SME Speak survey: Quarterly performance
This month SME Advisor Middle East and Tickbox Surveys Middle East conducted a survey to find out how their firms have performed over the last three months and their expectations for the next quarter, the aim of these monthly surveys is to provide a snapshot of the current practices in the market.
The survey was sent to SME Advisor Middle East readers between the 15th June and 15th July 2011. The advantage of using the SME Advisor readership was that it focused on the core business segment in the region and cuts across all sectors and industries. The sample is UAE wide and includes firms in the free zones as well as those in non-free zone areas.
It is hoped that the survey will also help SMEs in their business decision making process and allow them to understand what is happening in the wider sector in which they operate.
Expectations for the next quarter
The SME survey shows that over the next three months the sector expects a considerable improvement in their performance. Of the firms surveyed, 74% indicated an expected overall improvement in their performance of which 29% felt that that it would be a lot better than now. Nineteen percent of the firms felt that they would not expect any change in the forthcoming quarter while only 6% anticipated a decline in their overall performance. 52% expected new orders to increase while 45% foresaw no change.
Only 3% of the sample surveyed believed that new orders would decline in the next quarter. These results are a marked improvement on the experiences of the current quarter whereby 55% of the firms felt that it was better than the last. Thirty two percent of the respondents experienced no real change in their overall business performance this quarter compared to the last while a further 13% actually experienced a significant decline, the survey revealed.
It appears from the survey that the third quarter was by and large positive, but, nevertheless, difficult at least for a large proportion of the SME sector. The survey indicates that SMEs expect a marked improvement in the final quarter of 2011 with business services being the most optimistic followed by the trading sector (re-exporters). Interestingly, the greatest growth expectations are in the smaller sized firms (with fewer than 100 employees).
Consistent with an overall improvement in performance a similar proportion of firms (74%) indicated that their sales would increase in the next quarter. Again this is a marked improvement on the current quarter whereby 48% of firms experienced an improvement in their sales volume compared to the last period.
In fact, the survey shows that 23% of firms actually experienced a small decline in their sales in the third quarter compared to the previous one. The most optimistic sectors that believe the next quarter will lead to a marked improvement in sales are business services and trading.
When it comes to operating costs the general indication is rather negative with only 36% of the firms anticipating any improvement. The vast bulk of the firms (55%) believe that there will be no change in operating costs while a further 10% feel that it is going to deteriorate. Despite the low level of expected improvement in operating costs it is nevertheless higher than that experienced by firms in the current quarter.
The survey found that only 19% of the sample experienced any positive improvement in operating costs while 61% had no change. In fact, 19% of the sample actually experienced deterioration in operating costs in the current quarter. In the case of input costs 29% of the sample felt that there would be an improvement in the next quarter while 65% foresaw no change.
The most optimistic sector tended to be the retailing and the decline in property rentals may be an important contributory factor, however, this was not questioned in the survey. The most pessimistic was the manufacturing sector and to some extent the recent fluctuations in commodity prices as well as exchange rates may have contributed to this negative view.
The survey showed that the SME sector was concerned, to a small extent, with regard to the level of new competition with 27% of the firms surveyed indicating that it would increase. A little over half the sample felt that there would be no significant change in the level of competition in their industry. A further 20% felt that the level of competition would actually fall in their industry.
Although, the sector seems to be concerned with regard to competition there appears to be no real change to the experiences in the current quarter. The survey found that in the current quarter 23% of firms saw an increase in competition with 48% experiencing no difference. The sectors witnessing the least impact from competition were business services, trading, training and education and restaurants respectively.
Selling price
One of the most important business indicators is the selling price as any improvement indicates the willingness of consumers to pay a higher price which in turn improves the overall financial performance of the firm. The ability to charge higher prices also indicates that the firm is able to pass on any increase in input costs to the consumer rather than absorb it internally.
The survey shows that in the current quarter 35% of the firms were able to increase prices. In the next quarter the proportion of firms looking to increase prices is expected to increase slightly to 39%. However, only 6% saw deterioration in their selling price this quarter. The expectations for the next period are considerably worse with 29% of the firms expecting price deterioration. Again, the worst affected seem to be the manufacturing sector while those able to increase prices tend to be the business services and trading sectors.
Staff recruitment
Staff recruitment is perhaps the most important indicator of confidence in the SME sector because it represents a fixed cost which few firms like to take on unless there are consistent or significant indicators of growth. This is more so the case in the UAE whereby 90% or so of the working population come from outside the UAE.
Therefore, any staff recruitment has additional expenses such as visa costs, resettlement expenses and so on, which tend to be written-off over the period of the contract. Anecdotal evidence shows that staff recruitment tends to be one of the most difficult decisions for all SMEs and is carried out with considerable caution.
Almost two thirds of the sample surveyed indicated a willingness to recruit staff; positive indicator of the confidence in the UAE economy. More importantly, it shows that the economy is now on the road to recovery.
SMEs are looking to recruit new staff with 61% of firms indicating that they will hire in the fourth quarter of 2011. At the same time almost a third of the firms expect no change in staff numbers while 6% actually intend to dismiss a small number of staff. Again the sectors that are most likely to recruit tend to be in business services, education and training, retailing, hospitality and restaurants as well as trading.
The SME Performance survey for the third quarter of 2011 shows that in general that SMEs are more confident than in the previous period. There appears to be a strong indication that the sector will be recruiting staff.
However, there are still some signs of caution largely in terms of input and operating costs. The most optimistic sectors are business services, education and training, retailing, hospitality and restaurants as well as trading. In terms of size the greatest improvement is likely for the small firms (ie less than 100 employees). The manufacturing firms seem to be the most pessimistic and this may be reflective of its dependence on global markets which are still weak especially in North America and Europe.
Note
The figures may not add up to 100% due to rounding up.
About
Tickbox Surveys Middle East specialises in market research surveys for the consumer, B2B, investor, community and employee segments. They also specialise in helping companies to identify appropriate interventions for improving customer and employee satisfaction as well as loyalty through using surveys and statistical analysis. For more information visit www.tickboxsurveys.com
