New Zealand study finds mid-sized businesses not performing

Capital investment in mid-sized businesses is also low – they have a similar equity to assets ratio as small businesses.

Despite their significant contribution to the economy, a New Zealand study released today has found our mid-sized businesses are not performing as well as their counterparts overseas.

Conducted by Grant Thornton New Zealand, the research focusses solely on New Zealand’s mid-market. It found over the past decade, the number of mid-sized businesses has grown at a faster rate than small businesses, have more chance of survival and contributed $35 billion to GDP in 2017. However, it also found, while mid-sized businesses are outperforming both small businesses and large enterprises in employment growth, they fall behind when it comes to productivity and profit growth. Capital investment in mid-sized businesses is also low – they have a similar equity to assets ratio as small businesses.

Stacey Davies, Business Advisory Services Partner at Grant Thornton New Zealand says, “The mid-market is an important part of our economy, but it’s often overlooked as we focus on getting small businesses off the ground and celebrating the success of larger ones.“If mid-sized businesses’ view of the world is not articulated in New Zealand’s business and economic conversations, their needs won’t be met and opportunities for not only those businesses, but a significant portion of the population, will be missed.”The study found 76% of mid-sized businesses requesting financing in 2018 favored debt financing while only 9% of all mid-sized businesses requested equity financing.

“Having put the hard yards in to build their businesses, owners are reluctant to give up a share of ownership to an investor, however, in many cases it’s necessary to achieve meaningful growth,” says Davies.

Mid-sized businesses are also falling well behind when it comes to operating internationally. The study found about 27% of mid-sized businesses exported products or services in 2018, and only 1.9% reported having international operations. By comparison, 46% of German, 29% of the UK and approximately 33% of Australian mid-sized businesses have international operations.

The report recommends that mid-sized businesses develop a voice of their own, beginning with the Government determining an official New Zealand-based definition for a mid-sized business. Once a sharper definition is in place, why the best mid-sized businesses succeed can be identified and programs developed to stimulate or accelerate mid-sized business growth.