Start, manage and grow your business

Speech by Hon Clayton Cosgrove, Minister of Small Business and Immigration; and Assoc Min of Finance and Justice, etc

At the Dunedin Small Business Roadshow, Hutton Theatre, Otago Museum, Dunedin, 20 May 2008

Excerpt:

Small businesses here in Dunedin are as innovative and successful as any in the country. They are critical for the local economy. There are 22,478 small businesses in the Otago region. That is approximately 5% of New Zealand’s SMEs. And those SMEs account for a third of Otago’s total employment.

In recognition of the significance of local small businesses, the Chamber of Commerce and the Economic Development Unit have established a number of excellent economic growth and business assistance initiatives. These include the Upstart business incubator and the Project Gateway programme targeted at increasing links between Dunedin and Australia.;

Dunedin companies such as award-winning software company 1000minds, which is backed by the Upstart incubator, are a great example of what you can achieve.

1000minds is behind the innovative decision-making software that has grown from being the brainchild of University of Otago economist Paul Hansen to now taking on the world. So far it has been adapted for use in prioritizing patients in the New Zealand and Canadian health sectors, as a tool for Otago university students selecting their courses, and for students in the United Kingdom deciding which medical school to attend.

Dunedin has some extraordinary assets. These include New Zealand’s oldest University and the Otago Polytechnic and a student population of more than 25,000. They are a constant source of fresh-thinking, new ideas and originality. They can create opportunities for new entrepreneurial and innovative firms.

Entire Speech:

Good evening. Thank you for attending tonight’s event. I know that for the business owners here tonight it means you have given up precious business time or time away from your families. We will be doing our best to make that sacrifice worthwhile.

Thanks too to John Christie, the Chief Executive of the Otago Chamber of Commerce. Without your support, and that of the Dunedin City Council’s Economic Development Unit, we would not have been able to put on this event.

Two years ago I was here in Dunedin - as Statistics Minister at that time - to launch a new project called Go Stats.

Go Stats aimed to encourage small-to-medium sized enterprises (SMEs) to use statistical information to grow their business. Out of that programme came the government’s “Making Information Freely Available” initiative which I launched in May last year. Since its launch, more than $19 million worth of statistical information products have been given away, for free. More products will be rolled out by the end of this year. This initiative represents huge value for New Zealand businesses, community organizations and individuals.

Tonight I am here again to show you how the government remains firmly focussed on supporting the growth and prosperity of small businesses. Small businesses are the backbone of our economy. I am passionate about supporting them.

As a former small business owner myself, I know first-hand the challenges, and at times the frustrations, that you face. Running your own business, making the key decisions and being in charge of your own future is exceptionally challenging and rewarding. And I believe that Kiwis, as born innovators and entrepreneurs, are naturally attuned to running their own enterprises.

But I also acknowledge that it isn’t easy. It can get tough at times, especially when there’s no-one else who will pay the wages and the bills if things go wrong.

I meet hundreds of small business owners throughout New Zealand every year. They tell me that compliance costs remains one of the key concerns for small businesses. It is holding back their growth.

Well I can tell you that this government has listened to that. We have made significant progress towards reducing these costs. Since becoming Small Business Minister I have made it my top priority to cut these even further.

Another thing that I’ve learned from these small businesses is that many of them simply do not know about the wide range of services and assistance available to help them start, manage, and grow their businesses. That’s what inspired me to kick-off this series of information events. Tonight is the first one. There will be 12 more around the country.

The aim of the events is to answer your questions, solve problems and to outline the many ways that government agencies can be of assistance to add value to your business. With me here tonight are government officials who can explain what they can do to help you solve the real day-to-day problems that you face as business people. They are also here to answer your questions.

To assist you in finding out more about where to go for help I will also tonight launch a new publication for small businesses. It is called Start, Manage and Grow your Business. The booklet reveals real-life case studies of business people who solved their business problems with help from government agencies. For the first time, this booklet puts all that information together in one place.

I am doing this series of information evenings because the New Zealand economy can only remain strong if its’ small businesses are prospering.

Small businesses are vitally important to the New Zealand economy. They account for 97% of all New Zealand firms. They employ 31 percent of our workforce. SMEs are drivers of innovation. They play a key role in developing and spreading knowledge. They create jobs and wealth and they represent huge potential for growth. 96% of the annual growth in business numbers comes from businesses with fewer than 10 employees.

