Primary sector SMEs forecast rising revenue
Wages and prices both set to climb
The backbone of New Zealand’s economy, the rural sector, is forecasting a strong year after outstripping expectations in 2013.
The latest MYOB Business Monitor Rural Report underscores the strength of New Zealand’s rural businesses, with 34% of SMEs based outside of the cities reporting improved revenue in the year to February 2014. This was ahead of the forecast in the March 2013 survey, when 29% predicted revenue growth for the year to February 2014.
SME operators in the rural areas are even more confident of improved revenue in 2014, with 41% forecasting a revenue increase.
Federated Farmers President, Bruce Wills, felt the MYOB Business Monitor Rural Report was in line with its Farm Confidence survey.
"While MYOB surveys a rural audience, much wider than the on-farm population, the confidence levels it found are very encouraging. What is less positive is the inflationary pressure it found with the price of farm inputs."
MYOB General Manager Accounting Division, Adam Ferguson says such confidence in a sector that is normally conservative in its predictions underscores the real strength of the rural economy.
"The rural sector operators don’t usually overstate their expectations – as the 2013 survey shows," says Adam Ferguson.
"So when over 40% of rural SMEs report they are expecting improved revenue in the year ahead – and only 10% for it to decline – we can be confident that the sector will do well in 2014. When this vital sector does well, it underpins growth in the whole local economy.
"This is especially good news for the regions who rely so much on the flow-on from the rural economy."
The sector has enjoyed a solid first quarter, with 33% reporting more work on in the period from February to April.
Fuelling wage growth
"Further good news for the regions is the promise of wage rises in the rural areas," says Mr Ferguson. "Over a fifth of small business owners in the sector are intending to increase wages and salaries in the year to February 2015."
"An overwhelming majority of rural business owners intend to maintain a stable level of fulltime employees, and 16% of SME operators say they will increase the number of part time roles they offer this year."
"But with wages on the rise, we are also likely to see prices increase too, with close to a quarter of the sector planning to improve their margins."
Transport costs biting
Although positive about their own prospects, rural-based SME operators are feeling costs more acutely than most other sectors.
"This is particularly evident in the price of fuel and rising interest rates, where more rural businesses are reporting pressure than the SME average," says Mr Ferguson. "Although current interest rate rises are targeted at taking the heat out of the housing market, it’s important to recognise the effect this monetary policy has on key sectors, like rural businesses."
2014 key pressures on rural SMEs:
- Fuel prices – 37% (all SMEs 25%)
- Cash flow – 31% (all SMEs 21%)
- Interest rates – 30% (all SMEs 22%)
Mix of policies appeal
SME operators based rural New Zealand are strongly in favour of tighter controls on foreign purchases of land and infrastructure, according to the Monitor. 65% of respondents would vote in favour of the party with this as a policy in the upcoming election, 10 percentage points higher than the SME average. However, the sector is against imposing a Capital Gains Tax (63% would vote against) or raising the superannuation age to 67 (50% would vote against).
Use of online technology growing
Online participation from rural businesses has increased in the last year, with 27% of SMEs now operating their own business website, up from 22% in March 2013. A further 6% operate a social media site only for their business. The use of cloud computing products and services has doubled from 8% to 16%.
Sector operators report that their website has generated more leads (61%), provided a more professional brand image (50%) and made it easier for customers to do business with them (47%).
"It’s particularly encouraging to see this vital sector embracing the benefits of the internet by participating in the digital economy and using the cloud," says Mr Ferguson. "The use of online services and products in particular enables these operators to manage their businesses more easily. It also has the very real potential to address key pressures, like the cost of transport, cash flow and profitability."
It’s exciting to see what a confident, digitally-enabled and highly efficient rural sector can contribute to the economy in the coming years."
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Established in 1991, MYOB is New Zealand's largest business management solutions provider. It makes life easier for approx. 1.2 million businesses across New Zealand and Australia, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory and more. MYOB provides ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and now spends more than NZ$35 million annually on research and development. In 2013, MYOB expanded its offerings with the acquisition of accounting solutions provider BankLink. For more information, visit myob.co.nz.