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.
Alfredo Puche is the owner of The Alternative Board New Zealand and the area franchisee for Nelson and Marlborough. You can contact Alfredo on 027 427 9172, [email protected], or connect with him on LinkedIn.
Minister for Small Business Hon. Stuart Nash took time out to discuss The Alternative Board’s Autumn Pulse Check with Wayne Baird and offer advice and insights for business owners and members. In a wide ranging conversation – which you can watch below – they covered some of the main stressors highlighted in the most recent Pulse Check including port and shipping delays, employment issues, and other challenges.
Minister Nash said: “I find them invaluable. My thanks go to members for participating (in The Alternative Board Pulse Checks). It informs a lot of what we are doing and gives us insights we wouldn’t otherwise have”.
Hon. Stuart Nash is Minister for Economic and Regional Development, Small Business, Forestry and Tourism. He spoke with Wayne Baird, owner of The Alternative Board, Hawkes Bay.
As we marvel at the speed and agility of the four America’s Cup teams on Auckland’s harbour this weekend, it is interesting to reflect on how they got there and how they continuously innovate and improve.
To innovate you need an open and collaborative process and sometimes, businesses of all types rest on their laurels and forget the creativity and passion that got them started. Many years ago, Edward De Bono developed the Six Hats thinking process to encourage productive discussion and innovation in organisations, rather than blame or arguments. The Thinking Hats take away ‘right and wrong’ and encourage people working in a team to take different views.
First is the ‘Blue Hat’ that facilitates or conducts the process and keeps the team on track.
The ‘White Hat’ analyses – for example, it produces the engineering data which helps the high performance teams work out how to get the boats to go faster.
The ‘Green Hat’ is the creative hat full of alternative ideas – who else would have thought of leg-powered bicycle grinders on our boat in Bermuda?
The ‘Yellow Hat’ is the sunshine – full of optimism, it looks for benefits. In our Bermuda bicycle example leg muscles are larger than arms. This gave the AC50 grinders more power to supply the hydraulic systems which raise and lower the foils and pull in the huge wingsail.
The ‘Red Hat’ is the intuition hat, driven by emotion. “My gut feeling is this will or will not work.” Intuition is often built on complex judgement based on years of experience and may be an art rather than a science. Boatbuilding is an art and it is worth reflecting that, in business, restructuring often fails because the human element, the emotion, is not properly taken into account.
The ‘Black Hat’ is the caution or critical judgement hat. Engineers try to make sure the loads on these boats are safe. Get it wrong and death is a real possibility. However, imposing too much health and safety too early can kill creativity.
The boats we see in January and February will be very different to those we see this weekend. The ‘Blue Hat’ will oversee continuously trialing and optimisation on the water – proof that innovation is a continuous process.
As a small business owner, you’ll be wearing many hats – De Bono’s colourful collection and the Captain’s Hat too, as you steer your enterprise through the choppy waters of 2020 and beyond. A start up business is often born from a Green Hat creative idea, or from an optimistic Yellow Hat applying someone else’s crazy thinking. Bridging the ‘valley of death’ and not running out of cash in a start-up requires a big Blue Hat to navigate uncharted territory. Often it takes many years – and continuous innovation – to get your business model right.
I am currently working with a customer whose Black Hat thinking began an innovation process, building an automated system that manages lead generation and marketing through to sales, operations, accounting and pricing. Any information technology system implementation requires all the hats to get it to work, and because of the new automation his net profit margins are now much higher than his competitors.
As your business matures, it is easy to become stale – competitors whittle away your super profits and you continue to cut overheads. If you look at breweries, beer is in decline, and they have had to develop or acquire new categories to achieve growth or sustain profits. Innovation and creativity is the lifeblood of your business and is underpinned by your passion for what you do. Keeping your creativity alive is essential, as is innovation because, if you stop innovating or let your creativity stagnate, you can end up like Kodak.
Kodak was so blinded by its success in selling film it completely overlooked the disruptive potential of the digital camera invented by Steve Sasson, one of its engineers, in 1975. However, the real disruption occurred when cameras merged with phones and people shifted from printing pictures to posting them on social media. Kodak missed the trend and had to deal with the resulting consequences.
So remember as you watch the boats fly through the harbour this weekend, every captain must innovate, be prepared to change course and adapt – or run the risk of losing the race.
Skilled workers are getting harder to find – as our Spring Pulse Check revealed. The big question is how do you keep your employees happy and engaged so they’re not tempted to head somewhere new?