To get SMEs to reach their full potential New Zealand needs a business environment that encourages SMEs to grow.

We have one of the best business environments in the world. We retained our second-place ranking in the World Bank Ease of Doing Business Survey last year. This year we are in a strong position to compete for the top spot. In part that is because of the collaboration between the Companies Office and Inland Revenue. As a result of their work, business incorporation and tax registration, a process which 3 years ago took 11 days to complete, now takes one hour (and sometimes less).

There are many more examples of things that small businesses could find useful – many of which are free. One of the most useful tools is www.business.govt.nz

The website was launched last year and it will be demonstrated for you tonight. Basically it is a one-stop shop for anything you need to know about the help available from the government. It lets you access government and private sector information on things like employment contracts and calculating holiday pay. It helps you remember important dates by emailing alerts to you. And if you sign-up - like 5,500 other businesses have - you’ll get a free e-newsletter that updates you on the latest developments for SMEs.

Another thing to look out for is something called Management Focus. This initiative resulted from private sector individuals and government officials getting together to find ways to help business owners who want to improve their management and business skills. Why did they do this? Because the most critical success factor in a small firm is the owner/manager.

The first thing they did was to develop an on-line questionnaire to help business owners identify what sort of assistance they might need. It then directs you where to go to get the skills, information or support you need.

For those of you who want to get into exporting, the government has done a lot to get you access to new markets. The most recent success is the Free Trade Agreement with China that was signed last month. With their ability to adapt successfully and quickly, small businesses are uniquely placed to make the most of these possibilities. And to help with this New Zealand Trade and Enterprise has a business-focussed website at www.chinafta.govt.nz.

Dunedin has already established a relationship with its sister city Shanghai. This gives your businesses an ideal opportunity to take advantage of the Free Trade Agreement. We also signed a free trade agreement with Singapore in 2001.

Recently we celebrated the 25th anniversary of Closer Economic Relations with Australia. Every year it seems we are moving closer to establishing a Single Economic Market with Australia. The aim is that firms on both sides of the Tasman should face no unnecessary hurdles in expanding their businesses into each country.

And that brings me back to the issue of compliance costs. Earlier this year I launched a software package called the Business Compliance Cost Calculator.

The Calculator forces public servants, who are recommending that the government pass new business regulations, to tell the government the real costs these regulations will impose on businesses. How much additional time and cost will it take for a small business to comply with the regulation? How much time and cost will it take for you to learn the new rules? What extra costs, like training your staff about the new regulations, will you have to bear?

In short, the Calculator helps officials and my Ministerial colleagues to think carefully before agreeing to make new rules that affect business.

Another initiative, launched by the Prime Minister in February 2006 was called the Quality Regulation Review. Its aim was to find and then eliminate government rules that were unnecessarily holding back businesses that want to grow.

The review investigated ways of eliminating duplication, inconsistencies and uncertainty where multiple regulatory frameworks intersect and looked at improving Government’s own processes for assessing and monitoring the impact of regulations.

The QRR has helped strengthen the Government’s internal processes, such as Regulatory Impact Analysis. Since 1 April 2007 all proposed regulatory interventions have been getting more rigorous scrutiny before they are placed before Ministers for decisions. Further improvements are to come.

Today I am pleased to announce a very new cost-saving initiative. The government has agreed, in principle, to investigate the introduction of what’s called Standard Business Reporting into New Zealand.

When fully implemented this will allow businesses to file the same information only once with government, in one place, and from there it will be distributed to the agencies that are entitled to that information.

Based on calculations done for a similar system in Australia, the cost savings for New Zealand businesses is calculated to be between $55-75 million every year, once the system is fully implemented. In other words this new system will save small businesses in particular, both time and money.

We are going to start with the government agencies that deal with financial reporting – the Ministry of Economic Development’s Companies Office, Inland Revenue, Statistics New Zealand and ACC. This is where we believe the greatest savings for businesses will be found.

As a part of the project we have also asked officials to further investigate the introduction a single business number for New Zealand. This number would be unique to your business and could replace the dozens of identifiers (eg. tax numbers, incorporation numbers, ACC numbers etc) businesses currently have to use to interact with government. Should this number be introduced, the long term vision would be to reach an agreement with Australia that we recognise each others’ business numbers. That means you will be able to use the same number on each side of the Tasman and cut down further costs.

When we pull it off this project it will revolutionise the government’s day to day relationship with business. These programmes will bring direct and visible benefits to small businesses.

