Tag Archives: Economy

Press Release – May 2012

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Building a ‘Network-of-Influence’ with those who can best influence a positive outcome – SME owner / managers; not the Government.

In October 2011, Tenby Powell and Sharon Hunter (of Hunter Powell Investments: PC Direct, Hirepool & NZ Rental Group, EuroPacific Foods and Envoy360) began contemplating why very few New Zealand SME’s create an international, or even a national, enterprise given this sector represents 97% of all businesses.

It came to mind over the wet summer of 2011, as their investment in new start-up venture, Envoy360, a maritime security company operating out of Dubai and Singapore, was experiencing significant growth after only six months of operations under challenging conditions.

Is it that Kiwi’s aren’t motivated? Is it that the moat theory has become a self-fulfilling prophecy for many and, therefore, it’s all too hard?  Or is it that we have bought into the three B’s mantra (Boat, Bach and BMW) and simply stop at a comfortable point?  Has the Reserve Bank’s capital adequacy rules stifled investment funding? And of those SME owners seeking growth funding, are they forced to leverage the family home for lack of alternative financing options therefore reducing their risk appetite. And importantly, is Government interested in resourcing this sector with growth enabling initiatives?

So, together with Chris Simmons, their friend and colleague from the 2009 NZ Entrepreneurial Summit, they decided to start The New Zealand SME Business Network.  The founding motivation was (and still is) to develop an active Group of SME owner / managers from whom practical ideas can be generated to better understand & address some of these issues. This differs to past approaches in that it is not an academic exercise.

Over the past five months (the Group was started in December 2011 and now has circa 750 members) it has become very apparent that members of this network have a wealth of experience & abundant ideas to stimulate New Zealand’s sluggish economy.  Something Powell describes as a “Network-of-Influence”.

When probed further, Powell says, “The discussion threads have been intelligent, insightful and, occasionally, inspirational.  And, advantageously, it has also been apolitical enabling everyone to have a voice.  This is something that has been lacking in the SME community for too long”.

“What we desperately need is Leadership Thinking, which small business owners have traditionally abrogated to consultant advisors, Politicians & Government Officials”, says Powell.  “The prime objective in developing this Network-of-Influence  is to create ownership of Leadership Thinking by those who can best influence a positive outcome – SME owner / managers; not the Government”.

Hunter, Powell and Simmons have a disarmingly simple thesis, which reads like a strategic plan drafted by successful entrepreneurs – it is clear, simple and easily executable.

In simple terms it advocates that practical, hands-on, small business owners are in a significant position of influence. Their collective commentary and contribution to the Linked In (social media group) discussion threads speaks volumes in quantity and quality of ideas to jump-step the NZ economy.

While discussions have mostly focused on economic growth, the founders go to some lengths to argue that the SME community offers much more to New Zealand’s future prosperity then just creating a business to make a profit.

Powell cites a recent article in Forbes magazine that talked about the new ethos that is emerging to take the tenets of corporate social responsibility to the so-called “little guy”, as an increasing number of small businesses integrate a mission of social impact into their profit motives.

“In essence Forbes was talking about Impact Investing – those investments based on the practice of assessing not only financial returns, but also the social & environmental impacts. An impact investor seeks to create social good or improve the health of the environment, as well as achieve financial returns”, says Powell.

“The SME economy is now gaining an optic throughout the world. While America’s media focus remains on Wall Street, it is the small businesses on Main Street that may yet win the medals of valor in the US war on economic recovery. And it won’t happen without an equally positive social impact; ditto in New Zealand & elsewhere”, he says.

Powell, an experienced builder of multi-disciplined teams, see’s significant economic and social upside for New Zealand by harnessing the potential Leadership Thinking lying dormant within the cultural diversity of the SME ownership group.  “The heterogeneity among SME owner / managers, with their different ethnic, religious & educational backgrounds, is not dissimilar to a multi-disciplined team whose diversity often enables them to solve problems or execute plans more effectively than that of their homogenous counterparts”, he says.

