Finance: Bigger is better in regions

By Jeremy Tauri

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Is Auckland sucking the life out of New Zealand?
Is Auckland sucking the life out of New Zealand?

Does big business kill little business?

That was a comment made to me recently at a networking event. I understood and agreed to some extent with what my friend was trying to tell me.

Retail is the obvious example: the rise of price-competitive hyper-stores and online traders have replaced most of the "mum and dad" retail outlets that used to exist.

New Zealand is a country divided and Auckland is a lion in a strange land. In a recent television poll, Kiwis said Auckland was sucking the life out of New Zealand.

But are the regions unsure about how to tell us exactly what they need to survive?

Jobs are what we need to create in the regions - jobs to give people income to spend on their own homes, or on buying things for themselves and their families.

Jobs create opportunities for growth and keep skilled young people in the regions.

The way to do that initially is with the right big-business industry.

Most small businesses aren't intending to hire. MYOB Business Monitor analysis found just 8 per cent of small businesses intended to take on new staff, down from 11 per cent last year.

Managing a process of employing staff takes time, and is especially nerve-racking if the statistics are true that 53 per cent of small businesses fail within their first three years.

But if you incentivise a big business that can hire 50 people in a small town, you will need 50 more houses and the people who live in them will need to be fed, entertained and clothed. This provides a platform for smaller businesses to thrive.

Free-trade zones are probably not on the cards for New Zealand's regions, but the premise is the same. Where a free-trade zone might allow zero tariffs to imported commodities, local authorities need to look at what barriers can be removed for big businesses to become established.

And regions need to ask central Government for assistance - not just for hand-outs but for policy moves to help them develop.

There are some things a little business can learn from a large business. The most important is measuring a return on investment and understanding that long-term planning is crucial to success.

And a little business has the benefit of lifestyle, being small enough to adapt and to provide an exceptional service.

Jeremy Tauri is an associate at Plus Chartered Accountants.

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