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Growing New Zealand's Small Businesses

[ Last Updated 3 November 2005 ]

Media Release by the Small Business Advisory Group

25 August 2004

"Practical, implementable and urgent". That's how the Small Business Advisory Group describes the 19 recommendations in its first annual report published today.

"We are passionate about ensuring New Zealand's small and medium-sized enterprises (SMEs) can prosper and grow.

"We have provided the government with a package of measures which, if implemented, would lead quickly to business growth."

Innovations, such as having all new business regulations taking effect on only two pre-determined days each year, independent Advisory Boards for SMEs, and government agencies running monthly help clinics, are recommended. Changes to fringe benefit tax and depreciation allowances are also advocated, along with restricted rights for employees to take personal grievances.

There is a call for the government to assist in making access to finance easier, for example through guaranteeing bank loans. More individual business mentoring for SME owners and checklists for starting a business and employing staff are also proposed.

The recommendations cover four areas:

  • Improving the advice and mentoring available to SMEs and the provision of practical tools to assist SME managers.
  • Improving access to finance.
  • Creating more positive attitudes towards self-employment.
  • Lifting the regulatory burdens on small businesses.

"We don't ask the government for special treatment for SMEs. However, particularly in the regulation area, we want them to 'Think Small First'.

"SMEs are not baby enterprises waiting to grow up. They are fully functioning businesses, and need to be treated as such.

"We expect readers to come away from our report understanding much more about what it means to be an SME. They should be proud of what such businesses contribute to the New Zealand economy and to employment".

The nine-member Small Business Advisory Group was appointed in October 2003 to provide a business sector view on the development of policy relating to small-medium enterprises (SMEs) and provide a deeper understanding of how the government can work most effectively with SMEs.

The members are:

  • Peter Kitchen, Kaitaia, tourism sector, SME owner, Māori
  • Nigel McKinlay, Dunedin, footwear manufacturer, business owner
  • Alison Quesnel, Auckland, country manager health products firm, business mentor, SME owner
  • Lachlan McKenzie, Rotorua, farming, SME owner
  • Denise L'Estrange-Corbet, Auckland, fashion design and retail, SME owner
  • Murray Cleverley, Timaru, CEO Economic Development Agency, meat processing, SME owner
  • Cameron Moore, Christchurch, manufacturing, SME owner
  • Stuart Wilson, Wellington, information technology, SME owner
  • Robyn Reid, Nelson, aviation, SME owner

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Additional Information

What Is the Small Business Advisory Group

The Group is comprised of nine experienced business people, mainly SME owners, appointed by the government to give SMEs a greater "voice" in policy development and to advise Ministers of issues facing SMEs.

The Advisory Group provide a means for departments and the government to take more fully into account the interests of SMEs in policy initiatives and provide a deeper understanding of how government can work most effectively with SMEs. The Advisory Group also provide a means for dialogue with SMEs that goes beyond individual and immediate issues. It has the following functions:

  • To provide ongoing advice to the Ministerial Group on Small Business on any issues affecting SMEs:
    • Identifying issues impacting the growth and development of SMEs
    • Suggesting priorities
    • Exploring solutions
  • To provide assistance and advice to government departments on consultation with SMEs
  • To provide, for discussion with government agencies, suggestions on ways for enhancing SME and government agency performance.

The Advisory Group seek input from SMEs utilising existing stakeholder groups and their own networks. They also provide feedback on government initiatives to these same groups.

The Advisory Group use their business expertise to analyse the impacts of proposals on small business and assist the government to identify areas where further work should be undertaken. They work with relevant government departments on the issues being investigated.

They act as a sounding board as policies are being developed.

The Ministry of Economic Development provides secretariat services to the Advisory Group and facilitates the work of the Group.

Small and Medium-Sized Business in New Zealand

There is no universally accepted definition of Small and Medium-sized Enterprises. In New Zealand they tend to be defined as businesses that employ fewer than 20 staff.

Some recent SME statistics include:

  • In New Zealand 96.8% of enterprises employ 19 or fewer FTEs
  • 86% of New Zealand enterprises employ five or fewer FTEs
  • The number of SMEs increased 4.9% in 2003
  • SMEs accounted for 42.3% of all FTEs and 38.1% of the economy's output in 2003
  • Between 1997 and 2002 new firms employing 0-5 FTEs created 180,370 new jobs
  • The proportion of SMEs in New Zealand is similar to a number of other OECD countries, although SMEs account for a higher proportion of employment in New Zealand relative to other countries.

