I'm a bit on the fence. But I've never failed before and I don't want to start now."