Matt Roberts on Treasury's Economic and Fiscal Update & What this Means for Kiwi Businesses.
The Government Pre-election Economic and Fiscal Update was announced this week, and it was no surprise this came with the official announcement that New Zealand is in a recession.
In the June 2020 quarter, GDP reduced by 12.2% – the largest drop on record.
While the wage subsidy’s been used to alleviate some of the impact, which has been great at allowing businesses to support their employees, there has been minimal help for other significant fixed costs, such as rent.
It’s also possible that the wage subsidy may have masked some of the true effects of COVID-19.
So, what does this all mean for Kiwi businesses? SAS IT’s CEO Matt Roberts shared his views with us.
We’re in survival mode
The most recent Level 3 Lockdown really knocked people’s confidence.
Coming out of the first Lockdown, we had clients who were ready to invest in big projects to quickly get a return and get their business back to where it was pre-COVID.
Now, instead of focusing on growth, businesses have gone into survival mode – cutting back on all spending to help with cashflow.
While this helps in the short term, the downside is it can stifle your business and doesn’t give you the elasticity to scale back up when the opportunity is there.
Businesses also have to change the way they operate. Instead of a “build it and they will come”approach, you almost have to sell in advance of costs being incurred.
Though there are risks to your brand and reputation with this “buy it and we’ll make it”business model if you can’t consistently pull it off.
Turning to outsourced IT
This cost-cutting survival approach will affect every part of your business, including the IT department.
Previously, having outsourced their IT services and support, many businesses had pulled it in-house and away from their lethargic and slow providers, to be quick and agile.
However, to support your IT systems 24 hours a day, 7 days per week, and 365 days per year is a significant internal cost. For a medium-sized enterprise, it’s about four full-time staff.
In comparison, an IT company like SAS IT, which looks after multiple clients with the same team, can provide the same support more efficiently and at a lower cost.
With businesses in a survival phase, just needing a vanilla service of consistent, constant support, outsourcing your IT will be the best option for keeping things running and managing cashflow.
Focusing on what you’re good at
There’s a saying, “never let a crisis go to waste.”
For companies, this is an opportunity to take a step back and relook at the core of their business.
In a buoyant market, as we’ve had for the last ten years, businesses tend to become everything to everyone and can lose themselves.
Whereas now, you have to focus on what you made your name doing – what you’re good at – in order to survive.
The benefit of this is that it enables partnerships to develop with companies in different but complementary specialities, working together to deliver a shared outcome.
This leads to a higher level of competency where businesses like us “stick to their knitting” and focus on what they do best.
The flow-on effect is customers get an excellent experience in a cost-effective way.
To use an IT term, businesses are going through a rightsizing exercise, which will benefit them and their customers in getting through this period.
A time of uncertainty
No one knows what’s going happen next.
Will we experience more lockdowns? When will the borders open? If it’s 2022, as is currently being predicted, what will the impact be on the economy?
When we do get through this, what will the world be like?
It isn’t easy to live, work or operate a business through so much uncertainty.
But there are things businesses can control.
Cashflow is king, and you have to run your business using it, instead of your P&L as most CEOs and business owners have done.
Reducing costs is important for your cashflow, and outsourcing can help you navigate this survival phase more effectively and efficiently than keeping everything in-house.
Finally, see this an opportunity to get your business back to its roots.
For SAS IT,our focus is to support our clients by doing what we do best, so they can get on with what they do best.
Rightsizing your business and specialising in your area of expertise, creates the opportunity to partner with other, complementary companies, instead of trying to be everything to everyone.
Ultimately, this benefits not just your business but your customers and the industry as a whole.