If New Zealand can harness the economic growth of its small to medium enterprises, it will enjoy a significant boost to the national economy, according to Bank of New Zealand managing director and CEO, Anthony Healy.
SMEs have long been recognised as powerhouses of the New Zealand economy; 97 per cent of all businesses have 20 employees or less, they provide employment for roughly a third of all Kiwis and produce about 29 per cent of our GDP.
"I think we in New Zealand have huge potential for the growth of this sector," Healy says, "and there is some really strong entrepreneurial ambition among our SMEs to make it happen; we want to help with that."
The bank has recently launched its 'Supersize SME' programme in conjunction with NZME and Newstalk ZB. It is aimed at finding SMEs with growth ambitions; they pitch their business challenges to an expert panel, including Newstalk ZB's Mike Hosking, BNZ's Director of Partners Shelly Ruha and The Icehouse CEO Andrew Hamilton. Three will then be selected for mentorship programmes to help take their business to the next level.
Healy says the signs for SME growth are encouraging - gleaned from a recent roadshow focusing on SMEs and the latest MYOB Colmar Brunton business monitor survey of more than 1000 SMEs late last year. That survey revealed rising fortunes for SMEs and major optimism for 2017.
"My feeling is that, if you surveyed SMEs now, they'd be even more optimistic," says Healy. "When that last survey was taken, the dairy industry was still battening down the hatches a bit; now that picture is brightening, there should be room for considerable growth and more optimism."
The MYOB survey saw 39 per cent of respondents reporting a revenue increase in the previous 12 months, up from 31 per cent in the same survey the previous year. Only 17 per cent reported falling revenues, down from 25 per cent previously.
Looking ahead to 2017, 42 per cent expected revenue growth with only 11 per cent predicting a decline. That drove a remarkable turnaround in confidence about the broader economy, with 26 per cent of businesses optimistic about economic growth, up from a net negative 30 per cent in the same survey 12 months prior.
Healy said his SME roadshow also revealed the entrepreneurial spirit behind many New Zealand SMEs - like the newly-launched Mairangi Bay Automotive Workshop, only three weeks old when Healy met the two principals in Auckland.
"They were, frankly, inspiring," he says. "They were two mates, two car mechanics who had decided they wanted to shake up the industry by giving customers amazing service.
"They had a four-year plan, one of the fathers had put some money in and they had identified the weaknesses of their industry and were intent on acquiring customers, buying the right equipment, achieving a differential - and worked with us on how they would fund it."
They had, he said, gone from strength to strength, as had Organic Initiative, an all-woman company producing organic and biodegradable sanitary products. Another SME, Fall Pac, was taking advantage of the new health & safety regulations by selling protection and safety equipment to the building trades and construction industry. Green Gorilla was a clever South Auckland recycling business focused on the waste from the booming construction industry.
"The BNZ has always been strong in the SME sector and New Zealand's growth - but there's nothing better than getting out face-to-face with customers," he says.
The contact showed the biggest issues facing SMEs were what he calls "the three Cs" - capital, capability and connections.
"With capital, SMEs often struggle to raise it, to maintain cash flow and to raise the right equity capital to sustain growth.
It's often easier to obtain big funds than it is for SMEs [to raise smaller amounts] and our venture capital market in this country is pretty small, so this is a consistent challenge for SMEs."
Capability means growing or finding the skills to help the business to the next level. "It's like the two guys from the Mairangi Bay workshop - the skill which got them into business and to a certain level of growth may not be the skills which can take them where they next want to go.
"That's where you have to decide things like whether you establish a board or bring in outside help, like a bank or accountants or the like."
Connections refers to the fact about 70 per cent of SMEs have only one employee - a busy person running all aspects of the business who does not have the time to network and make the connections which can accelerate the business's growth.
"The whole idea behind SuperSize SME is to showcase some of the really bright and entrepreneurial people and spirit we have in businesses which often do not follow a traditional business model," says Healy.
"It's also to show that help is at hand and there are many things you can do to grow that business."
Follow the journey on The Mike Hosking Breakfast on Newstalk ZB and at SupersizeSME.co.nz