Privately owned business is the engine room of the New Zealand economy, but is it running at full throttle? This is one of the questions posed by ANZ in response to the findings of its second annual ANZ Privately Owned Business Barometer.
When Chris Simkin decided to stop pulling pints at The Mill bar in New Plymouth, he opened bottle store next door to launch business that’s become New Zealand’s largest independent liquor seller.
The Mill Liquor Save did not stop there. Now the business has manufacturing plant in Australia supplying New Zealand and Australia and is making inroads into Asia.
The initial move came from Simkin’s view that consumers were ill served by the domination of the liquor trade by the two main brewery groups.
“We gave people choice and product that was the best value. That’s still the case now.”
Quickly the business grew – from one store to three – and then spread nationwide.
“There were three choices,” Simkin says. “Stand still, specialise or grow. We chose to grow.”
The Mill Liquor Save is one of many very successful privately owned businesses which understand the dynamics of rapid growth and change and are creating wealth and jobs for New Zealand, says Nigel Williams, ANZ managing director institutional corporate and commercial.
“The ability to take long-term view, understand what is required to realise it, and bring together the people and resources to execute are essential for any successful enterprise.”
In the current environment, many firms are putting aside the long-term vision and making short- and medium-term tactical decisions to focus on organic growth, according to the main finding of the ANZ Privately Owned Business Barometer 2008.
The only in-depth study of the sector, regarded as the engine room of the economy, found that the appetite for risk and debt is still strong but only third of respondents were willing to contemplate accelerated growth in the short term by merger, acquisition or international expansion.
“Clearly it’s difficult and challenging environment, but from strategic perspective there’s no better time to make big gains than when competitors are equally challenged,” Williams says.
“In particular, we’re seeing an increasing number of consolidation opportunities across range of industries, with the decision by some owners to exit presenting acquisition prospects for those looking to grow faster,” Williams says.
Booming economies, along with completed and prospective free trade agreements in Asia, also provide once-in-a-generation opportunity for businesses to expand into new markets.
The 2008 ANZ Business Barometer published in June also found:
• Owners wanting to release time and capital from their businesses, and growing demand for alternatives to outright exit – but many are yet to start planning for that outcome, or identify successor;
• Owners are clearly aware of the issues and opportunities relating to effecting change within their businesses (ie, growth plans, succession), but there’s worrying lack of active planning; and,
• An apparent reluctance to use external expertise to shape plans for growth or change – despite increased awareness of the benefits of different ideas and perspectives.
There is heightened awareness that succession is “problem” no doubt reflecting the profile of many owners wanting to retire in the next three to five years, but yet to identify who might take over the business. Sixty-three percent of those who responded to the survey see this as an
issue to be resolved compared to 48 percent in the 2007 ANZ Barometer.
However, it does seem to be question of ‘who’ rather than ‘how’, with three quarters favouring the clean break that trade sale might deliver, although those with family members in the business don’t necessarily expect them to succeed as owners.
There is also doubling of interest in management moving to ownership – via management buy-in – but business owners still perceive the barrier as lack of access to finance, with only 18 percent regarding management as having the financial capability.
There are both risks and opportunities for owners in regard to succession, Williams says.
“Evidence suggests that the risk of doing nothing can often result in destruction of value of the very asset owners are looking to protect. But the opportunities are also significant. Succession can mean far more than just selling up. staggered succession is very real prospect – gradually releasing time and capital on the way to what might be an eventual exit from ownership and transition to wealth management.”
Time to address these issues and the resources to evaluate the opportunities are often scarce, particularly amongst smaller companies, prompting ANZ to put together specialist team comprised of experts in business planning and wealth management. The team can help owners identify the possibilities for their business and help them plan for those outcomes, Williams says.
“ANZ is committed to this sector. We are further investing resources to continue to provide services and products that will support business.
“As the Barometer findings show, business owners are aware of these issues, but we’re concerned by the lack of progress in actually grappling with the task. Our real fear is that by not making plans business owners will limit the opportunities for themselves, their families and their businesses – and thus the wider New Zealand economy.”
This year’s survey, undertaken on behalf of ANZ by Colmar Brunton, targeted just under 1500 privately owned businesses. The response rate was 21 percent, or total of 306 responses, similar number of respondents to the 2007 survey. ANZ customers comprised 36 percent of respondents.
The complete ANZ Privately Owned Business Barometer 2008 is available at: www.anzbarometer.co.nz
