Some of the challenges of starting/running a small business.

I was living in Russell (Bay of Islands) 2017 – 2021. Had a lovely home with three units that could be on Air BnB – but still doing work in Auckland.

During that time the most phenomenal property became available at the high point of Russell – 400m oceanside of Flagstaff and 10 hectares with 360 degree views. It had five cabins that could sleep 8 in each, a kitchen, very good bathrooms and a large learning centre space.

We (myself and my wife at the time) created a business called “Bay-Light” and set about bringing school groups to the area to learn about the hub of NZ history.

The business took off in 2019 and we went from leasing the property to purchasing – via a bank. We had HUGE plans.

The property somehow came with a smalls arts business in Russell called Wood2Water and we purchased the Russell Booking and Info Centre as a form of vertical integration.

The next part of the story will have obvious threads. Covid came along and the NZ government responded as they saw best. We got through 2020 because, by and large, schools and families could still travel. The complete lack of nuance for Northland meant that when Auckland was locked-down – so was Northland. That the long Auckland lock-down lasted until December 13 2021 killed the Bay-Light business as we lost the bulk of our 2021 revenue – plus could easily see that:

1. Schools would not book for 2022.

2. Grant Robertson’s spend-a-thon was going to drive interest rates up for at least two subsequent years.

We closed the business and sold one of NZ’s beautiful properties. Heart-breaking in a way that many can detail during that time. Speaking in Auckland to those surviving hospitality owners – some look like success stories – but many will tell you that they have spent 15 – 20 years’ worth of life savings just to stay afloat.

What was left in Russell for us was two small businesses. I left the two, and a long marriage, at the beginning of 2022 and, for separation type reasons could have nothing to do with the shops until February 2024 when I took over all management/ownership responsibilities.

Since then – even with an economics/business studies background I have learned a phenomenal amount about the challenges of SME NZ.

When I took over – and saw the books – the previous management had managed to build a debt of $163,000. The worst part of which was $83,000 to IRD. There was also a debt to a single company that was high.

The first step was to attempt to negotiate some relief from IRD as there was social value. The Russell Booking and Info Centre has 40 tourism partners and approx. 25 wholesale suppliers.  Wood2Water is a small arts and craft shop that primarily sells for approx. 50 local artists and 15 wholesale businesses.  The debt never should have developed but for IRD to simply liquidate the businesses would have cost a lot more than they saved.

Depending on who I spoke to at IRD over 8 months of frustration – I either seemed to make progress or – at the extreme – was a accused of trying to create a “phoenix” business (something I had never heard of or considered). I eventually found a very good person and we negotiated relief from penalties (not from genuine tax owed) and a payment plan that we have now met for two years.

One of my observations from this experience is that bigger businesses attempt to canabalise smaller ones and squeeze every margin that they can. The biggest business strains have been with two large corporations who simply chose to not understand the challenges – especially re post covid tourism. One – Explore Group/Fullers – ultimately came around and we have build a good relationship. The other, Entrada/Northland Ferries, has been a nightmare and the cost of their ferries for people coming to Russell continues to be a significant barrier to tourism and a form of exploitation on local people who have few options.

Having good staff is crucially important. At Wood2Water over the last two years I have had two very good people who have developed the business into a thing of beauty and relate so very well to domestic and international tourists and the local community.

Not all staffing has gone well at the Russell Booking Centre with one gentleman helping himself to approx. $20k with a tardy police response making any redress impossible.

Fortunately – over the last four months I have found the ideal manager for this business who is doing as well for that unit as the people are in Wood2Water.

The point of the story … I have no doubt that many aspects here are a shared experience for SME owners across NZ. SME’s account for 95% of NZ businesses and 25% of employment. One huge aspect of our economic issues is that the percentage of spending in NZ reliant on government is now 43% (try and take that in) and our tax burden/GDP at 35% is well above succeeding countries such as Ireland, USA, Australia, Singapore. The NZ government sector significantly “crowds-out” the private sector.

Small changes could mean a great deal as many SME’s truly work in the margin. Two with regards to taxation could be:

– early and assistive intervention from IRD when any form of tax debt begins to rise. Penalties truly are the killer and are completely ineffective if a business simply cannot pay – plus they can rise incredibly fast. Many current liquidations are occurring due to this burden.

– when a problem has developed a medium/long term view is better for the business and the country’s fiscal outlook than the IRD bring the ultimatums. It should not be an aggressive contest.

– if a business does not meet a $60k revenue threshold then they do not have to register to pay GST. A much more helpful policy for be for all SME’s to be able to claim a GST rebate on their first $60k of revenue. It may not seem like much at $9k per annum – but there are times during the year (especially in tourist areas) where that is a fortune.

I am delighted to employ five good people in the Bay of Islands. I am also delighted to be a part of supporting 130 business from small to more significant ways. The businesses are approximately 2 years away from being debt free – and there is scope for expansion on the way. We will get there. For me it is something of a hobby business … for those that absolutely rely on their one small business for their lively hood … we need to work things out better.

Alwyn.poole@gmail.com

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