It’s looking like 2023 might be another challenging year for Aotearoa’s economy. Talk of recession and rising interest rates are likely to be putting the squeeze on households and small businesses alike.
When it comes to the economy, there are a few trends we expect Kiwi small business owners will encounter over the next 12 months.
Now’s the time for small business owners to figure out where they stand and what to anticipate in the next year. This all needs to be factored into their ongoing business plans.
Inflation or price rises?
One thing Bay of Plenty small business owners will need to ask themselves is how to walk the tightrope between inflation burden and passing these costs along to customers.
For businesses in local communities especially, owners can be slow to act because it’s a concern to pass expenses along to loyal customers.
While this is a concern, we often find customers are much less sensitive to price changes than businesses imagine.
After all, pricing is only one of the factors they consider. Given the current economic environment, many will be expecting prices to increase.
Jumping into e-commerce
The last three years have provided plenty of incentive to diversify how small businesses in Aotearoa operate. One of the key outcomes was the explosion of e-commerce off the back of Covid-19, and this trend isn’t going anywhere.
Effectively, e-commerce is a low risk way for businesses to reach a broader audience. The current climate is pushing for small business owners to get creative with reaching and delivering their goods or services to customers.
And for entrepreneurs who have a new business idea, trialling it through an online-only platform is a great way to get started. The lower running costs and wider net profit margins give more freedom to try something different.
Small business employment to grow
The current trends point to a reversal for small businesses who have typically found it harder to hire new staff.
During challenging economic times, medium and larger sized businesses may lay people off or cut hours as a fast way to reduce costs.
As new potential employees begin to look for new jobs, small businesses need to be ready to take advantage by understanding the roles they’d like to fill and being ready to
offer the right candidate at short notice.
Brace for a challenging start to the year
We know small businesses go through a tricky revenue dip every year, as sales typically slow in January and February.
Recent Xero Small Business Insights data found New Zealand small businesses experience negative cash flow for about four months of the year.
Observing cash shortages, these tend to cluster around the same periods – quieter Decembers and Januaries leave small businesses short of cash when February and March
bills come in.
Strong, strategic cost management can help mitigate these impacts, while a solid business plan that outlines the annual operation can identify individual business pressure points.
Digitise to get paid faster
While the challenges have been numerous, over the last two years we’ve seen Kiwi small business invoices get paid faster than pre-pandemic.
In fact, invoices were paid in 23.6 days across the first 9 months of 2022, which is 2.9 days faster than in 2019.
One element of this can be attributed to the growth of digital invoicing and online payments.
We want to empower small business owners to look into investing in cloud-based invoicing software and e-invoicing, so they can get paid faster while staying on top of their own invoicing and payments
The main trends emerging for 2023 revolve around making smart decisions to weather the impending economic challenges of the next 12 months.
For any small business owners out there feeling particularly anxious about the new year, now’s the time to speak with an accountant or bookkeeper to get your house in order and put in place the plans to get through.