The NZ economy is dominated by small, under-performing businesses that often go bust.
In New Zealand, less than 2.8% of businesses have sales of over $5M; 29% report zero profit or losses and only 4.7% of businesses make profits over $500k. On top of this, 50% of all new businesses die within four years (Source- Stats NZ), and in the tough times ahead, many more will fail. How can this be good for our economy or our SME business owners? Surely there is an alternative?
The majority of our businesses are sole traders, small teams or partnerships with great technical skills in their field. Getting a business to grow and achieve critical mass takes a different kind of effort; management effort vs technical skill or working “on” not “in” your business.
If you have survived, well done! But you will know that making money in an SME business is really hard. Most SME business owners in NZ have little experience in business management and have even less time to dedicate to building strong foundations for growth.
Why is it so hard?
There is a famous business book called “The E-myth” by Michael Gerber. If you are serious about running a successful SME business, we strongly suggest that you read it – several times! Here is a link to a summary version.
The book talks about the skill sets required to grow a business from start-up to success. Its premise is that too many businesses are started with the myth that a flash of entrepreneurial spirit and a heap of technical skill in your field will grow into a flourishing business.
It’s a very common observation in our industry, but frankly, the stats show this to be true. The impact of not working “on” your business is that you are very unlikely to scale your business or make an income that is commensurate with the effort and risk that most business owners endure.
Most SME business owners start out with a dream; but that dream is rarely fulfilled because it’s “too hard”, and the business either fails or the owner gives up or settles for a small, easy-to-manage business that provides them with a mediocre income and no time to enjoy it!.
So why is it that NZ is dominated by SMEs that are so small, do not provide the owners with a satisfactory income and usually fail?
- The dream does not match reality: running a business is HARD! Managing clients, staff, and cash is a constant and immediate pressure that requires new skills. Many businesses have evolved rather than being designed. They do not have adequate systems to take the pressure off the owner.
- Total immersion (drowning): consequently, the owner is under stress which often leads to poor decision-making, errors, and time and cash pressures. This puts stress on the team, the owner and the owner’s family and lifestyle.
- Lack of motivation: given this pressure, why would an owner want to take on more stress by employing more staff, and investing more cash and time in growing the business?
So where is your business at?
Where is your business now on the pyramid below, and, importantly, where would you like it to be?
What can you do about it?
If you want to get a quick appreciation of where your business can improve, then take this 2-minute challenge to see how well your business is set up for growth. Just click here to visit our self-audit programme.
Then if you seriously want to build your business and want to know more about how we support NZ business owners, then book your no-obligation chat here.
Paul Watson, Director and a Business Success Partner at Oxygen8 Consulting