Staying upbeat despite the global gloom

Seventy percent of respondents in the last ANZ Privately-Owned Business Barometer, released in June 2008 , said they were pessimistic about the economy as a whole.

About the same number were optimistic about their own business performance for the next 12 months.

ANZ director capital solutions  Hamish Bell says good companies with good management teams can still find capital to fund growth.

“It is more expensive, however, because the global cost of funds has gone up, so they may have to reconsider their timing.

“Rather than go for a stepchange, owners are looking for organic growth. [They’re looking for] new product lines, more marketing, an incremental ‘steady as she goes’ that can be funded out of cashflow.”

Matt McKendry, a partner at business consultancy Deloitte, says businesses must prepare more rigorously.

“Banks are looking at risk everywhere, so a greater degree of analysis is needed, particularly around possible business scenarios.

“You need crystal-clear analysis of your market. You must know more about it than the bank does.”

Help is available

For Mark Robotham, general manager of the Escalator Service, helping businesses get ready for investment is a business in itself.

The Escalator programme is a partnership between the Economic Development Association of New Zealand (EDANZ), and business advisors Deloitte New Zealand, I Grow New Zealand, Ignition Partner and Frontier Group.

New Zealand Trade and Enterprise (NZTE) provides support.

Escalator offers businesses three levels of assistance.

The first is educating business owners on how to raise capital finance. This  includes seminars on vital skills like making the power pitch.

The next stage is to offer an investment-ready needs assessment. This examines whether a business is able to go to the next stage.

“We put several thousand dollars worth of professional services into the business, no strings attached, to see if it has what it takes to get through to the next stage,” Robotham says.

The third stage gets hands-on with a deal broker, preparing the business and negotiating with selected investors.

Companies pay a success fee once a deal has gone through.

Escalator receives around 350 applications a year.

Annually, it provides specialist advice to 200 businesses, prepares 62 firms for potential deals and aims to raise $20 million from the private sector.

Positive outlook

Mark Robotham is upbeat about prospects for many New Zealand companies in the current climate.

Tough times can provide great opportunities for companies with great value propositions that offer significant efficiency gains for their clients, he says.
 
“People focusing on niche markets, and who know where the dollars and cents add up, can grow their businesses.

“It’s the three ‘Bs’ people that are under pressure: those in it for the Beemer, the boat and the bach.

“[In current conditions] marginal firms will go under,” says Robotham.

“We’re already seeing businesses without clear financing strategies going into receivership. They’ve left their run too late.

“But good companies will always hold their heads up.”

He believes it is vital to get access to good advice – whether from an advisory group or from professionals with an outside view of the company.

“Advisory groups can give you huge power at very little cost.

“A lot of people are also not getting good value out of their professional advisors.

“Either they’re not asking the right questions, or they are asking the wrong person.

“There are too many ‘rear vision’ accountants, not using finance as a tool to grow the business. You can only do that by being in touch with the business.”

Matt McKendry suggests talking to lawyers and accountants about other sources of investment.

“In difficult times, people with money, make money,” he says.

“You can get to them through lawyers and accountants. People are looking for businesses with growth potential. They might be smaller deals but they can bring skills as well as finance.”