New Zealand SMEs urged to grow or die
28 March 2019
News that the New Zealand economy is losing steam should be a warning to small and micro business owners here to grow or die.
Partner ¬– Accounting and Advisory at OneHQ, Niran Iswar, says self-employment and SME ownership is a lifestyle choice for many, but business is not a lifestyle, it’s a deadly serious undertaking that can destroy families, finances and health when it goes wrong.
“I’ve seen it happen too often to remain silent on the issue. If you are in business, or contemplating entering business, the choice is simple – grow or die.”
Iswar says New Zealand SMEs are poorly equipped to cope with the predicted downturn, considering that even in good times 70 per cent of Kiwi businesses have no staff and almost half of SMEs fail within two years.
“Somebody is a good plumber, or copywriter or graphic designer and so they set out on this great adventure that is business, but the reality is that so long as you are the one doing all the work you cannot reap the financial rewards of being in an actual business.
“Instead, all you do is give up job security. This is all well and good when the economy is buoyant, but when a downturn comes – and it will because everything happens in cycles – there’s a lot of pain to be had.”
Iswar acknowledges that some people have managed to remain successfully self-employed for years, but they are far and few between and usually it’s because they are well resourced and they work hard on their sales, marketing and networking.
“One solution, for the self-employed and small business owners who want to stay in business but are not multi-skilled or financed enough to grow, could be to merge with other people in a similar position – pooling your resources brings instant scale.”
Iswar says however that survival shouldn’t be the only reason for business owners to contemplate merging with another business.
“You need a vision for the future and a nice lifestyle is not a vision. It may be that you want to focus on what you are good at while leaving others to apply their skills to essential core functions like finance and sales.
“Or, like us, you want to help improve the lives of as many people as possible beyond what you can do as a small company,” says Iswar, referring to the recent merger of his previous small accounting partnership NexGen Group with OneHQ.
“NexGen Group had about ten staff and we were achieving good organic growth year-on-year, but we wanted to take it up another level so when OneHQ came along we leapt at the opportunity to make a bigger impact and build a bigger legacy.”
Iswar says human capital brings additional support to a business. Doing what you are good at while letting others can focus on what they are good at, creates a business that can move forward faster.
He offers the following advice to people considering a merger:
Make sure you
gel with your potential business partners
Iswar says joining forces can create issues with multiple leaders.
“Personalities are always a factor with teams. They may have the right skill set, but if you don’t get along with the people it’s not a good start – make sure you work with people you like.
“For example, work life balance and flexibility could be a culture you want to retain, so make sure everybody else is on the same page.”
Be sale or merge
Many SME business owners are afraid to have the conversation about selling or merging, or don’t know how to do it.
“Sometimes it is a matter of waiting for the right person to come knocking. Whether it’s a reactive or proactive thing, get yourself merge or sale ready. It doesn’t mean you’re definitely going to do it, but you’ll be ready if a bigger opportunity comes along for you and your staff.”
Iswar says sometimes the excitement and potential of a sale or of merging with people you get along with, can over-rule common sense.
“Sit down with your accountant and lawyer. Draw up a rough financial model of each business and bring them together to see what the new business looks like.
“You may be required to sign non-disclosure agreements and memorandums of understanding and it may be that the people you are going into business with are not in a pretty position, so they play their cards close to their chest – make sure you have access to the relevant information.”
When the goals, vision and end-game align – when everybody is working to the same goal – there’s nothing more exciting, secure and promising than a business that has scale and depth.
For more information: https://www.onehq.nz/