Introduction to small businesses in Aotearoa

This is the first module in the programme. It’s called Small Business Fundamentals.

The module has been created to:

• introduce a range of business management theories, common business activities, small business structures, and relevant legislation
• equip you with the skills to produce a business model concept.

By the end of this module, you’ll be able to produce a business model concept that includes:

• the purpose of the business
• the product or service offering
• the market
• the business structure.

Assessment outline

To finish this module you need to complete two assessments:

SBE01A1: Business purpose and value proposition. You will need to:

1. Clearly define the purpose or purposes of your small business and its value proposition.

SBE01A2: Market analysis and business structure. You will need to:

1. Conduct a market analysis to refine and validate your value proposition.
2. Determine the most suitable business structure for your business.

Go to the assessment pages now and read the full assessment requirements.

So... what is a small business, and what can you expect from the process of setting up and running one?

In this first topic we’ll answer these questions and point you in the direction of information sources and support mechanisms for small businesses in Aotearoa. This will give you a good foundation to move forward from, so let’s get started!

Aotearoa and small businesses

Aotearoa New Zealand has a long tradition of people who innovate and start or build businesses based on their ideas. Aotearoa is seen as one of the easiest places in the world to run a business (New Zealand Trade and Enterprise, 2023).

Our country has a strong tradition of small businesses across a range of industries.

“Small businesses are the lifeblood of the New Zealand economy and the backbone of our communities. From our sole-traders to the next high-tech innovative start-up, small businesses provide the drive that keeps New Zealand growing. The contribution that small businesses make to inclusive and sustainable growth for New Zealand should not be under-estimated.” (Small Business Council NZ, 2019)

A small business is generally defined as having fewer than 20 employees, although there is no official definition. In 2022, 97% of businesses in New Zealand were small businesses and 29% of all employees were employed by small businesses.

Defining products and services

A business provides either a product or service to customers, or both. Products are tangible items that you purchase. These items can be used or consumed after purchase, such as food, appliances and tools. On the other hand, services are intangible. Services are the results of the outputs of individuals, such as personal training sessions to help you reach your fitness goal, legal advice, or accountancy services to prepare your end of year financial reports.

A car is a product, whereas performing a warrant of fitness (WOF) inspection is a service.

Products or services may be targeted to individual customers, or to other businesses. A business that provides goods or services to other businesses is sometimes referred to as B2B (business to business) operation. A business that provides office cleaning services is an example of a B2B.

Whether you choose to provide a product, a service or both, there are a number of factors to consider. You will explore these throughout this programme.

Why start a small business?

There are benefits to owning your own business, like the freedom to structure your work in a way that suits you. There are also challenges such as dealing with uncertainty. Either way, starting your own business can be exciting and comes with plenty of learning opportunities. If you don’t mind taking calculated risks and have confidence in your own ability, starting a business could be well-suited to your personality.

When we talk about a small business, this could be a “side hustle” or sideline, your main source of income, or something that you want to grow into a larger enterprise. All of these are valid and valuable small business models.

There are a number of reasons why you might want to start your own small business. This might be because it lets you be more flexible and comes with the satisfaction of creating and nurturing something of your own. Or you may have seen a market for something you’ve been doing as a hobby or a new idea you’ve had.

Alternatively, your main reason may be that you want to make a difference, perhaps for your local community, or for as many people as possible. If this is you, read the following article.

The article emphasises that businesses can be profitable while making a positive impact. It suggests focusing on a societal issue, creating a sustainable business model, and balancing purpose with profit. It also discusses ways businesses can contribute, like donating profits or introducing innovative solutions, and stresses the importance of research to ensure success.

Questions to ask yourself

The Business.govt.nz website poses these questions to prospective business owners who are just getting started:

• Do you have what it takes?
• How good is your business idea?
• Will it solve a problem or fill a need?

How good is your business idea?

“There can be big differences between a good idea and an idea that will be strong enough to build a business from. Often the most commercially successful ideas are the simple ones, like identifying a gap in the market that can be filled with a new product or service or adapting and improving an existing business idea.

Take time to assess your business idea before you leave your job, borrow money, or make big changes to your life.” (Ministry of Business, Innovation & Employment, 2023)

Will it solve a problem or fill a need?

A successful business idea is one that solves a problem or fills an unmet need. If your idea doesn’t do either of these things, come up with another idea. If it does, consider the scale of the problem. It needs to be big enough to convince people that they’d rather buy your product or service than put up with the problem.

