Small business still backbone of economy

Photo / Northern Advocate

New Zealand may not be a nation of small shop keepers, but with 90 per cent of enterprises having five or fewer employees, it is certainly a place of small and medium enterprises according to the Ministry of Economic Development's report on SME structure and dynamics.

Of the 477,000 total New Zealand businesses, just under 70 per cent have no paid employees, with self-employed people making up 10.4 per cent of the workforce as at February 2009, according to the recently released, and 11th edition of the MED report said.

The information, crunched from Statistics NZ data, indicates that there are 228 businesses with more than 500 employees, totaling just over 320,000 people.

There are 1472 enterprises with 100-499 employees, for an aggregate number of 286,000 of workers.

The latter group has the highest average value-added output per employee of $60,233.

For the first time since 2001, there were more SME deaths than births to February 2009 with 51,682 start ups and 52,708 closures.

Still, if zero-employee firms are removed there are almost 2000 more births of employing SMEs than deaths of employing SMEs.

Businesses with 1-5 employees have the highest average real profits per employee at just over $25,000/employees, while 40 percent of total profits are generated by businesses with five or fewer employees.

The survey took particular note of high-growth enterprises, based on a global definition and standard of all enterprises with 10 or more employees, with average annualised growth in employment or GST sales greater than 20 per cent per annum over a three year period.

Results based on employment show 3.1 per cent of the total population of active enterprises with at least 10 employees are high-growth.

Based on GST sales the figure lifts to 5.8 per cent. Both these measures are down from February 2008 when the employment measure was 4.4 per cent and the GST measure was 7.6 per cent; a time when the global financial crisis was really beginning to hit home in New Zealand.

In measuring business operations the survey found that the percentage of all businesses that undertook or funded research and development activities rose to 8% in 2009 from 7 per cent in 2008 and 2007.

The likelihood of a firm engaging in R&D increased with firm size, with 20% of firms with 100 or more employees undertaking R&D. The rate of innovation has remained constant between the 2007 and 2009 survey, though its rate increases with firm size.

Firms with 6-19 employees had the lowest innovation rate at 43 per cent, with those with 100 or more employees had the highest innovation rate at 64 per cent, with the most common reason for innovating being to increase revenue.