“This diversity could contribute to a powerful source of Leadership Thinking which, if captured & executed appropriately, could change New Zealand’s economic landscape and with it, also make a positive social impact on our country”, says Powell.

Tenby Powell is the co-Founder & Director of Hunter Powell Investment Partners. He is Chair of ENVOY360, Hunter Powell’s latest start-up, Chair of Waikato Link (the commercialization company of the University of Waikato), a Director of Antarctica New Zealand (a Government entity) and a Trustee of the Auckland Rescue Helicopter Trust (Westpac Rescue Helicopter).  

Beating the Stats in a Complex Start-up Environment

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We are in month seven of a business start-up.  All things being equal, we are therefore only 29 months away from failure, according to most statistics.

Statistics New Zealand tells me 53 percent of SME enterprises fail within 36 months. Research suggests that “difficulties associated with poor financial management” is the reason two-thirds of businesses collapse.

Other countries like the US, Canada, and Australia range from 8 out of 10 new businesses failing within the first five years, to 80 percent failing within three years, and, alarmingly, eighty percent failing in year one.  Either way, it seems that 80 percent of start-up’s will fail sometime in the first five years.

Recent data released by Statistics Canada show that 145,000 new businesses start up each year and 137,000 declare bankruptcy each year.  That’s an annualized net gain of 5.6 percent – aka 94.4 percent failure.

And of real interest to SME owners is a Dun & Bradstreet report that shows businesses with fewer than 20 employees have only a 37 percent chance of surviving four years.

So other than running head long into the gale force hurricane of start-up statistics, Envoy360 has myriad other quirks too.  It’s a maritime risk management and security company and therefore operates in the world’s high risk zones: East and West Coast Africa, The Red Sea, Arabian Gulf, Somali Basin,  Gulf of Aden, and, nowadays, the wider Indian Ocean due to pirates having an increased range and operational sustainability to launch piracy operations from large mother-ships.

This particular start-up needed considerable legal and administrative forward-loading to ensure we were wholly compliant, legally and ethically, with various international and flag-state conventions and legislation, including compliance with maritime law, before we could start operating.

We only recruit ex-Tier One Special Forces and they aren’t quite as plentiful as sales reps, and we are now operating out of multiple countries in the Middle East and Asia concurrently.

Statistics, it seems, are very much against us. Any Banker will tell me this; many have and not for the first time.  It’s familiar territory having bankers and accountants tell me what will and won’t work.

This is of course why they do jobs of that nature and I choose to be an entrepreneur; in this case purposefully mixing a new business venture with 27 years of military service.   Many of the doubters are concerned friends, or close professional associates, but I’d rather have my tongue hammered flat on an anvil than be an accountant; I’m sure they feel the same.

The difference between us is of course a strength.  I’d encourage all SME Owner / Managers to develop their relationship with banking and accounting professionals, many of whom bring an important, albeit conservative, perspective to those who lack good financial skills.  Remember, statistics say two-thirds of business collapse is due to difficulties associated with poor financial management.

Which leads me to Paul Graham’s (of Y Combinator) Start-Up Curve.  It’s brilliant.  And it’s been developed by someone who knows about start-up’s.  Mr Graham is obviously a serial entrepreneur and a risk taker.

 

While there is no time scale on the X axis, when I apply it to our new business, Envoy360, we are in very good shape given the company was incorporated, in Dubai, in Aug 2011.  We are only 7 months old and we are defying statistics – at the moment anyway.

My pick is that we are well clear of the Trough of Sorrow.  It was awful to see grown men, all with military backgrounds, cry, but hey, we hugged our way through it.  We may still be experiencing the odd Wiggle of False Hope but in the main we are tracking on a clear bearing towards The Promised Land.  And the reality about Wiggles of False Hope is that every business, start-up or mature, will pursue some opportunities that just don’t come off.  That’s life.

We were determined not to fall into the Crash of Ineptitude trap – couldn’t afford to actually given the nature of the business – so we conducted considerable customer research into what shipping companies, insurance brokers and international logistics firms actually wanted.  And this is exactly what we give them – at the highest of International levels according to our latest series of audits.

