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Domestic and international economies have taken a hit that will last at least two years and businesses that haven't taken steps to ensure their future success will be vulnerable, say experts.
Consolidation - driven by a shortage of resource, time, capital, skilled management and labour - is already
happening "quietly and in a very straightforward manner," says Ross Verry, general manager of ANZ Corporate Banking.
Consolidation means more small businesses closing, weeding out "under-capitalised, over-optimistic, interest-only debt financed" businesses, says BNZ chief economist Tony Alexander.
This process provides opportunities for longer-running entrepreneurs to pick up valuable businesses that have cash-flow problems, or assets such as people, premises or contracts.
There is evidence businesses are rationalising their existing labour force and Alexander recommends they take the opportunity to improve staff quality by having a hiring policy to seek out good staff other companies may lay off.
Alexander says: "The manufacturing sector shifting offshore will free up good people, who have shown company loyalty and have built up good skills."
Productivity has been declining for the past two years by 0.6 per cent per annum.
Alexander attributes this to businesses having to employ relatively unmotivated and low-skilled people with the labour market being so tight.
Once there is an economic slowdown, there can be a lag in business reaction, resulting in productivity further worsening.
"Internationally speaking we are a fragmented economy, so I think further consolidation will bring us closer to our [international] competitors in terms of productivity growth," says Verry.
ANZ's privately owned business barometer released last week showed a significant percentage of business owners at an age where they're looking to exit, another factor giving larger and more focused businesses an opportunity to consolidate.
Alasdair Thompson, chief executive of the Employers' & Manufacturers' Association, says these baby boomers are not at a stage of their lives where they want to develop a new business model. "Those people are already looking around to find someone to sell to," and if changes are required, prospective buyers may be positioned to acquire these businesses cheaply compared to what they may have been worth at the height of their success.
Verry warns mergers and acquisitions are not easily implemented. Capturing all the gains you think you should be able to without advisers can mean taking your eye off the ball on day-to-day business.
With the prolonged period of strong growth preceding this slump, Alexander says there are many operators who have never experienced a downturn.
He says they shouldn't close when all they need is a sound strategic plan to pull through.
Alexander predicts when we get an economic upturn in 2010, productivity could be strong, based on recent business capital spending data.
Businesses should direct resources into biotechnology, IT and the creative sectors with an export flavour, Alexander says, but on the other hand, capital expenditure must go into the primary sector of sheep and beef.
Thompson says pharmaceutical research and development is another growth area, and that all these things also need to be manufactured - which New Zealand has learned to do well through supplying niche markets.
He points to start-up companies in the university incubators, such as Auckland University's Icehouse, as the future of innovating businesses.