Other good news for small employers is the PAYE subsidy scheme, or Payroll Agent. If you pay less than $100,000 a year in PAYE and employ five or fewer employees you can get help to pay for someone else to do your payroll, giving you more time to grow your business.

What you sometimes don’t see with all these programmes is the work that goes on behind the scenes to make sure that a small business perspective is considered when policy is being developed.

One of the ways that this happens is through the Small Business Advisory Group – or SBAG. SBAG was set up in 2003 to give small businesses a direct line to government. Its members are small business owners like you. They bring a voice for small business right to the heart of the government’s policy making process.

I meet with SBAG as often as I can to make sure that I am hearing the issues straight from the horse’s mouth. Dunedin has been represented on SBAG by Nigel McKinlay from McKinlays Footwear and Bernie Graham from Streets Clothing. In 2004 and again in 2006 SBAG produced reports to the government on action points to improve the environment for small businesses. The government has delivered on 75% of the recommendations in these first two SBAG reports, including

· Introducing www.business.govt.nz that I noted earlier

· the Employment Agreement Builder which helps employers and employees draft employment agreements

· funding via New Zealand Trade and Enterprise for SMEs to set up advisory boards to help grow their businesses

· the Holidays Act online tool for working out holiday pay/leave entitlements

The third SBAG report was delivered to me last month. I am currently pulling together a comprehensive government response to the recommendations. I will be releasing that response later on this year. I am confident that the government will once again be able to respond positively to many of the recommendations.

But what does all this mean for you here in Dunedin? Why is it important?

Small businesses here in Dunedin are as innovative and successful as any in the country. They are critical for the local economy. There are 22,478 small businesses in the Otago region. That is approximately five percent of New Zealand’s SMEs. And those SMEs account for a third of Otago’s total employment.

In recognition of the significance of local small businesses, the Chamber of Commerce and the Economic Development Unit have established a number of excellent economic growth and business assistance initiatives. These include the Upstart business incubator and the Project Gateway programme targeted at increasing links between Dunedin and Australia.

Dunedin companies such as award-winning software company 1000minds, which is backed by the Upstart incubator, are a great example of what you can achieve.

1000minds is behind the innovative decision-making software that has grown from being the brainchild of University of Otago economist Paul Hansen to now taking on the world. So far it has been adapted for use in prioritizing patients in the New Zealand and Canadian health sectors, as a tool for Otago university students selecting their courses, and for students in the United Kingdom deciding which medical school to attend.

Dunedin has some extraordinary assets. These include New Zealand’s oldest University and the Otago Polytechnic and a student population of more than 25,000. They are a constant source of fresh-thinking, new ideas and originality. They can create opportunities for new entrepreneurial and innovative firms.

Design company Ooid is one example of that innovative spirit. Ooid’s popular Sprout bags were created by two Otago Polytechnic students in their final year and have gone on to be stocked in shops around New Zealand and in London, Edinburgh and Shanghai.

In acknowledging the success and importance of Dunedin’s tertiary education sector I also commend the proactive approach taken by the Economic Development Unit. They have recognised the value of these highly skilled people by establishing the Kickstart programme to foster and retain student entrepreneurs.

However I want to acknowledge upfront that Dunedin businesses also face tough challenges. As one of this country’s southern-most cities, the usual constraints faced by all New Zealand businesses of being a long way from most markets are further exacerbated. This can, and has been, overcome but it does represent a significant hurdle. The increasing importance of Dunedin’s information and communication technology industry is a testament to both the problem and the solution.

I would like to acknowledge the recent closure of three large businesses in Dunedin, despite the strong economy we currently have in New Zealand. If anything, the closures of these big companies mean that an even greater emphasis must be placed upon encouraging, nurturing and guiding the development of Dunedin’s small businesses.

This brings me back to the central purpose of tonight’s event. This evening is about you and the needs of your businesses. It is about what government can do to add value to your business.

The importance of small businesses to the New Zealand economy cannot be overstated. As global competition and technology changes intensify, small firms matter more. Small businesses have the flexibility to move faster, to be innovative.

They are a key driver in the government’s Economic Transformation strategy.

So grab the opportunities presented here today. Take what you learn here and put it to good use in your businesses.

Whether you are just starting out, thinking about new ways to manage your enterprise or wanting to expand, I think you’ll find some of value from tonight’s event.