Craig Jackson, from Dr Feelgood, says “You need to be totally sure of your product and to make sure you’ve [got] a market… It’s really important to ask, ‘do people want your product?’ and then ‘are there enough of them to buy it?’”

Information and support for small businesses

The New Zealand government offers a range of support to small businesses in the form of resources, tools and grants. These will be discussed in more detail as you make your way through this programme. In the meantime, read New Zealand’s support for small business and note down those support initiatives that you think may help you and your business.

In addition, there are many sources of information for those starting a new business in Aotearoa. Below is a brief summary of a few key sources that we’ll expand on later.

New Zealand government support resources

• Hīkina Whakatutuki Ministry of Business, Innovation and Employment (MBIE) is the Government’s lead agency that supports businesses.
• Business.govt.nz makes business easier by packaging advice from across government and the private sector into tools and resources designed to meet the needs of small businesses. This short video (1:50 minutes) outlines Business.govt.nz can help you: Business.govt.nz - Make business easier
• The Regional Business Partner Network is a gateway that connects you to the right advice, people and resources. RBP Network consists of 14 regional growth agencies throughout the country. This means you’ll get support from people who live and work in your region.
• Other government departments that small businesses deal with regularly include:
  • Accident Compensation Corporation (ACC) – responsible for prevention, care and recovery after injury.
  • Te Mana Ārai o Aotearoa New Zealand Customs Service – responsible for promoting Aotearoa’s international trade and enforcing import and export restrictions.
  • Te Tari Taake Inland Revenue (IRD) – responsible for collecting revenue to run government programmes.
  • Manatū Ahu Matua Ministry for Primary Industries (MPI) – responsible for supporting the primary sector, improving productivity, exporting more, protecting food safety, and protecting Aotearoa from biological risk.
  • Te Taurapa Tūhono New Zealand Trade and Enterprise (NZTE) – responsible for supporting businesses to export their products internationally and connect international investors with New Zealand businesses.
  • Te Puni Kōkiri – Aotearoa’s Ministry for Māori Development is responsible for developing policy and implementing programmes to support Māori wellbeing and development.
  • Mahi Haumaru Aotearoa WorkSafe – responsible for health and safety monitoring in the workplace.

Specialist advisors

Running a business is a complex undertaking. As we learned earlier “You may have to be company CEO, bookkeeper, sales team and cleaner until you hire specialist staff or advisors” (Ministry of Business, Innovation & Employment, 2023). When you are in a position to engage specialists, consider the following as a good place to start unless you are already highly skilled in these areas:

• Accountants can help with financial planning and management and know accounting law and regulations you need to abide by.
• Lawyers can help with general and industry-specific legal and compliance requirements.
• Business advisors can review the business operations and assist with the business development. These advisors should know something about the industry or type of business you want to run.  Ideally, they should know you as a person as well.

You might also want to engage a marketing specialist to help with marketing planning, activities and the use of social media platforms.

Industry and trade associations

Industry or trade associations are organisations whose members are involved in a particular business or trade, such as retail and wholesale, fabrics, foodstuff, and transportation. These associations support their members by providing services such as training and networking opportunities.

Small Business Essentials Level 4

This programme of study is an investment in you. By developing your skills and knowledge you are investing in yourself, and ultimately in your business too.

The programme exists to help you make sense of the huge amount of information about business setup and management that is out there. We’ll guide you through the key stages of starting and running your business, following a proven path that is underpinned by theory and robust business practice.

Stick with it and you’ll find that by the end you will have started your business and be confident in your ability to manage it.

Mentors

A mentor is an experienced person who assists others (“mentees”) to develop specific skills and knowledge that enhance their professional and personal growth.

Business Mentors New Zealand is an independent not-for-profit organisation that partners small business owners with experienced mentors in their location. You might like to consider signing up for a mentor once you’ve completed this programme.

You can find more information on the Business Mentors New Zealand website.

Your wellbeing

Like with any risk we take or challenge we face, stress or anxiety can be a factor. Your wellbeing is important, not just for you, but for your whānau, and for your business too. Being in a good “headspace” means you’re likely to make better decisions and are better able to support staff and deal with challenges that arise.

Watch: Looking after yourself is good for business (3:24 minutes)

Watch the following video where Psychologist John Eatwell explains what “headspace” means and why it matters.

Pre-watch question: Why is it important to look after yourself, especially when running a business?

