Skills Shortage Bites and Business Confidence Wanes Among Business Owners

Skills Shortage Bites and Business Confidence Wanes Among Business Owners

Autumn chills have crept through the economy with current conditions eroding confidence among business owners.

In The Alternative Board’s Autumn Pulse Check, business owners report their focus has shifted from the immediate impacts of the pandemic and they are now dealing with the consequences of COVID19 rather than COVID19 itself. Those consequences include tackling a serious skills shortage coupled with changing employee expectations regarding pay and conditions. Some business owners are meeting those expectations, with more than 40% indicating they are now offering higher wages.

Despite the difficulties, business owners say they’re doing ok – that they are staying steady and taking on the challenges as they arrive – but economic conditions, government policy including the recent Budget 22, have further dented their confidence.

Inflation and supply chain issues are adding to existing pressures. Concerns are emerging around lack of sales and, while most have enough sales for now, owners are worried they won’t last.

To get through 2022, business owners are looking for more government or financial support while some are reporting they are exhausted and in need of a break.

Alfredo Puche, Managing Director of The Alternative Board said: “Inflationary pressures, supply chain and employment issues continue to be at the forefront of the many challenges business owners currently face and the pressures are starting to take their toll”.

You can download the full results here and access all the Pulse Checks here.

The Alternative Board supports small to medium sized businesses and their owners through advisory boards consisting of other local business owners, expert one-on-one coaching, a suite of business planning tools and business mentoring.

The Pulse Check is run as a regular monitor of the sector. The Autumn edition went to 2225 of our members and associates between 20 – 27 May. Results have a confidence level of 90% and a 5% margin of error.

Small Businesses Stay Calm and Carry On

Small Businesses Stay Calm and Carry On

Keeping calm and carrying on – that’s the current steady stance of small business owners despite the backdrop of rocketing Omicron cases, disruptive protests and ongoing uncertainty.

In The Alternative Board’s Summer Pulse Check, nearly two-thirds of business owners report their confidence is holding steady in the face of ongoing challenges.

For many, this confidence is lessened by government policy and economic conditions, although in contrast, a smaller number report that government policy and economic conditions improve their confidence.

Three-quarters of business owners report they are having to manage labour issues, including skills shortages, juggling staff absences or retention. The vaccination rollout has not had a huge impact on their workforces or businesses – a small number report staff losses but for the majority, it has been business as usual.

After last year’s lockdown stresses, when our Spring Pulse Check showed owners were at their lowest ebb since the start of the pandemic, the summer has seen business owners rally, finding ways to manage uncertainty and pandemic pressures. Chief among the stressors are rising input prices with lack of sales and supply chain issues not far behind.

To get through 2022, business owners are looking for more government or financial support however recent changes to lending conditions has not had an impact. Working capital and customer relationships are also holding steady and while the future isn’t bright, the current pulse is stronger than at the end of 2021.

You can download the full results here and access all the Pulse Checks here.

The Alternative Board supports small to medium sized businesses and their owners through advisory boards consisting of other local business owners, expert one-on-one coaching, a suite of business planning tools and business mentoring.

The Pulse Check is run as a regular monitor of the sector. The Summer edition went to 3520 of our members and associates between 18 – 24 February. Results have a confidence level of 90% and a 5% margin of error.

Challenging Realities Ahead For Small Business Sector

Challenging Realities Ahead For Small Business Sector

Falling confidence, fragile operating conditions and the shadow of inflation are just some of the economic challenges stacking up for small business owners in 2022.

This year’s Pulse Tracker from The Alternative Board tells the story of small business survival through the second year of the pandemic and, while the strong, steady beat of the small business pulse remained consistent through the first onslaught of COVID19, it has now quickened with anxiety as the realities of the pandemic’s midpoint move into view.

The Pulse Tracker charts the progress of small businesses and their owners through a year that has seen them grapple with employment issues, cash flow crises, supply chain breakdowns, port disruptions, rising costs and other problems.

Alfredo Puche, Managing Director of The Alternative Board said: “Confidence remained high until July, despite the many obstacles and uncertainties but the Delta outbreak cracked that confidence with many business owners who had resolutely worked their way through the highs and lows finding themselves exhausted – and some have reached breaking point.

“July also saw the first red flags with business owners warning their prices would have to rise in response to higher input costs. The prolonged lockdown in Auckland plus restrictions across the rest of the country eroded confidence even further, with many feeling it was time to sell up and move on”.

The latest phase of the pandemic is crunch time for many, taking some by surprise with its severity and cementing the view that doing business is likely to get tougher.

With the end of the year in sight, owners are analysing the potential scenarios 2022 might deliver and planning how they will cope. Inflation, rising interest rates, worsening supply chain issues, the implementation of vaccination policies plus the advent of a new variant have fuelled the uncertainty clouding the months ahead.

The Pulse Tracker tells this year’s small business story, as seen through our quarterly Pulse Check, which provides ongoing insights into how owners have managed during 2021, where they are now, and how they will tackle the challenging realities ahead.

The Alternative Board supports small to medium-sized businesses and their owners through advisory boards consisting of other local business owners, expert one-on-one coaching, a suite of business planning tools and business mentoring. The Pulse Check is a quarterly monitor of the sector and the Pulse Tracker aggregates and analyses the research results for the whole year. Each edition of the Pulse Check has a confidence level of 90% and a 5% margin of error.

