The discussion we need to have about Small Business...
Small Business Conversation Let's talk improvement and putting SME's at the forefront of our economic planning.
My experience in Small Business is extensive, crossing a number of varied areas, including ownership, innovation, human resources, labour and employment (HR), health and safety, compliance and finance. The following is a brief outline of my experience, along with some ideas and suggestions to improve the small and medium size business (SME) space.
Background: My husband Dan and I are partners in a Longline Fishing Company (yes, we have camera's on our vessel if you were wondering) and also a consulting company. My work with InVenture enables me to work alongside a number of different start-ups and small businesses helping them to identify areas for growth, innovation, capital raising, identify new opportunities and mitigate and risk management.
General: Bureaucracy is currently the primary hindrance for the small business sector, with more and more compliance and regulations being created for SME’s which is difficult to navigate and manage, whilst driving profitability. Without proper support for the small business sector, New Zealand will be headed towards corporate and government only organisations where the wage earners become solely reliable on the state or a state-connected enterprise to earn a living or provide for a family. This in turn stifles creativity, lowers job satisfaction, and diminishes New Zealand’s hard-earned reputation for creativity, work ethic and entrepreneurialism, not to mention the lowering of productivity. Post Covid, it is even more important than ever that we look after small business owners and make it easier for them to grow their businesses by removing much of the bureaucracy currently hindering their growth.
Human Resources: As a business owner, one of the hardest areas to navigate is managing employees, particularly when things go bad (which they often do). Legislation has arguably shifted too far in favour of the employee, affecting small businesses willingness to take the plunge in employing staff, or even to expand current employee numbers. These changes have meant small business owners mitigate risk by contracting workers instead of hiring FTEs. As a business we have moved away from hiring employees and instead only contract due to the number of risks we faced as a small business when hiring. Within small businesses, employers need to rely on their contracts as a tool for holding employees to account where applicable. Legislation needs to protect both the employer AND the employee, not favour one or the other.
Difficult employees can have a much more detrimental effect on the culture of a business because it is easier to influence a small team around you, especially when working in close proximity. This is evident in our own industry as the crew are out at sea for a number of days at a time together and a challenging culture (determined often by only one employee), can increase staff turnover and create more administrative and human resources issues. Issues around managing out staff, are similar to managing someone out if they haven’t been successful within a three-month trial period as well; employment law protects the employee much more readily than the employer. Even though on principle this trial period makes sense, there doesn’t actually seem to be an upside for employers as they have to go through a fairly intensive process after that three month period anyway if the potential employee turns out not to be a good fit for the company.
Labour & Industrial Relations: I have experience working with Unions and dealing with a variety of industrial relationships across the Marine industry and from being the chairperson of a school. As a small business owner, working through the complexity that unions bring into our industry is extremely difficult. Unions drive their own agendas to secure their own future, which leaves little support for the small business owners. While unions provide many benefits for employees, as a business owner there are a variety of disadvantages. One of the main disadvantages is the rise of our labour costs and with collective bargaining, this can lead to higher production costs. By not agreeing to the demands of a union, our business is at risk of a strike which then directly impacts our cash flow. We’re almost held to ransom by unions.
Local government: As the owner of a longline fishing company, I have significant experience in dealing with local government. To simplify a very complicated issue in Tauranga. The city council hired an Auckland contractor who did not understand the local marine industry and had no previous experience in building commercial marinas. Although it was outlined in his contract that proper engagement and consultation needed to take place, this did not happen. All feedback and complaints given to the council were ignored with the council and this consultant carried on. This resulted in only five metres maximum of usable wharf front space for the entire local marine industry.
Over the past four years, these issues caused significant loss for small businesses (upward of $120M+ revenue) from Tauranga’s local economy, forcing many small businesses to close. I now am part of Tauranga’s Marine Precinct Advisory Group which works with the council and consultants to ensure that all stakeholders have a voice and are properly consulted with and can work collaboratively together. This is one example of many where decisions are being made at a local government level that have significant impacts on small businesses when crucial decisions are being made without proper industry experience or understanding. Additionally, projects and the tendering processes should be publicly visible which could further extend into the procurement of local businesses and contractors in the first instance (where practical). When national contractors are hired, it should be demonstrated why local companies were not used. If international contractors are used, it should be clearly outlined why the expertise was not available locally or at least within New Zealand. The promotion of local business, for example in construction, would be positive exposure showing the ‘support local’ as part of Covid-19 response, as well as push projects along when they are not waiting for outside contractors. There would be potential to also link up with the trade training which NZ First already supports, so multiple wins on this.
Health & Safety / Compliance: The unintended consequence of the new health and safety requirements has been the development of a plethora of pre-qualifying entities all trying to clip the ticket along the way. When the new Health & Safety Act came into effect, one of my clients (also in the Marine Industry) worked to become accredited with ACC. There were benefits to both this company and ACC in achieving accreditation. ACC would hopefully reduce claim risks as they could be confident that appropriate processes were in place and the company could minimise its ACC levies. This small business assumed that being accredited with ACC would be considered a GOLD Standard by all clients. This was not the case. Instead, their clients started to request this small business become accredited with their preferred pre-qualifying supplier. Currently, this client has to maintain certification with 26 different organisations a ridiculous situation and a huge burden for a small business. Common sense would perhaps lead one to believe that if a company (such as this one) has pre-qualified with a crown entity, that this certification would be adequate and acceptable for all the local or regional councils. It is not. In our own business, the health and safety obligations for staff is outlined and signed in our policy and contract documents. However, should one of our workers (who signed contractual obligations) decide not to follow the H&S requirements and get injured, our business could be held liable. Therefore, the requirements we have to put in place drastically slow down our productivity as we are forced to treat adults as children placing limitations around their capability in the off chance, they could get injured. I have many examples in this area.
Finance: As a business owner, the understanding of finances and banking is crucial. Given the current economic outlook as a direct effect of Covid-19, as a business we’ve found it shocking that we were told we couldn’t alter the terms of employment, without extensive consultation with staff. Cashflow became so critical to some companies that their very survival was reliant on some give and take. There is inadequate provision within current laws to provide flexibility to small business owners for unprecedented circumstances. Without the ability to act rapidly and the ability to streamline processes around restructuring, Directors became exposed to liquidity issues.
Government was quick to suggest that business owners utilise cash reserves and or seek additional business loans to trade through COVID, however banks normally seek bricks and mortar collateral - which for a small business owner would likely mean their family home. Further stress and vulnerability for an overwhelmed business owner. Covid-19 has illuminated a complex risk for business that may require changes to legislation to allow businesses to be more responsive during exceptional circumstances.
Have input or feedback as a small business owner?
Authorised by E. Witehire, 251E Rawhiti Rd. RD4, Hikurangi, Northland, 0184