Post-watch questions: 

1. How do you currently prioritise self-care in your life, especially in a work context?
2. What are some specific actions you can take to improve your mental and emotional well-being based on the video's advice?
3. How do you think your business or work performance could benefit from better self-care practices?

Optionally, watch the two other videos in this series, which describe a few simple things you can do to keep performing at your best.

• Look after yourself mentally (5:35 minutes)
• Look after yourself physically (5:51 minutes)

Business.govt.nz has plenty of resources relating to taking care of your wellbeing while in business, which you can find here: Mental health and wellbeing support.

Now take a moment to think:

• What are some strategies that help keep you in a good headspace?
  • These could be things you’ve just learned about from the resources in this subtopic, or things that have worked for you in the past.
• How could you implement some of these strategies so that they become part of your business routine? For example, always scheduling time in a mentoring session to discuss your own headspace.

So what do we mean when we talk about “the law”?

“There are two main sources of law: statutes (the laws passed by Parliament) and 'the common law'.” (Courts of New Zealand, no date) Common law, also referred to as case law, is law created by judicial decisions (decisions made by judges) from previous cases that have been brought before the courts (Wikipedia contributors, 2023b).

Legislation in Aotearoa

In this programme we are interested in the first of these two sources: the statutes, along with their related legal documents. We use the term legislation to mean “the whole or a part of an Act or any secondary legislation” (Legislation Act 2019, 2023)

In Aotearoa, legislation consists of two main types: Acts and secondary legislation (About legislation, no date). Secondary legislation is created under empowering Acts, with Parliament delegating the authority to do so. Secondary legislation usually has one of the follow statements in its title:

• “regulations”
• “rules”
• “Orders in Council”.

The following website hosts all Acts and secondary legislation created by the Parliamentary Counsel Office: https://www.legislation.govt.nz/

This is an extremely useful website that you’ll probably come back to time and again throughout your career so you might want to bookmark it.

To find secondary legislation, view the relevant Act at https://legislation.govt.nz and then click the “Secondary legislation” tab near the top of the page.

Throughout this programme, key legislation will be introduced where relevant. You may need to use the information above to find more legislation relevant to your business or industry.

Complying with legislation

Many aspects of business operations require you to comply with legislation. Here are some examples:

• The requirement to provide a safe place of work for you, your employees, and others who visit the site (Health and Safety at Work Act 2015).
• The requirement to provide staff with paid breaks after they have worked a certain number of hours (Employment Relations Act 2000).
• The requirement to pay income tax (Income Tax Act 2007).
• The requirement to provide paid annual leave after a certain period of continuous employment (Holidays Act 2003).
• The requirement to automatically enrol a new employee who meets certain requirements into KiwiSaver (KiwiSaver Act 2006).

When trying to find information about the compliance obligations of your business, you might like to start with Compliance Matters.

Compliance Matters allows you to search for compliance requirements relevant to different aspects of your business. This may come in handy when you are completing your assessments.

Mentors who know your industry and organisations that represent your industry or sector can also be a valuable source of information about legislation. This is especially the case when new legislation is being introduced or amended. Sometimes industry associations run special events to help members understand what they need to do to comply.

Complying with contracts

If you're planning to buy a franchise, bid for an agency agreement or licence a product or service, it's important to follow the terms of the contract and the policies of the master franchisor or corporation you're joining. Similarly, if you're setting up a business to import and supply products from overseas, you might be required to comply with specific policies like selling your product only in a particular geographic area.

Make sure you understand your obligations and the obligations of the other party before signing a contract. It's always a good idea to seek professional legal advice when reviewing contracts and assessing potential risks to your business or yourself as a business person.

Record-keeping

Sound and systematic record-keeping is a vital requirement for any organisation. This means you need to maintain and systematically store important documents, data and other information, securely. You should be able to retrieve them quickly when needed.

Records can include:

• Legal documents such as partnership agreements, contracts, and leases.
• Personnel records such as length of employment, hours worked and leave balances.
• Health and safety records such as hazards, risks and near-misses that have occurred in the workplace.
• Financial records such as wages paid, taxes paid, superannuation contributions, and profit and loss statements.

While it’s not essential for compliance reasons, you might find it useful to keep links to government policies that affect all businesses, and those that are specific to your business, in one central place.

We’ll dive deeper into record-keeping practices later in this module.

You’ve reached the end of Topic 1.

Let’s take a moment to recap what we’ve learned so far:

The following topics introduce you to core principles, concepts, and practices related to different aspects of your business, including financial management, business operations, products and services, business brands and target markets.