Something you may not know about the online tax-refund industry in New Zealand is that it sprang from the South Island. It's a phenomenon that might be observed in a number of sectors: in my industry, the largest players all started in the South Island and have grown far larger than our competitors have managed to do in the major centres of Auckland and Wellington.
A recent report by the New Zealand Institute of Economic Research suggests the optimal population is 15 million, and to support this we'll need to make many centres as viable for business as the largest cities are now. But here's the thing: they already are. Living in Nelson hasn't stopped me from building two successful businesses.
Indeed, the New Zealand Mid-Market Report 2014 by GE Capital finds that the mid-market sector is an important part of regional economies. While Auckland has a relatively high density of such firms (which employ around 21 people and generate sales of $4.2 million annually on a per-firm basis), in the regions, Marlborough has the highest mid-market density, followed by Nelson, Southland, Hawke's Bay and Gisborne. This part of the market is growing, contributing 27.8 per cent of New Zealand's sales growth between 2010 and 2012, and contributing $66.2 billion to the economy (32 per cent of GDP) in 2012, up from $61.5 billion in 2011.
Others can do what MyTax.co.nz has done, and I am certain that my business is more profitable in Nelson than it would be in Auckland. Some reasons why:
• Retaining staff is easy. Everyone is in Nelson because they want to be here and have made the choice to come back after being educated elsewhere. As a consequence, turnover is close to zero. In general, staff are more loyal than in a larger job market, and it's easier to be a stand-out employer and accrue the right people;
• Lower overheads mean good rewards. Staff have individual KPIs and there are group targets across the company. Managers have bonuses tied to performance, and other recent rewards include a company-wide weekend trip to Auckland and a team outing to a winery;
• Travel is no bother. There are 12 regional flights a day from here to Auckland alone, and the flight itself is just an hour. All of my competitors travel as much as I do, even those based in much larger cities. It's easier for me to travel once or twice a week than manage the logistics of moving my family and business to Auckland;
• Work-life balance is not just a fantasy. I live the furthest away from the office of anyone in the company, and I can be home in 10 minutes. It allows me uninterrupted time to work or spend time during the day with the family;
• The list of positives in working outside a main centre is bigger than the list of negatives. Aside from the profitability factor, I suspect my staff's happiness is much higher than it would be in Auckland, even if wages aren't as high. Some of my youngest staff already own their first homes, because they needed just a $20,000 deposit. Having settled and committed people is a benefit - they are incentivized to work hard for the business.
At the same time, we have not had to compromise on quality of staff and support personnel. There is no shortage of skilled and hard-working people in Nelson, who appreciate the lifestyle and reasonable cost of living. We draw on the talents of independent operators outside Nelson on an as-needed basis. For instance, our lawyers are in Auckland and our media team is in Christchurch, and that is no handicap.
We're not breaking the mold by doing this; all over New Zealand you will find skilled people and thriving businesses benefitting from the lower cost of doing business in smaller places. One of New Zealand's largest online health stores, healthpost.co.nz, runs very successfully from remote Golden Bay.
Local bodies have something to do with it, being keen to support and retain good companies. Some months ago, fibre-optic cabling was laid past my quiet little street, so there isn't necessarily a compromise on infrastructure or services either. There is plenty of space to build offices and factories and warehousing, and land is affordable and easy to access.
For the New Zealand economy to grow we need more business hubs around the country. Outside of farming and tourism, we are placing too much pressure on the Auckland economy. It's time to recognize that there are other viable options.
More about Lester Binns and the company can be found at www.MyTax.co.nz.