Business deaths outnumber births
24/04/2013
Sourced from stuff . Co. Nz and shared on the South Africans in Business in New Zealand blog .
Canterbury businesses are bucking a nationwide drop in business numbers, with an average of 300 more opening their doors than shutting up each month.
Kiwi business “deaths” outnumbered “births” for each of the last three years, meaning the number of Kiwi businesses has been shrinking, Statistics New Zealand figures show.
Meanwhile, the latest Inland Revenue statistics for Canterbury business births and deaths show an average of 300 more ventures over those that fail each month since the first quake in September 2010.
The nationwide business demography data, released late last year reported start up numbers were lower than at any time since 2000, with only 40,690 new businesses in the year to February 2012. That was 11.2 per cent less than the previous year. There were 469,120 enterprises in total at February 2012, down 0.8 per cent from 2011.
Lender ANZ highlighted the “alarming” trend yesterday, touting a new $500 million fund to help businesses get off the ground over the next two year.
However, the bank has not loosened its credit criteria, and had instead put in place more business planning advice and offered a business account with no fees for a year, which it believes will increase funding to start-ups in the hundreds of millions of dollars.
ANZ business banking managing director Fred Ohlsson said the country was in danger of becoming an “employment backwater” unless more was done to help turn ideas into new businesses.
“Today’s backyard entrepreneur can be tomorrow’s market leader, hiring hundreds along the way.”
However, loosening credit criteria was not on the agenda, he said.
“In the current environment few banks would be doing that.”
To get the bank’s money, entrepreneurs needed a solid business case, collateral and cashflow, he said.
ANZ’s 600 business banking consultants, including 55 in Christchurch, would be trying to speak with as many prospective businesspeople as possible to find and support the best of them, he said.
Canterbury Employers’ Chamber of Commerce chief executive Peter Townsend hoped the city attracted as much extra finance for startups as possible.
“My initial reaction to that is we want more than our fair share of it.”
The rates of business creation and death in the city were on par with before the quakes, he said.
He was focused on helping Christchurch businesses manage their growth.
Start-ups were just one aspect, with many small firms on the cusp of growing fast with the effect of the rebuild, Townsend said.
Many small businesses usually ran out of money when they grew too fast, but Christchurch businesses would also face other shortages such as labour and materials, he said.
HFK Chartered Accountants consultant Keiran Horne said the churn of Canterbury businesses starting and failing was steady.
Although the areas where businesses were thriving had changed from the central city to the suburbs people were still taking advantage of opportunities presented, she said.
Hospitality was a keen example, with suburban cafes booming from the increased traffic coming from firms that had relocated nearby, she said.
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When Liz Phelan needed cash to start up her New Regent St cafe, she didn’t go to a bank.
The young owner of fledgling city cafe Shop Eight instead revisited her business plan, and worked out a plan to piggyback with another business to cut costs and help her cashflow.
Phelan recently returned from studying in Melbourne, due to family reasons, and decided to start up a cafe and winebar.
With no money behind her, and outlay for a fully-licensed wine bar looking to cost roughly $80,000, she had canvassed people she knew in the hospitality scene, and accountants, for advice and potential investment.
“That was a great experience; everyone was incredibly helpful. Some people were interested, I learnt a lot and got feedback and it forced me to go over my figures, trying to bring it [the cost] down.”
A friend working at a bank told her not to bother trying to secure a loan from the bank because she would need a guarantor on the principal.
“He said there was no point really. He said I could secure a loan, but I’d have to have a guarantor which would have been my mother, so she may as well have just loaned me the money.”
Phelan stripped her plans back to a cafe, with the potential to grow, and to become licensed and introduce wine further down the track.
She also made a canny deal with recycled timber furniture business Rekindle to fit out her cafe with its style of interior design in return for using the cafe as a showcase.
Rekindle has also taken the upstairs space of Phelan’s shop, helping her to pay the rent.
Her mother put up the $15,000 she needed to get off the ground and her landlord had been very supportive, she said.
Running a business was a change from the English literature and history she studied in Australia, but she had worked in hospitality and had spent a lot of time getting her plans right, she said.
“It’s worked out to be much more feasible and less stressful, and I’ve risked less than I would have with my initial plan.”
She was still nervous, but business had been going well since the street reopened on Saturday, she said.
“I’m feeling good about it and hoping all the hard work will pay off.”
– © Fairfax NZ News