The importance of small business

The conglomeration of New Zealand Government agencies now called MoBIE (Ministry of Business Innovation and Employment) has produced an information-dense infographic about small business that is worth wading through (more info on MED site):

It’s excellent to see the government putting a focus on the small business sector, not just because it’s Xero’s target market, but because, as the results themselves point out, 97.2% of enterprises in New Zealand fit this category. If we want to really grow our economy then making this sector more efficient will make a big difference.

Of course just because small business dominates every industry by number of enterprises doesn’t mean they’re producing the most GDP. The larger companies still dominate the stats, including with respect to innovation and exporting. However, the infographic shows that enterprises with less than 50 employees are creating nearly half the jobs in the economy and a third of the GDP. Also, while the amount of innovation is pretty static in this group over the period 2009-2011, it actually fell for larger firms.

A lot of the information is dated, but one can speculate significant untapped potential in small business as we move online and use more cloud and e-commerce technologies. For a start, the growing availability of integrated solutions in the Xero ecosystem give small businesses a new nimbleness and the vertical tools to compete against larger businesses, including CRM and PoS, without the huge IT costs of the past.

Look also at the growth of e-commerce on sites like TradeMe where small shops and niche-market individuals are competing head-on with large retail chains, delivering goods that the larger players aren’t stocking or are over-pricing. Personally I had two examples of that in the past few days buying seeds from an individual on TradeMe and a squash racket from a Christchurch shop’s e-commerce site.

This ability to sell online also removes major barriers for small business around exporting. The charts show exporting grew faster amongst small business than for the larger firms for the period 2010-2011, particularly in the 20-49 employee group where there has been a higher survival rate than in the below 20 group.

Congratulations to the government for bringing some insight to the small business environment, which can only help to improve confidence and get people talking about the opportunities. We believe that with the right tools and the support of trusted advisors, small business can really up the game and lead significant growth in our GDP.

 

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