So after seven months, some of which was spent crawling through our own little Trough of Sorrow, we can take heart in the fact that we are tracking in the right direction . . . towards The Acquisition of Liquidity aka positive operating cash flow.

Importantly, Paul Graham’s model recognizes the importance of exit / succession planning by leaving some Upside for Buyer.  Strategically we entered this sector as our research showed there will be significant Mergers and Acquisition (M & A) activity over the next three years.

Our vision is for Envoy360 to grow generically in some areas, and through M & A in others, to create a globally respected risk management and security company.

All we need to do now is defy start-up statistics.

Tenby Powell is Chairman of ENVOY360 FZ LLC and a Director of Hunter Powell Investment Partners. He is also Chair of Waikato Link (the commercialization company of the University of Waikato), a Director of Antarctica New Zealand (a Government entity) and a Trustee of the Auckland Rescue Helicopter Trust (Westpac Rescue Helicopter). 

The Iron Lady lifted the UK economically by focusing on SME performance.

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  We can do it in New Zealand too!

Since the publication of the Bolton Report in 1971 the contribution of small and medium-sized enterprises (SME’s) to economic growth, job creation, innovation and promotion of enterprise has been widely recognised in the developed world. While SME’s are important in terms of their overall share of GDP, it is also acknowledged that many smaller firms lack the managerial and technical skills, which inhibits their effectiveness.

In the first four years of the first Thatcher government, more than one hundred SME-related policies were introduced (Beesley and Wilson, 1984). And the Competitiveness White Papers published during the 1990s acknowledged that small firms, particularly those that were growing rapidly, could make important contributions to competitiveness (Johnson et al., 2000).

So – in October 2011, we started a Linked In Group called the New Zealand SME Networking Group. The Group was formed in recognition of the fact that 97% of all NZ businesses are SME’s (employing 19 or fewer people), yet we get very limited support despite the positive economic impact this sector could have on New Zealand.

Our objective is to provide support, in the form of practical initiatives, to SME Business owners by those who have successfully grown SME’s here & abroad.

It is our intention to form a working party to draft a White Paper for Government, in cooperation with the Minister of Small Business and Associate Minister of Commerce, Hon. John Banks, who has already been very supportive.  Following a recent meeting with Banksie, he has offered the full resources of his electoral office as a secretariat.

Banksie clearly demonstrated to Sharon Hunter and I that he understands SME’s; he has been in business for 40 years, mostly in parallel to his political career, and implicitly understands the issues at a practical level. He cited a number of examples where established businesses, some with many decades of trading history, are in real trouble and the long awaited economic recovery, that faint glimmer on the horizon, may be too little, too late when it finally comes.

While it is our intention to work constructively with Government, we are not waiting for help in any form. And, after talking to Banskie over lunch (which he paid for, btw) we are convinced that by pooling ideas from the SME Group, together with other business leaders, including the Minister and his team, we should be able to generate a range of practical growth initiatives to stimulate our SME businesses and, at a macro level, our country economically.

We now have over 350 members, many of whom are successful entrepreneurs or senior corporate managers who have generously pledged pro bono time to work on developing initiatives to lift NZ’s SME performance.  Many are KEA members – Kiwi Entrepreneurs Abroad who are highly motivated to see New Zealand lift out of the doldrums.

We will keep you updated both here, on our web site, and in the New Zealand SME Networking (Linked In) Group on progress.

Next week we will release a short study done by one of our members, Steve Norrie, Director of Streetwise Consulting Ltd.  Steve has addressed a major issue, bank lending to SME’s.  SME’s depend heavily on access to capital from their bankers.  Banks repeatedly claim that they are continuing to support Kiwi businesses, but the facts say something different.

Please join The Group on Linked in¨ http://www.linkedin.com/groups?gid=4202444&trk=myg_ugrp_ovr

Tenby Powell is a Director of Hunter Powell Investment Partners