More NZ SMBs now in the half million club
- 15 December, 2014 07:15
One in four (28%) New Zealand small businesses are now turning over more than half a million dollars annually, up almost 14% on 2011, according to insights from accounting software company Xero.
Benefits from an increased understanding of technology and a renewed confidence in the economy are driving the growth as small businesses unlock efficiencies in their processes and production output.
According to the Ministry of Business, Innovation and Employment’s 2014 Small Business Sector Report, there are around 460,000 small businesses operating in New Zealand which are contributing around $56 billion annually to the economy – nearly 30% of the country’s Gross Domestic Product (GDP).
Xero’s analysis also shows there are around 150,000 Kiwi small businesses that are not captured in official reports as they do not meet current minimum criteria of a $30,000 turnover, however, they too make a valuable contribution to the New Zealand economy.
These 150,000 small businesses bring the total number to more than 600,000 – a significantly larger pool – and add up to an additional 10% contribution by small business to the country's GDP.
In addition to more businesses now in the half-million club, Xero analysis shows success among other small business.
With more than half of all Kiwi small businesses generating an annual turnover of more than $180,000 and with more than 600,000 small businesses in New Zealand there is little doubt that small business really is big business.
Victoria Crone, Xero NZ Managing Director says the contribution of small business to our economy cannot be understated.
“The fact that we are seeing this growth in the sector is a strong indicator of the drive our small businesses leaders have to advance and excel, and that’s good news for the country’s economy going forward,” she says.
“Part of Xero’s commitment in supporting these smaller organisations is to help them to grow and continue to be prosperous.
"We know that scale plays a big role – that the bigger the business the higher the chances of success are and the smallest shift in the environment can have a marked effect on smaller operations.
"By being alert and aware of the challenges and constraints small businesses face we can work to manage and help mitigate these together."
According to Xero's own analysis, Crone says these “smaller” businesses under the $30,000 threshold look just like every other business – just with a smaller annual turnover.
“What’s really encouraging is that Kiwis are out there giving it a go with 13% of small businesses generating a turnover of less than $20,000," she adds.
"In time, some of these small operations will be reaching half a million plus in turnover and becoming great New Zealand success stories in their own right.
“We’re seeing the smaller businesses taking advantage of technology too, despite the size of their business, and using tools like Xero to manage their finances."
Backing up Crone's claims, independent global research shows that 61% of Xero customers have experienced revenue growth in the past 12 months, compared to just 33% of the total small business market.
Furthermore, according to the 2014 World Bank Doing Business Report, New Zealand is ranked first in the world for starting a business and investor protection.
"So there really is no better time to think about starting your own business,” Crone adds.