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PricewaterhouseCoopers Clever Companies/EMA Survey

Monday 28 August 2006

PricewaterhouseCoopers Clever Companies/EMA Survey

Businesses are much more confident about their own prospects than those of the nation, the domestic market is seen as the key to growth, staff are a major headache, planning is not widely embraced, and the tax system needs to be overhauled.

These are the key findings of the PricewaterhouseCoopers Clever Companies/EMA Survey 2006 released today. The Survey elicited responses from 1122 organisations across New Zealand, primarily in the SME sector, and from a wide range of industries.

Backing ourselves but not NZ

PricewaterhouseCoopers partner Sharon Cresswell said the Survey findings rammed home several important messages for businesses in the SME market including the interesting discovery that businesses are much more bullish about their own prospects than they are about the New Zealand economy as a whole.

“While almost 40% said they were confident about their organisation improving its prospects over the next year, only 8% had a rosy 12-month forecast for New Zealand,” she said. “This is probably due to the widely held view that a slowdown in the economy is looming, but indicates many businesses back themselves to counteract the gloom they are told lies ahead.”

Exporting concerns

Sixty-two per cent of businesses surveyed said they would increase their revenue but all sectors were overwhelmingly focused on growing their domestic sales (71%) in order to achieve this. Sharon Cresswell said there were some concerns about the ways in which companies were looking to expand.

“While it’s definitely positive that the majority are predicting they will grow in the next 12 months, the fact that 73% don’t see exporting as the way forward is a little disheartening,” she said. “Something will have to give as they can’t all squeeze extra juice out of the local market.”

She said there needed to be a shift away from reliance on importing and that there was “a smorgasbord” of agencies and grants that could provide assistance when breaking into offshore markets.

Labour pains

Staffing issues were identified as the number one concern for businesses – 23% said their people were responsible for keeping them awake at night.

In particular, recruiting skilled staff loomed large with 69% of respondents saying this was a significant challenge. The major solutions to this problem were local in nature rather than international – upskilling existing staff and recruiting locally.

Sharon Cresswell said it was good to see that working staff longer and harder was no longer a viable option – 84% of respondents said this was not how they would address growing pains.

“There’s been a shift in thinking over recent years and businesses are now looking to be smarter in how they use and retain their staff – with a shortage of well skilled people to fill positions this was inevitable.”

Planning strategically and for succession

One-third of businesses have no formal strategic planning in place. Sharon Cresswell said this was an area where people needed to be “pulling their socks up”.

“There can be nothing more frustrating than running a business, working damn hard and then not getting the results – or not knowing how well you are doing,” she said. “If things do change in the business environment then it’s highly likely that those without a plan will be slow to adapt and won’t be ready for the consequences of those changes.”

Succession planning was also an area where businesses needed to place increased emphasis. More than a third (36%) anticipated an ownership change in the next five years with private equity buy-out being a new option in the minds of 19% of owners and managers.

Sharon Cresswell doubts whether business owners will be able to realise fair value for their organisations without robust business plans and operations being in place.

Tax attacks

The New Zealand tax system was almost unanimously described as being a more complicated beast to that which was in place three years ago – 98% of businesses said it was at least slightly more complicated.

The one tax change businesses would most like to see is a lowering of the company tax rate. This was chosen by more than a third of respondents (38%), followed by personal tax changes (10%) and a general reduction in the burden of tax (10%).

Sharon Cresswell said businesses had been consistently advocating a lower rate for several years and that the proposal to move to a 30% company tax rate set out the Business Tax Review released last month was a “welcome and long overdue move”. She also said that the changes should be extended to businesses that do not operate as companies such as the self-employed.

Other highlights

 Just half of the family businesses in the Survey said they had identified their successor.
 Those in the Tasman/Canterbury area and the Personal Services area were the most optimistic about New Zealand and their own business prosperity over the next 12 months
 Those in the Hawke’s Bay/Taranaki area and the Transport/Storage sector were the least optimistic about New Zealand and their own business prosperity over the next 12 months
 Confident companies demonstrated some interesting characteristics which set them apart from those less confident and were more likely to be focused on external issues like branding and customer satisfaction (rather than money and costs)
 62% of companies made significant changes to their business in the last two years

To download the full report please follow this link:
http://www.pwc.com/pcs/ema2006/2006_PwCEMA_Survey.pdf


NOTES FOR EDITORS

1. About the Survey
The questionnaire content was developed by PricewaterhouseCoopers’ Private Client Services team and the EMA (Northern) in conjunction with The University of Auckland Business School. It was distributed to businesses throughout New Zealand – diverse in terms of revenue, geography, staff numbers, business strategy and ownership model. More than 1000 responses were received from owner/managers, general managers and senior executives on the membership lists of the EMA (Northern), EMA Central, the Canterbury Employers’ Chamber of Commerce and the Otago Southland Employers’ Association.. Independent research house, Research Solutions, then subjected the data to rigorous analysis and presented the Survey’s findings. To download the full report please follow this link:
http://www.pwc.com/pcs/ema2006/2006_PwCEMA_Survey.pdf

ENDS

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