Wall of worry

It’s been very interesting to watch business confidence surveys over the last 12 months and contrast what executives have been saying about actual conditions and expected conditions.

For most of last year, entrepreneurs and managers were on the happy pills. They were convinced that the economy was set to take off and seemed to shrug off the fact that conditions remained patchy.

But since the start of the new year, it appears a different reality has set in – executives are increasingly worried that the patchy conditions are here to stay.

That is underlined by the Australian Chamber of Commerce and Industry’s latest business expectations survey, released this morning.

It shows business conditions are now back to levels not seen since September 2009, and well below long-term averages.

About 35% of respondents said conditions in their business were either poor or worse. Almost 40% said sales were poor or worse. Over 47% said profits were poor or worse.

And while 42% of respondents said sales were improving slowly, and 33% said profits were improving slowly, more than 20% believe profits are still deteriorating.

It’s a grim picture and one that we hope the Reserve Bank of Australia looks closely at over the next few months, as they almost inevitably get closer to raising interest rates.

Business owners have little choice but to ride out these conditions, and hope they’ve underestimated the speed of the economic recovery.

But what’s particularly interesting is that even when these business owners and managers get through to better times, they know they will face a fresh obstacle to growth – people.

In a list of the top 10 concerns for business owners, wage growth and the availability of skilled candidates ranked second and third, behind only government taxes and charges.

In other words, even when the time is right to start expanding, the availability and cost of good staff is going to be a huge hurdle.

This is the sort of outlook that makes it very difficult for entrepreneurs to plan. But smart businesses shouldn’t put growth plans on the back burner completely – you need to come out of this extended period of patchiness in good shape, and ready to accelerate.