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Tradesperson Cameron Goldsmid believes businesses that can grow through a downturn are those that will be sustainable and most successful long term.
The co-owner of residential concrete slabbing business Tidy Slabs is cautiously optimistic about growth opportunities for his business despite the construction industry being a depressed market.
The industry was currently in a “bust cycle” and price had become the biggest consideration when it came to making sales and securing work, Goldsmid said.
He described it as a “race to the bottom”. Maintaining a cash flow-positive position was also challenging in the current economic environment, he said.
“We move reasonable amounts of money every month, but like most businesses, we’d be under capitalised. If we didn’t get paid at the end of the month by anyone we couldn’t pay all our bills.
“We’re running on goodwill like others and that’s where you’ll see the domino effect of when one will go then a few others will fall in collateral damage.”
New research by Xero has found that cash flow challenges remain a headache for SMEs, with the emotional and physical impacts of cash flow management taking a toll on many.
Almost half the small business owners surveyed by Xero, and 60% of sole traders, were not paying themselves, so they could keep their businesses running.
About 80% of business owners reported feeling stress in the survey, 70% anxious and a further 60% said they had trouble sleeping at night over the past 12 months because of it.
Xero NZ country manager Bridget Snelling said these insights indicated the significant financial stress many small business owners were facing, which was having a negative impact on their emotional and physical health.
“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,” said Snelling.
“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.”
Late paid invoices were one of the biggest contributors to small business cash flow troubles.
Last year, Xero research revealed late invoice payments cost Kiwi small businesses $456 million annually.
Other findings were that 94% of small business owners were not achieving their business goals.
And, 90% of those who were less confident that they will meet their financial obligations are suffering from stress.
Supplied/Stuff
Cameron Goldsmid says market conditions are tough but he is cautiously optimistic about growth opportunities.
Goldsmid said he was lucky his business was not in the same financial position as many of his peers, but admitted that he and the other owners of Tidy Slabs were not getting paid market rates as they would as an employee.
He said many businesses in this country were just one or two-people operations, essentially set up as their own organisation to give themselves a job and the flexibility of being their own boss.
But in times of downturns that was catching traders out, Goldsmid said.
“There are so many good builders who have found themselves in business, but they’re terrible businesspeople.
“In a boom time and when everything is growing, you are sheltered from it because everything is going well, and you don’t need to pick up the phone to make sales as they just come to you. That’s all changing now, and pair that with inherently undercapitalised businesses in New Zealand, it is a bit of a perfect storm.”
Staffing issues were the biggest concern for Auckland and lower North Island-based Tidy Slabs, which employs 25 staff and 20 subcontractors, last year. However, sales and the pipeline of work was fast becoming a major concern.
Goldsmid said he was cautiously optimistic about growth opportunities in the next 12 months.
“We’re a growing business so we volunteer for a few [additional] growing pains,” he added.
“There are opportunities in everything and the best businesses grow the most in downturns.”
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