Small business owners 'walking a tightrope every day'

Business / news

Xero small business survey shows many owners not paying themselves to help keep the lights on

12th Jul 23, 10:26am by Gareth Vaughan

Nearly half small business owners and 60% of sole traders aren't paying themselves so they can keep their businesses running, according to a survey from Xero.

On top of this Xero says 52% of New Zealand small businesses have increased prices to cover cash flow challenges, while 48% have sought to review and remove costs.

Late payment of invoices is a key contributor to small business cash flow troubles, Xero says. Xero research shows late invoice payments costing NZ small businesses $456 million annually.

“Cash flow is one of the biggest challenges small businesses are facing. When you add in inflation, climbing interest rates and reduced spend from consumers, small business owners are walking a tightrope every day,” says Bridget Snelling, Xero's New Zealand Country Manager.

“When small business owners experience cash flow issues one of the first things to go is their own pay, followed by an inability to pay suppliers which has a ripple effect throughout the economy.”

“It’s a systemic and volatile cycle, which sees business owners dipping into their own personal savings, working unattainable hours, and ultimately sacrificing their emotional and physical wellbeing to stay afloat," Snelling says.

Xero provides a cloud-based accounting software service for small businesses and their advisors. It's report is based on collated responses from an online survey conducted by Insights Exchange with 500 small businesses, with up to 50 employees across NZ, between May 24 and June 5.

The survey also asked about business owners' emotional and physical states.

Xero says 80% of business owners reported feeling stress, 70% anxiety, 60% had trouble sleeping and 47% said they had lost time with friends and/or family over the last year. Additionally 94% of small business owners said they were not achieving their business goals.

“These findings reflect how closely business goals and financial health are connected to small business owners' personal stress and anxiety,” says Snelling.

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13 Comments

by nktokyo | 12th Jul 23, 10:53am 1689116012

Running a business is very tough. I run 3. There are certainly periods when you go without.

I suspect that more than a few are waiting until the election to decide whether to continue. I wish we had more politicians who had started and run companies. It gives a very different perspective.

by Pa1nter | 12th Jul 23, 11:08am 1689116882

Anyone genuinely adept at running a business is unlikely to be too enthusiastic to enter the world of politics, because it's the exact opposite of commercial enterprise. But yes you're quite right, there's a marked difference in outlook having to live or die on your commercial results than getting by being a talking piece.

For many business owners the worst is likely to come, and I don't see a change in government altering the outcome too much.

by Yvil | 12th Jul 23, 7:30pm 1689147058

Well said nktokyo. I also have 3 businesses, it's good in the sense that I see which business provides the best return in relation to the amount of work I put in. I'm actually going to let one of the businesses go, not because it's not profitable, but because it's a pain and I don't enjoy it anymore.

Sure, when you start a business, you have to put in serious hours, but, if in the long term you still have to sacrifice your life to keep your business afloat, then let go of the business, it's not worth it, you have only one life.

by speckles | 13th Jul 23, 1:21pm 1689211274

A enterprise economy NZ is not, four businesses, three are hard work and make a return in NZ which requires great effort while the fourth in the US is making a small fortune. It's the environment and regulatory framework here which is a huge hurlde...

by dumbthoughts | 12th Jul 23, 11:31am 1689118308

It's definitely tough out there for a lot of smaller businesses at the moment. I'm in contact with a relatively diverse range of businesses ranging from sole trader to 100 headcount and the mood is generally sour at present.

Most common complaints I'm seeing are:

Sales pipeline has dried up (for businesses with more 'complex' sales - for retailers it's more 'we aren't getting punters in the door') - I've been tracking this for a couple of clients heavily exposed to resi construction and it's incredible just how fast the inquiries have dried up
Leads are much harder to convert, with many more sales falling through, buyers backing out, larger capex-type deals failing to get management sign off etc.
It's taking much longer to get paid - I'm noticing this in my own business.

I'm lucky that my business has a very low cost base, and whereas many of my peers/competitors have spent the last few golden years ticking up flashy cars, renting boujee offices and growing headcount for the sake of growing headcount I've focused on building up a sizeable cash 'war chest' to tide over a slowdown (I've been working towards having sufficient cash to cover all my expenses for three years off zero revenue ... of course I'm unlikely to lose all my work at once, and if I did I'd go get any job or Chippy bucks )

Painful times coming, and I suspect many business owners will decide the juice just isn't worth the squeeze.

by Pa1nter | 12th Jul 23, 11:45am 1689119147

Your approach mimics a lot of what companies large and small have been doing the past few years; rationalise your footprint do less work overall, but of higher average value. Much better returns than being all things to all people.

by dumbthoughts | 12th Jul 23, 1:18pm 1689124708

Yep I've narrowed my service offering and target market, really streamlined down on solving a few core problems for my clients, and cutting out unnecessary costs in the process so I can both a) build up cash reserves and b) offer a more competitive price point that still gives me profit.

My clients don't care that I arrive on a bike, or travel economy class when flying internationally.

by Yvil | 12th Jul 23, 7:34pm 1689147260

Well said !

by FCM | 12th Jul 23, 11:48am 1689119280

We got a SME, like yourself, but have very low O/H and both have other income's, but have seen a number of our competitors close shop over last 4 months as just finding it very tough. Our T/O down about 10% (we picking up some of customers from these closed companies), but marketing costs/transport are up trying to maintain that..so profit down about 25%. But like I said we are lucky ones with other income streams, we were hoping to get it to a point where we could do it FT, but that is now on the back burner.

by Yvil | 12th Jul 23, 7:34pm 1689147280

Good luck FMC

by FCM | 12th Jul 23, 11:41am 1689118868

The GST Threshold needs to go up to 80k, it hasn't moved for years.

by Yvil | 12th Jul 23, 7:24pm 1689146687

94% of small business owners said they were not achieving their business goals.

OMG, how sad is this, you have a dream, go for it, do your best and then... just terrible.

by Baywatch | 13th Jul 23, 1:16pm 1689210967

Capitalism tends to benefit capitalists the most. These include business owners, investors, and other owners of capital.