Business advice for 2013
The best way for Waikato businesses to get ahead this year is to invest in staff and better technology and to manage rising costs, according to a new economic analysis.
A study by the New Zealand Institute of Economic Research (NZIER) and business management solutions company MYOB showed 39 per cent of Waikato businesses surveyed said rising fuel costs were their number one pressure point, with 32 per cent nominating interest rates as holding back their business.
NZIER analysed three years of data from MYOB's regular nationwide survey of more than 1000 small and medium enterprises.
The analysis found fuel prices, competitive activity and business prices and margins were the most severe pressures on businesses.
NZIER chief economist Shamubeel Eaqub said business operators able to find ways to turn these challenges into opportunities would have a real advantage in the year ahead.
NZIER's report said a combination of leveraging new technologies, new organisational structures and better systems could help businesses improve operational and financial performance.
MYOB chief executive Tim Reed said the report showed business owners and operators were more likely to have financial success if they improved communications technology, built a website presence, resisted staff cost cuts and moved parts of their operation into the cloud, whereby a contractor manages IT functions.
Updating accounting systems and managing inventory more efficiently would also assist, he said.
Companies which made use of online marketing were more able to compete, because they were able to communicate with customers in a targeted way, which takes pressure off their margins.
Waikato businesses were on a par with others in New Zealand in that 39 per cent of all companies surveyed said rising fuel costs were their main challenge.
Eaqub said this was relatively unusual as demand for fuel tended to fall in an economic downturn. However in citing interest rates as the second biggest pressure, Waikato companies stood out from other regions.
For the rest of the country, second-place pressures were difficulty in attracting new customers, increased competition and prices and margins, were often interconnected in a downturn.
These challenges demanded significant attention by business owners who tackled them alone, Eaqub said.
"There is greater competition for available customers in a downturn. This means that many businesses are less able to pass on costs for fear of losing market share, which has a real impact on profitability."
Businesses trying to improve their margins without having to pass on costs to customers should ensure they have a solid understanding of where their costs come from and how they can provide greater value to their customers to justify price rises, he said.
"Customers will often pay more for a product or service if the benefits of doing so are clear."
NZIER's analysis suggested 2013 will be a big year for business advisors such as accountants.