Small business owners are struggling to keep their doors open in the face of rising costs and a looming recession

Entrepreneurs fear the coming year as inflation continues to stall.

Stuff

Entrepreneurs fear the coming year as inflation continues to stall.

Entrepreneurs fear they won’t be able to keep their doors open for much longer as the costs of running a business continue to rise.

Co-owner of the popular dumpling food truck and restaurant The Rolling Pin in Auckland, Yina Yang, said: “Business is going well,” but like many small to medium-sized businesses (SMEs), felt pressure from rising prices and competition.

A MOB survey of over 1000 SME owners, directors and managers found that the continued impact of inflation and the Reserve Bank’s efforts to contain it took its toll.

Some 34% of SMBs had seen a drop in revenue in the past 12 months, while (38%) business leaders said they could only sustain their business for up to six months before having to delve into their personal finances or seek additional funding.

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On average, SMEs estimate that their business overheads, such as rent and electricity, had increased by more than $1,500 per month in the past year, while only 13% said costs had increased in the past 12 months.

Yang compared her current pre-Covid situation and said some of the goods needed by the company had tripled in price.

While The Rolling Pin raised some prices slightly, Yang said it was a “tough choice” as they didn’t want to lose customers.

Yina Yang, owner of The Rolling Pin, says there has been a noticeable reduction in foot traffic at the Ellerslie, Wynyard Quarter and DressMart locations.

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Yina Yang, owner of The Rolling Pin, says there has been a noticeable reduction in foot traffic at the Ellerslie, Wynyard Quarter and DressMart locations.

“Furthermore, further minimum wage changes have also created significant costs for the company,” she said.

Changes in consumer lifestyles and spending patterns continued to be felt, she said.

With three locations in Ellerslie, Wynyard Quarter and DressMart, Yang had found DressMart to be quieter in the evenings with less foot traffic, and working from home meant fewer customers at the Wynyard location, particularly on Fridays.

Yang said that while the company was solid overall, she was concerned about the economic climate and what would happen if costs continued to rise.

MYOB spokesman Jo Tozer said inflationary pressures continued to weigh on SME confidence, which had remained stubbornly low over the past year.

“Across the country, SME leaders have pointed to rising inflation and the high cost of living as the most pressing, with three-quarters saying it had the biggest impact on their level of confidence,” Tozer said.

“Similarly, the other major influences on SME confidence are also inflation-related, including fuel costs (+64%) and interest rates (+61%).”

Reserve Bank of New Zealand

The road back to low inflation – Paul Conway, Chief Economist of the Reserve Bank of New Zealand

On top of the latest StatsNZ GDP data showing the economy contracted 0.6% in the December quarter, declining profitability and income among SMEs could also point to a potential contraction in activity in the first quarter of this year .

Recession warnings flashed red for SMEs, with 80% saying they were concerned about the risk of the economy sliding into recession this year.

It was a critical time for many SMEs, as they were at risk of a recession with few resources to cushion them against a major trade downturn, Tozer said.