In pre-COVID times a pay rise might have been just the thing to keep them onboard but as times get tougher that may not be feasible. How do we tackle this tricky topic in these difficult days?
Pay and conditions are top of the list for many employees but in today’s world people look for more from their employer including the opportunity for personal and professional growth. Excellent internal communication is vital to ensure your employees know what is going on and that they feel listened to and understood. Small businesses frequently report that their staff are like family but sometimes, as can happen in any family, people don’t talk to each other enough and problems arise.
All businesses – small or large – must remember that while employee engagement is important, the employee experience is now a critical consideration. The employee experience has a number of different aspects, internal communications being one, with the others including training and development, recognition of their work, how change is managed, flexibility and a sense of purpose.
You may not be able to provide a pay rise at this point in time but the other aspects of the employee experience are within your grasp.
Focus on training and development and, again, if budgets are tight, look for help and support through schemes like the Regional Business Partner Network. Communicate constantly – keep your employees briefed on the changes and challenges the business may face and celebrate the wins. Recognise their efforts – it could be as simple as publicly acknowledging a job well done – but let them know you appreciate their skills and abilities.
After our year of working from home, working through disruption or not working at all, we all understand the need to keep people engaged when the organisation is operating remotely and there are many approaches to help with this but don’t forget to maintain the good communication habits you cultivated during the crisis and stay connected to your employees.
If you find you can’t recruit someone who has the skills necessary to support your business look to your existing staff – there may well be someone already working for you who is willing to grow and is capable of doing the job but they will need you to invest in the extra training or development to undertake the role and, of course, pay them appropriately for their work.
Above all, be a trustworthy employer. Your employees will be looking to you to lead them through this period of time and effective communication, a good employee experience and a demonstration that you care will help keep your ‘work family’ together and growing happily.
Damon Harvey editor and publisher of The Profit took some time out recently to discover what really goes on inside a board meeting of The Alternative Board.
TAB was first featured in The Profitin 2018, when it was launched in Hawke’s Bay by Wayne Baird and Russell Jaggard. Back then, Wayne and Russell were just starting to establish TAB, seeing the opportunity to offer the model that was benefiting small businesses across New Zealand and the world.
The more conventional advisory structure for a business is to have a governance board, made up of experienced business people across a range of business competencies such as financial, legal, human resources and marketing and sales.
This type of structure is usually for medium-to-large businesses and is particularly common in the corporate sector as well as the not-for-profit sector.
TAB was launched in 1990 by US entrepreneur Allen Fishman as a way for small businesses to get the benefits of a board structure. In 2012, Aucklander Stephen James introduced TAB to New Zealand and it’s now in nine cities and towns across the country.
Wayne Baird is the franchisee for Hawke’s Bay, Gisborne, Taupo and Wairarapa, with Russell being joined by experienced business leader and start- up extraordinaire Ailne Bradley as board facilitators.
Having been a board director and chair myself for the past 14 years, it was a pleasant surprise to turn up for a TAB meeting and be asked to go to the white board and rate out of 10 how I was feeling about my own business and also how I was feeling personally.
New Zealand had just moved from COVID-19 Alert Level 3 to Level 2 and so the four of the five members of the TAB I was joining were all happy to see each other in person, instead of via a Zoom video conference call, therefore they were in relatively high spirits, with the lowest rating being 7.5 (and this was me!).
Wayne hosted of the TAB meeting that was attended by local business owners Carol Reid of Soulpreneurs, Kay Castles of Admin Plus, Alieta Uelese of Learning Innovations and newcomer Joanna Monteith of Consult Ltd. Absent was Dr Sundar Jagadeesan of new dental practice Dentiq, who had only just reopened his practice and had a backlog of patients to treat.
The agenda for the meeting followed the TAB’s well-honed formula that affords everyone around the table equal opportunity to provide updates on their business, and then report on progress from actions they agreed at the previous meeting before presenting a new challenge or opportunity their business is facing.
Following the biggest disruption to businesses and the economy and the world strike on March 24, you would have expected the mood of the table to be sombre, but in fact it was largely the opposite.
The forced physical closure of their businesses and lockdown spent at home had given these business owners the time to not only keep business going and staff motivated but also to adjust their businesses to the new normal. When it came time to put forward a recent challenge or opportunity, the true benefit of the TAB board format came into its own.
As each member addressed their fellow board members, they were scrutinised first, responding to a range of questions, some expected but many unexpected.
