A Cathartic Year for Small Business

As the 2009 year draws to a close and as the ICEHOUSE’s first contribution to Tony Alexander’s BNZ Overview I thought I would provide some reflections on what we have seen in the market and then some thoughts on the year ahead in 2010.

Business owners have told us that 2009 has been a tough year. It started with an interesting difference between the relative performance across the cities and regions. In the first half of the year we saw businesses in the main centres really struggling for pipeline, revenue, margin and ultimately cash flow. They could not get the costs in their business out quick enough while the regions did not seem to be affected at all and were bullish and confident. How quickly this reversed and changed through winter with the first signs of recovery coming as spring arrived in the centres, while my visits to the region showed quite a bit of paralysis and not the optimism that we saw earlier in the year.

As with all markets, there have been exceptions with pockets of strong growth and some industries in particular that have some rather terminal issues of structure and a lack of competitiveness. The year for service industries like construction and recruitment has just been horrible. The end of the year cannot come quick enough for them I suspect.

The good pockets are certainly businesses that are focused on the Australian markets with that lucky country just continuing to push ahead. We have also learnt that a significant segment of the economy which is doing well are the larger more established owner manager and family owned firms who are twenty plus years old and who have greater than half of their revenue coming from offshore. I have heard so many stories across New Zealand of these firms having over 30% growth even in the economic conditions which have challenged so many.  This is great news for our future as these firms will be in our opinion the ones that will cause us to head up the OECD, not the big corporate organisations.

It would also seem that in addition to exporting into Australia, Asia is really starting to bear some fruit while the North American, Europe and Middle East markets have been challenging. It was interesting on my trips into Asia that the ‘words’ recession did not even get a mention. We have also heard quite a few encouraging stories of businesses that have spent the last two to three years investing in China are now starting to see significant traction and uplift in the market place. We do need to make much more of this FTA and no matter what Government says, businesses are the only ones that make trade work, Government has done its job with the FTA now it is up to you.

As for 2010, many businesses are telling The ICEHOUSE they are ready to go. They have addressed their big issues, taken cost out, refocused on core business and are now preparing with a much smaller, tighter and efficient machine. If you have not done this, you need to do it now. The key issue they are grappling with is when to start re-investing to deliver on the opportunities out of the up-turn. We sense despite the optimism some nervousness and uncertainty which is creating some interesting middle of the night glasses of milk around increasing investment and commitments to resources to ready for demand when it comes.

We have no answer to this question, other than the number one factor which time and again leads to success is the quality of your people and team. The smart businesses have got their house in order first and are now using the back-end of this year to reinvest in their capability by up-skilling their team. If you have great people, they find the opportunities and quickly gap-fill the resources.

The opportunity each month in this piece is to give some exposure to what is happening in the engine of the Kiwi economy – small to medium business. If you would like to give input, thoughts, comments and suggestions please email me at a.hamilton@theicehouse.co.nz Andy Hamilton, CEO, The ICEHOUSE

The BNZ is a Foundation Partner of Business Growth Centre The ICEHOUSE. The ICEHOUSE gives owner managers and entrepreneurs the knowledge, tools and contacts to grow internationally capable businesses. Together with a start-up business incubator and New Zealand’s largest group of Angel investors, The ICEHOUSE delivers award-winning, education programmes for owner-managers with growth aspirations. More than 1,000 BNZ business customers have benefitted from these programmes.   www.theicehouse.co.nz