You can download a copy of the tracker report here.

We will continue to check the pulse in 2022 with the next edition scheduled for mid February.

Each Pulse Check has had a confidence level of 90% and a 5% margin of error.

Confidence Plummets as Delta Blues Batter Business

Confidence Plummets as Delta Blues Batter Business

Delta blues have left our business owners battered and bowed, weighed down by months of lockdown and prolonged restrictions across the country.

The Spring Pulse Check shows a fifth of business owners are ready to give up and sell while those struggling on want greater clarity from Government, firm policies and more support.

Alfredo Puche said: “Results show we’ve reached a watershed moment. Confidence has plummeted, going from ‘great’ in our Winter Pulse Check to ‘grim’ this time around. Frustration and dissatisfaction have set in and business owners are full of trepidation over the future of the economy.

“There is a strong feeling that Government isn’t listening and this has compounded the very pessimistic outlook.”

Cash flow is under pressure and, with the sharp rise in input costs, most business owners intend to raise their prices. Good management is easing the ever-deteriorating supply chain issues for some but with more cash tied up in inventory, others are struggling as they fall further behind.

Problems caused by worker and skills shortages are on the rise and there’s a clear divide between businesses who have sorted out their vaccination policy and those who want guidance and support from Government on the issue.

Alfredo added: “Well publicised supply constraints and increasing freight costs are hitting business owners in the pocket, with most intending to pass on those increased costs through price rises of their own. The road ahead seems destined for some tough economic times with inflationary pressures combining with rising interest rates, a difficult labour-supply situation, and inevitable business failures following prolonged lockdowns.

“We are really concerned about those business owners who are feeling more isolated as they deal with ever-increasing pressures and would urge them – along with any of their contacts or colleagues – to get in touch so we can provide help and support in the difficult times ahead.”

You can download the full results here and access all the Pulse Checks here.

The Pulse Check is run as a regular monitor of the sector. The Spring edition surveyed 727 of our members and associates between 27 October – 1 November with a confidence level of 90% and a 5% margin of error.

What’s the Forecast? How to keep a weather-eye on your Financials

What’s the Forecast? How to keep a weather-eye on your Financials

I was talking to a business owner recently who was worried what her end of year results would look like after the pressures of a global pandemic, economic uncertainty and operational constraints had had their way – and she was hoping that somewhere there would be an extra 100k to pay off the mortgage.

We talked through her business plans and goals and decided the right place to start was with a financial forecast so, equipped with her profit and loss, balance sheets for the last three years, a whiteboard, laptop and two large cups of coffee, we settled down to cast a weather eye on her financials.

We discussed the previous three years’ revenues, how COVID19 had affected one of their product lines – and forced them to create two new ones. Then we created a monthly sales forecast per product line. At this point – and very sensibly too – she asked me how she could forecast what she was going to sell so first we examined the different product lines, their gross margin, analysed market demand, production capacity and last – but not least – which product they enjoyed the most. Then we looked into production capacity and her wish to grow the business sustainably.

She decided to split the revenues of their four product lines as follows: 40% for the highest margin and enjoyable one, 25% for the second and 20% and 15% for the others. Thinking also covered the efforts to improve processes, increase capacity and get new customers, so she decided to increase the revenues every quarter by 10% for the two top products, maintain the third and reduce by 5% the lowest margin product line. Pricing also needed consideration and we decided to increase by 5% the prices of the first two lines every six months and once per year for the other two. By this time we had finished our coffee and had some sales goals set for the business.

But more caffeine was needed as we then had to look at the resources necessary to produce and sell the lines. We started with the Cost of Goods Sold (CoGS) or materials and subcontractors costs and estimated an increase of their buying cost of 2% per quarter. With Revenues and CoGS to hand, we could calculate her Gross Profit (GP) by subtracting them and comparing it to the previous year. All looked good, with an increase from 76% to 78%, which meant more money available for paying salaries and expenses.

Next was Direct Labour (DL) – the people who produce the goods. Our previous calculations made it easy for her to determine the number of hours and people needed and it was evident she would need two new employees in the third quarter. But when we calculated the Contribution Profit (CP) over the months, subtracting the DL from the GP we saw that adding both employees at the same time would affect the CP too much, so we delayed hiring the second resource for two months.

Gradually, we moved through Operational Expenses (OE), including Indirect and Administrative Labour (IL), expenses such as the lease costs, power and marketing. To achieve the new sales targets Mary thought that a new sales representative would be needed and as training was key to doing the job well, she decided to add that resource in the first quarter of the year. Subtracting OE from the CP we arrived at the Operating Profit (OP).

Then Non-Operating Expenses (NOE) and Non-Operating Incomes (NOI) were entered into the Forecast and the Net Profit (NP) calculated. At the start of the year it looked a bit low due to increased labour costs but as it was not below the new break-even point of 10% NP and, Mary was achieving her mortgage goal, we decided to go ahead with that configuration. The financial forecast was finished! Mary now had a plan with clear goals and deadlines for her and her team, so she was able to return home feeling more confident.

Forecasting can seem overwhelming – and confusing – at times but the good news is that some of the tools available such as Numereyes can be a powerful and easier way of working out where you are with your business – and charting where you want to go.

Author: Alfredo Puche