The appeal of the process was that the room wasn’t full of ‘yes’ or ‘no’ people, nor those who had a vested interest due to being a staff member, director/ governor or an investor/shareholder.
The questions were tough and the advice even tougher. And that’s the gold of TAB. There are no hidden agendas, you get what you give, as your time to put something forward soon comes.
For small business owners it can be a lonely place leading from the front but with TAB, there is genuine support as well as accountability.
As the facilitator, Wayne gave everyone an opportunity to firstly ask questions rather than risk going straight to the possible solutions.
This was an easy trap for me to fall into and I quickly realised that I couldn’t shoot straight to what I thought was a solution. Instead, by asking questions you get to fully understand the situation each business owner is experiencing before putting forward any suggestions, ideas or advice.
I like to think of myself as an ‘ideas person’, so this was particularly challenging, but the approach works. Not only does it draw out the full picture but it enables the business posing the issue or opportunity to get a broader and more external perspective.
Everything is confidential; there’s no risk of ideas being leaked. As an observer I signed a confidentiality agreement, so I’m not going into any detail on what was raised.
However, two members had challenges they wanted to moot about how to evolve their businesses, while the other two members were looking at solutions to get the best out of their teams.
My summation was that the challenges and opportunities weren’t anything I hadn’t heard before but it was the process – the listening, line of questions, advice and agreement for action – that was unique.
There’s accountability and it’s not to those within your business that perhaps you can make excuses for not actioning as promised.
To close the meeting, Wayne asked each member what they intended to action before the next meeting and it was recorded. After the formal meeting, Wayne contacts and works with each member on their actions.
Kay Castle sees many benefits in becoming a member of a TAB board, saying that she always gets something valuable to further develop her administration support business.
“We all share ideas and our experiences and there’s a high level of confidence and trust in each other. We’re also very fortunate to have Wayne and the opportunity to tap into his wealth of knowledge.”
Like the board meeting format, the final word must go to Wayne (not me …). He says his personal vision is to work alongside as many SMEs as possible to help them reach their own goals and visions for what they want their business to be.
“When you ask questions, you gain clarity. I often see business owners who leave the meeting with a completely different viewpoint. That’s the beauty of the collective wisdom around the table and one of the aspects that makes The Alternative Board different.”
As we all move out of COVID-19 and look to keep adapting our businesses, it’s worth contacting Wayne at [email protected] thealternativeboard.co.nz to discuss how TAB can assist.
Damon is the editor and publisher of The Profit. Damon has over 20 years experience as a journalist, content developer, marketer and public relations specialist. Damon is a huge advocate for Hawke’s Bay businesses and The Profit was created as a platform to celebrate HB businesses and business people. You can contact Damon on 021 2886 772 or [email protected]
For the third month in a row, small-to-medium size businesses outside the hard-hit sectors of retail, tourism and hospitality are proving confident, optimistic and actively planning for their future beyond COVID-19.
Our September Pulse Check shows exceptional levels of confidence and optimism with business levels booming or the same as last year, relatively unchanged levels of employment and sustained sales.
More than 80% of you are confident you’ll make it through, more than half report sustained or improved business levels, nearly two-thirds are optimistic about the next twelve months and 65% are already working on future strategies and getting business plans in place.
On the downside, 2020 has taken a toll with business owners feeling exhausted and that’s a real concern. Government support and business advisors have helped get through the difficult days of 2020 but despite weathering exhaustion, lockdowns, alert level changes and varying levels of uncertainty, you’re not giving up and have your head down, planning your way to the future.
For some, the forthcoming election, mainstream media stories and government policy are reducing confidence, while for others, their own resilience drawn from past experience, government policy, and the thought of open borders is a confidence booster.
Stephen James observed: “Our members are, for the most part, outside the sectors acutely affected, such as retail, tourism and hospitality. It may seem that member confidence levels and optimism are at odds with other commentary but our small business owners are efficient and resilient because they have to be. Small business owners regard their employees as family, do their utmost to retain them and are able to adapt and evolve business practices swiftly with the right support, even among those hardest hit.
“It’s heartening – and speaks volumes for business owners – that so many have got through with relatively unchanged levels of employment, due in part to the government support people have turned to and a willingness to change where necessary.
“One of our priorities will be to help business owners cope with the high levels of exhaustion they’ve reported. We see this as a danger area as, no matter how resilient they may be, working through an ongoing crisis is hard and it is draining. Supporting our business owners helps them to help their business, so developing strategies and solutions to what we know will be an ongoing challenge is an area we will be working on with our boards and through our coaching sessions”.