KEY POINTS:
"Dear Mr Key
You're off to a great start, and we have very high hopes for your Prime Ministership.
I'm pleased to read that you're looking at ways to help small and medium business get through the recession, and that you're welcoming suggestions from the head of the stock exchange and NZ Institute, and other experts. Last year, in your speech to the Entrepreneurs Organisation, you impressed many of us with your understanding of our issues, and of business.
One request I'd make is that you come and talk to some of us at the coalface for our ideas about what would really help. As someone who gets to clean up the mess when things go wrong, I'd love to see this opportunity make a lasting change to the landscape.
I'm not suggesting that the provisional tax idea won't fly. However, given that our profits are going to drop if our companies or markets are contracting, and that we can re-forecast and not pay provisional tax if we are not predicting the same profits as the previous year and the penalties are reversed if our profits are down - it isn't really going to do much.
John, currently small business is funded without discipline or support. Start-ups get borrowing secured against their property, then have to try and make it work until they run out of opportunity to borrow. You know the data: 12 per cent fail each year, compound that and you get 80 per cent failed after five years. The cost to our society and economy is huge.
Take a look at a specific group in terms of the current challenges - 'growth' companies. These are the young bright companies that will make up the next wave of successful big companies in NZ. Over the past five years they have been told to keep growing so they've reinvested all their profits in the company and borrowed from the banks, etc.
Provisional tax reductions won't help them. Growth sucks cash, and right now there isn't much cash around.
John, if you want to make a real difference in small business, why don't you give some incentives to investing in them. That would mean that instead of borrowing against their house, small business owners can have more sophisticated investors, PE firms and VC's who will be encouraged to get in alongside them and provide guidance and support with capital.
Right now there are good companies which have focused on growth instead having to stop growing and focus on survival.
Not because the opportunities aren't there, but because the capital isn't, or worse, the basis on which they had borrowed is being reviewed.
It is the same for companies beginning to export or expand overseas. Until they can attract capital they are competing on a shoestring budget and have to survive on their wits and Kiwi ingenuity. The NZTE helps - however, to take on a big market requires some big backing, and surely helping these firms get investment would be better for the economy than many of the other ideas out there.
Currently most end up with backing from Australian PE or VC funds. Given that we have this big fund, why do we invest it all in offshore companies and not ensure some of it creates liquidity in our own markets?
John, I know that you know a lot more about macro economics than I do, I'd just request that you spend some time talking to us (business owners) as well as the professors and corporate guys about what will make a difference in our world.
While we know we can't have it all - while you are at it are you able to look at a more flexible Employment Relations Act (ie, that employee trial period) and increased funding available to support and educate small and medium business?
Kia Kaha
Ben"
* Ben Ridler is managing director of business coaching company The Results Group