The next edition of the MED's annual report entitled SMEs in New Zealand: Structure and Dynamics is due out in September 2004.

Recommendations from the Small Business Advisory Group Report

  1. Enhance funding to Business In The Community and/or similar providers of mentoring services to upskill their mentors and mentor co-ordinators in order to provide a superior service to clients and to market their services.
  2. Provide funding to SMEs with growth potential to engage an Advisory Board to assist them in the governance of their business. The Advisory Board would typically comprise 2-4 people capable of bringing to the business an impartial eye and expertise that the founder/owner does not possess.
  3. Support the use of existing and new local business awards programmes as a way of providing benchmarking information to firms. The expectation is that a common template would be devised that could be used by local business organisations and trade associations to establish and judge annual business awards. The template should be designed in such a way as to permit key comparisons with companies in already established benchmarking systems. The information from these templates could be fed into a central database that would provide benchmarking data for participating businesses across the country.
  4. Make readily and cheaply available to all SMEs a checklist of things they need to do, and the assistance that is available, when starting and growing a business. Any help-sheets that are produced must be in a consistent and user-friendly format and be kept up to date.
  5. Provide a complete checklist of issues to be considered when hiring an employee, together with supporting advice and guidance, quickly and cheaply for businesses.
  6. Undertake policy development work aimed at making access to funds easier for SMEs with growth potential (e.g. encouraging banks to lend on cashflow/character in addition to assets; loan guarantees).
  7. Urgently undertake a revision of rates of tax deduction for depreciation with the view of reducing taxation in the first three years of plant installation, and offsetting that with lower allowable tax deductions for depreciation in the following years.
  8. Develop a strategy for providing assistance to SMEs to implement sales and marketing strategies and plans.
  9. Ensure basic enterprise education is part of the core curriculum at Year 10 (4th form) and that provision is made for better support for enterprise education providers and for promoting careers in business to school pupils.
  10. Identify and remedy the barriers to government agencies purchasing from New Zealand suppliers to ensure that the government makes greater use of its procurement powers as a tool to encourage innovation and growth in New Zealand's SMEs.
  11. Make greater efforts to harmonise borders with Australia and make trading with our neighbour easier.
  12. Have each government department identify a small business advocate who would be responsible for presenting the SME perspective on any proposals being developed by the department that might impact SMEs.
  13. Charge a senior manager in each government department with scrutinising all the regulations designed by the department, to assess the need for them, their quality and the impact they will have on business (and SMEs).
  14. Measure and publish the cumulative effects of the costs of compliance with regulations passed in the previous six months.
  15. Ensure all business-related legislation and regulations come into effect on only one or two pre-determined days per annum. Common commencement dates, especially when coupled with advance notice and guidance, would offer a greater degree of certainty, and would help SMEs to plan and budget, and reduce their costs. In addition, businesses would know that they have to deal with regulatory changes only at fixed, predictable points in the year.
  16. Ensure proposals for changes to regulations that affect business are put out for a minimum three months' consultation period and do not come into force until three months after the government or Parliament agrees to the changes. This provides adequate time for SMEs to contribute to the design of the regulations and to prepare for their commencement. Listening to businesses has a number of specific benefits. It allows government to tap the widest source of information possible and thus improve the quality of decisions reached; it alerts policy makers to any concerns and issues not picked up through existing evidence; and it helps to monitor existing policy and to determine whether changes are needed.
  17. Have government agencies (particularly ACC, OSH and ERMA) run regular (e.g. every third Wednesday of the month) local information nights. There, businesses could learn what is required of them by way of compliance, hear what is new since last month, and have one-on-one advisory sessions (information from which is not passed on to the enforcement arm of the organisation).
  18. Simplify FBT on business vehicles by moving it from the FBT return to an adjustment on depreciation in the employer's income tax return and base this adjustment on the depreciated value of the vehicle.
  19. Rebalance the legal procedures for dismissing non-performing staff and provide qualifying periods for personal grievances for probationary staff. We believe that these are the single most important changes that could be made to the employment legislation and that they would lead directly and immediately to employment and business growth.
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