In New Zealand, small businesses represent the backbone of the economy. In conversation with Craig Hudson, managing director of Xero, New Zealand, we talk about what New Zealand’s environment is like for small business, as well as what small businesses can do to survive in this tough sphere.
“Small businesses represent around 28 percent of the GDP and employ around 29 percent of all employees,” begun Hudson. “Around 97 percent of all entities are classified as small, as the New Zealand government classifies anything under 20 employees as a small business.” From these figures, it is clear that the environment is saturated, but not necessarily one that provides assistance or nourishment. “Small business is such a massive part of the community, as well as the economy, and it should be getting way more oxygen from big business, and from the government than it has been.” Considering that small business has been outperforming big business in growth, employee numbers and revenues, as well, it seems logical to assist with such a crucial part of the country’s industry.
Xero has recently released the Xero Small Business Insights. These insights provide core platform data for the first time. “This is actual business performance data that we’re able to aggregate and anonymise. We have around 55 percent of all businesses using our product in New Zealand, so it provides fantastic insight.” Gaining access to the statistics that the Small Business Insights provide gives business owners the truest sense of the state of the industry, and how they can make better decisions about their business. “The unique thing with the Small Business Insights is that we’re able to benchmark data across parts of Australia and the UK to be able to see how we’re going. New Zealand is outperforming the other regions that we measure, but there are still challenges.”
Some of New Zealand’s most significant challenges are cashflow and isolation. Hudson noted that the way small businesses are treated in terms of invoicing is systemically poor. He said that from the data from the 350,000 companies involved in the insights, small businesses have on average $7000 worth of outstanding invoices on any given day. “When you’re a small business, this can be crippling for you—especially if you’re trying to put food on the table for your family. It reduces the ability of a small business to thrive, which has a flow-on effect in terms of well-being, mental health, and connections at home. Invoicing needs to happen faster.”
In terms of isolation, it can be difficult for small businesses as there really isn’t a safety net or any support from the industry. “It’s a stressful environment, and you’re trying to be a jack-of-all-trades, and you’ve potentially had no exposure to HR or business law… it can get really tough.” Hudson’s advice to combat this is to get help from those around you—never be afraid to ask for help. “We call them the trusted advisors, who are effectively accountants that are in business advisory. They don’t just do tax and compliance, but they’re able to advise on company structure and how to maximise opportunity; they can help you come up with a plan to help organise the next best action for your business.” The main thing is that through this, small businesses can connect with people that know what you’re doing, and are helping to harness the passion that you have for your work.
Potential business owners shouldn’t be discouraged from getting involved in small businesses, however. Hudson recommended understanding the technologies that are out there to help reduce double-handling and unnecessary work. “It’s imperative that you have systems that talk to each other—that your AI machines are working for you.” Additionally, in terms of invoicing, Hudson said that one of the best, and simplest ways to improve payments, is by putting a pay-now button on the invoice so that customers can pay through their credit card instantly. “You could even ask for down-payment if you’re doing a decent amount of work. Ask for money upfront and don’t be afraid to turn customers away if they’re a particularly bad payer.” Remember, though, you’re not alone, and there are people that will be willing to help. “Find people you can share with and grow together. Use your accountant as your trusted advisor; if you don’t have one today, go and find one that gives you the right type of advice to grow, because you don’t have to be alone.”
Small business is resilient, and at the moment, performing well. Utilising such comprehensive data can help define the success of a business. In addition to Hudson’s other tips and recommendations, small businesses around the country can thrive in this critical, and bustling part of the economy.
About Xero Small Business Insights
Xero is dedicated to improving the lives of small business owners everywhere. More than 350,000 Kiwi subscribers in New Zealand rely on our cloud-based accounting software to manage their finances every day.
Xero Small Business Insights is a snapshot of the sector’s health, updated monthly. Its metrics are based on anonymised, aggregated data drawn from hundreds of thousands of our subscribers. The result is a picture of business conditions that’s more accurate than most private surveys, which have a far smaller sample size, and more frequently updated than other New Zealand data on small business.
With that goal in mind, Xero is sharing some of their observations through Xero Small Business Insights. It’s their hope that with this data in hand, policymakers and large enterprises can make more informed decisions that benefit the small business economy.