InTouch : Small Business, Big Voice

The New Zealand Government has created plethora of agencies and programmes to promote small business enterprise, but it fails to consult properly when introducing legislation and regulations – and that in turn effectively inhibits doing business and adds more operating costs.
That is one of the most emphatic conclusions to come from last month’s inaugural Small Business Summit in Auckland. Organised by the Independent Business Foundation, ginger group for small and medium enterprises (SMEs), the Summit brought together participants from the SME, corporate, academic and government sectors.
The Summit drew up ‘wishlist’ of key priorities and recommendations for circulation to politicians across party lines, government agencies and SME advisers. Entitled “Small Business – The Key to Tomorrow”, the ‘wishlist’ focused on the need to develop specific SME policies in order to create an environment in which SMEs can succeed.
The large number of central and local government agencies offering intervention programmes to SMEs came in for particular criticism. These create confusion and administrative waste rather than opportunity, and they are invariably inadequately marketed so businesses do not know how to access them. The Summit was also critical of the quality of advisers and mentors to the SME sector, and recommended more stringent vetting process.
The Summit advocated the Government should focus on supporting companies with the potential for high growth, and leave large companies to succeed on their own.
More importantly, politicians should analyse the impacts of proposed new regulations and legislation on SMEs before they introduce them. This would help reduce the heavy compliance costs that hamper SME growth.
The Summit endorsed the Government’s moves towards streamlining and simplifying reporting procedures by creating single ‘one-stop shop’ or portal to handle all government compliance and reporting needs, as this will allow SMEs to focus on doing business.
The KiwiSaver scheme is classic example of poorly drafted and implemented legislation. There was little objection to the basic saving scheme concept, but its implementation, its inherent compliance demands and the way it was introduced without adequate consultation has delivered yet another unnecessary cost burden to SMEs in particular.
Current employment law and industrial relations barriers are also impacting on small businesses. Poorly drafted legislation that is inadequately discussed and reviewed before enactment undoes any beneficial impacts that might come from other industry promotion initiatives.
Taxation also came in for criticism, with calls for lower tax rates to help reduce the outflow of skilled workers to Australia and elsewhere. The R&D tax credit scheme could be improved by widening the scope of the scheme, lowering the expenditure threshold, and ensuring business owner-managers and advisers receive regular IRD reports on how these credits are utilised by SMEs.
The Summit called on the Government to provide resources for Enterprise Development Associations to drive local area development of integrated clusters of firms operating within the same specialised sectors. Successful clusters currently include the superyacht cluster in Auckland and the equine cluster in Matamata, which have enabled small firms to specialise and collaborate to compete successfully at home and abroad.
Instead of supporting large firms or ambulance cases, the Government needs to offer potential high-growth SMEs with more support in range of areas including validation of ideas, markets and business models, intellectual property strategies, capital raising, differentiation, niche marketing, networking and governance.
Not all companies have the capacity or commitment for growth so it is important to encourage and facilitate it where the SME owner-manager-entrepreneur understands the risks, is prepared to commit and where the business model is profitable.
The Summit advocated raising awareness of entrepreneurial culture in New Zealand through government-backed schemes and communication strategies. Education has role to play here, and the Summit supported the introduction of business and entrepreneurship as ‘core’ subjects throughout the school and tertiary education curriculum. ITOs also need more work to increase the quality of their training programmes.
Sustainability was another area of concern to the Summit. Reliable data on the survival rate of SMEs would help to understand the ‘churn’ factor and establish why high proportion of our small firms are not sustainable. The Summit also recommended the provision of advice and support on adopting sustainable business practices to allow SMEs to keep up with the expectations of their customers, markets and communities.
Evaluating the success of initiatives to support SMEs is crucial. The Summit recommended systematic and independent analysis to determine the value created by these initiatives, and also called for more case studies of successful New Zealand entrepreneurial firms, clusters and regions to identify factors for success.
SMEs are the backbone of the New Zealand economy, the Summit concluded. They have valuable role to play in improving the country’s overall performance and helping to raise New Zealand’s OECD rankings. Recent initiatives in Europe and Australia to encourage and support small business development are an encouraging sign that small businesses, if treated correctly, can deliver substantial economic growth.