Chapter 1: Why SMEs Are Important
- SMEs are numerous. They are the dominant form of business in all countries worldwide1, and New Zealand is no exception. SMEs make up over 96% of all businesses in New Zealand.
- SMEs are contributors. New Zealand SMEs account for nearly 40% of our total value-added output. They are also critically important to improving productivity, which is the key to the country's long-term economic wellbeing.
- SMEs are significant employers. They employ around 29% of all employees. However, when working proprietors are included in the figures, SMEs account for around 40% of employment. Around 60% of all the new jobs created in the past five years came from SMEs.
- SMEs lead innovation. Many of New Zealand's innovators and entrepreneurs can be found in our SMEs. As is the case in other countries, most of our leading-edge products were created by people in SMEs.
- SMEs generally remain small. For most of them, being compact, fleet of foot and focused on their main product is their competitive advantage. Many provide essential products and services that support successful larger businesses. Others, of course, have the potential and drive to grow into larger companies.
- SMEs are diverse. In our first report, we set out some of the common characteristics of SMEs. However, this does not mean that they are homogenous. And they certainly should not be treated as a "sector". The government must recognise this when communicating with and targeting initiatives to SMEs, particularly in the area of regulatory change.
- SMEs face qualitatively different challenges from larger businesses. Most SMEs are managed by their owners. Their small size means that they usually also have fewer resources, fewer in-house specialist skills and less capacity to deal economically with change, when compared with larger firms. These facts are often overlooked by policymakers. Their "one-size-fits-all" approach often has a disproportionate impact, in terms of time and cost per employee, on SMEs.
Therefore, as Minister for Small Business, your contribution to transforming New Zealands economy will be through encouraging the flair and courage inherent in our SMEs, helping to build their business and management capabilities, and removing or minimising impediments to their growth.
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