Rising costs, staffing and inflation are major concerns for small business owners according to research from small-medium enterprise (SME) consultants Employsure, with the biggest priorities for Kiwi businesses being either to grow or simply survive.

The group’s research from 240 SMEs from around New Zealand showed rising costs were the biggest concern for Kiwi SMEs, followed by the national labour shortage, recession and inflation.

Employsure found growth was the top business goal for 41.6 per cent of SMEs surveyed, while 26.6 per cent of respondents just wanted to survive, followed by client retention with 10.4 per cent of the vote.

Associate director of operations Laurence McLean said, “If you had asked me a year ago, the biggest concern would have been around hiring staff.”

Surviving the next year

“A lot of clients are looking at restructures or redundancies, making sure they can operate more efficiently so they can actually survive at least until next year when hopefully things will become a bit more positive, particularly as we see global supply become a little bit more reliable,” McLean said.

While recruitment didn’t top the list for SME business goals, it was identified as the biggest current staffing challenge for more than a quarter of employers surveyed, followed by pay increase requests (20.4 per cent).

For other SMEs, cost of living, staff absences and retaining staff topped the list of challenges.

But he said labour shortages have “dropped” to the second-highest concern following the tightening of the economy, with further pressure from the most recent gross domestic product (GDP) announcement last month.

The economy shrank 0.3 per cent compared to the June quarter and GDP per capita fell 0.9 per cent, according to Stats NZ data.

McLean said the financial was outlook is becoming “more pressing” as business confidence comes under pressure.

“I would have said it was improving but I think a lot of business confidence would have been shaken by the GDP announcement,” he said.

In particular, McLean said retail, trades and the construction industry were struggling in the “post-Covid hangover”.

But he said industries like agriculture and tourism appeared to be picking up.

Tackling staff shortages

More than half of respondents (54.1 per cent) said all employees were back in the office full time, with 32.9 per cent offering flexible working hours for their staff.

Research showed 4.5 per cent of SMEs surveyed have made hybrid working a full-time policy, 3.3 per cent have introduced a fully remote workforce, while 2.9 per cent have moved to a four-day week.

Just 2 per cent of respondents said they struggled to recruit after a large number of employees chose to leave the business instead of returning to the office full time.

SMEs identified flexible working hours, financial remuneration and rewards as the top three ways to support staff.

Researchers said hybrid or remote working arrangement requests have not had a significant impact on employee retention, with only one in 10 employers using it to retain staff and 24 per cent using mental health support for the issue.

Most respondents said they have dealt with ongoing skill shortages by offering pay increases, flexible working hours and upskilling.

Hybrid working environments were the lowest-rated method to manage the issue, identified by 7.5 per cent of respondents.

McLean said it’s hard for SMEs to feel certain with the tight labour market and reduced demand.

“Labour cost is often a very large component of their spend as an organisation as demand sort of fluctuates up and down. It becomes really hard to plan and have security and confidence.

“What they really want to see now is that demand actually coming through,” he said.

Alka Prasad is an Auckland-based business reporter covering small business and retail.