Data analysis.q1 48 final3

NEW ZEALAND BUSINESS ASSESSMENT

Data Analysis REPORT

Josh Forde September 2010

BUSINESS ASSESSMENT | Data Analysis Report

NZ Business Assessment Data Analysis 2

Table of Contents

INTRODUCTION ........................................................................................4 Purpose 4 Scope 4 Methodology 4

Expressions of Interest..............................................................................5 PROFILE ....................................................................................................6

Who are the business owners? 6 LEADERSHIP ..............................................................................................8

Question 1. Motivation 8 Question 2. Achievement 8 Question 3. Staffing 9 Question 4. Expertise 9 Question 5. Internal Capabilities 10 Question 6. Decision-‐making 11 Question 7. Shareholder Agreement 11 Question 8. New Ideas 12

PLANNING ..............................................................................................13 Question 9. Business Plan 13 Question 10: Business Plan Review 14

CUSTOMER & MARKET............................................................................15 Question 11: Point of Difference 15 Question 12: Sales Channels 16 Question 13: Selling 16 Question 14: Revenue Stream 17 Question 15: Market Revenue 17 Question 16: market Analysis 19 Question 17: Competition Analysis 19 Question 18: Customer Satisfaction 20 Questions 19-‐22: Growth & Decline 21 Question 22: Customer Relationship 22 Question 23: Suppliers Relationship 22

PRODUCT & PROCESSES..........................................................................23 Question 24: New Products & Services 23



Question 25: Product Development 23 Question 26: Intellectual Property 24

FINANCE & BENCHMARKING...................................................................25 Question 27: Performance Reports 25 Question 28: Performance Tracking 25 Question 29: External Comparison 27 Question 30: Business Issues 27 Question 31: Contingencies 28 Question 32: Employees 28

PLANNING & DOCUMENTATION .............................................................29 Question 33: Training & Development 29 Question 34: Contingency Plans 29 Question 35: Documentation 30 Question 36: Staff Issues 30 Question 37: Business Process 31 Question 38: Process & Product Development 31 Question 39: Consultation 32 Question 40: Risk Management 33 Question 41: Disaster Recovery 34 Question 47: Staff FTE 35 Question 48: Export Status 36

Appendix A : Questions not analysed......................................................37



INTRODUCTION

Purpose The purpose of this analysis is to investigate data collected by the Business Assessment

Tool up to end April 2010 such that:

The meaning of New Zealand SME Business Capability data captured can be

communicated

The most valuable questions may be retained or represented in the Business

Capability Platform.

Options for data analysis, presentation and packaging may be explored

Results may be released in a targeted and/or gradual strategy to assist Capability NZ

to provide data on SME practices in New Zealand.

Scope This report covers all the data in a two dimensional manner. It is an initial broad analysis

as a precursor to cross-‐tabulations and more detailed investigation.

Methodology Data was collected from business owners using the Business Assessment Tool from

inception until the end of April 2010.

The tool is an online survey, located at businessassessment.co.nz. The data set consists of

all answers submitted through the Business Assessment Tool by business owners

responding either by invitation from Business Advisors or from finding the site on the Web.

Many of the participants came through the ‘Join the Race’ campaign to promote the tool.

This is the first analysis of the data. Data was contained within the Tool in an encrypted

format and has been extracted for reported here for the first time.



Expressions of Interest

Capability NZ would welcome expressions of interest from any parties with an interest in

SME business capability. A new Business Assessment Tool is in development, in

partnership with New Zealand Trade & Enterprise (NZTE). Feedback to make the

assessment more relevant is invited.

Please contact : Roisin King CEO, (04) 913 1200, [email protected]

Limitations of the data

The intent of the report on data analysis is to give a broad picture of the existing SME

business capability in New Zealand. It is not intended as exhaustive research but gives

insight into the state of real business practices, as perceived by owners and managers.

In some instances, the assessment asks a single-‐answer question where respondents are

able to answer more than once. Thus in some questions data responses sum to more than

100%. These questions are annotated as such.

Statistical bias. Bias may be present in this data as it does not constitute a random

sample. It deals with business owners in New Zealand who have an interest in business

assessment.

Respondents access the survey through a variety of channels, such as:

Web-‐based respondents seeking to improve their business practices

Participants in the Enterprise Training Program, participating to access courses

subsidised by NZTE

Referrals from business advisors, being business owners who seek to improve their

business.



PROFILE

Who are the business owners?

The survey data set contains 4007 unique assessments.

Questions were not mandatory to respond to, thus the set fluctuates. More difficult or

scenario-‐specific questions received low responses however, generally the respondents

engaged with the questions. For most answers n (number of respondents) is between

3500 and 3850

In line with existing data, the majority of SMEs employed 5 people or less. 47% had no

employees.

The business assessment had a wide spread of participation nationwide, particularly

where Regional Partners promoted the assessment in conjunction with ‘Join the Race’

campaign or the Enterprise Training Scheme (‘ETP’) administered by NZTE.

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LEADERSHIP

Question 1. Motivation Which of the following is this business's main motivation for being in operation?

(n=3906)

Almost half of all businesses existed to satisfy the lifestyle goals or interests of the owner.

Only 12% aspired to expand internationally and 2% were setup for sale.

Main motivation for business # %

to satisfy the lifestyle goals or interests of the owner(s) 1,833 47

to provide employment for the owner(s) or their family 1,203 31

to become an international business 453 12

other 321 8

to sell the business 96 2

Total Responses 3,906 100

Question 2. Achievement To what extent has this business consistently achieved the objective in question 1?

(n=3875)

Businesses were normally distributed in their success at achieving their purpose, although

slightly more report full achievement (15%) than none at all (11%)



Question 3. Staffing

What is this business's main vision for its future staffing?

Most businesses expected to grow staff numbers (51%) in the immediate 1-‐2 year term

but 71% over the longer term. Only 2% expected to reduce numbers.

Future staffing numbers less same more n

in the next 1-‐2 years 2% 47% 51% 3,731

In more than 3 years 2% 27% 71% 3,300

Question 4. Expertise

Does this business use external expertise from the following?

(n=3494)

By far the most popular source of external expertise for businesses was financial

advisors/accountants, used by 87% of businesses. Business mentors/advisors were used

by 44% and other specialists by smaller proportions.

It should be noted that there is a selection bias in the population in that the tool is

promoted by businesses advisors, therefore business owners who do receive advice may

be over-‐represented compared to the SME population as a whole.

Source of external expertise # %

financial advisors / accountants 3,026 87

other (e.g. lawyers, bankers) 1,723 49

business advisors / mentors 1,552 44

sales and marketing advisors 834 24

human resources consultants 420 12

independent directors 275 8

efficiency improvement advisors 236 7

export advisors 160 5

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Question 5. Internal Capabilities

Question 5: Does this business have internal people, including the business owner, with

the following?

The most common formal qualifications for businesses are technical/job-‐related while

there is a clear pattern that most expertise to be gained in the workplace. The areas with

no experience include exporting (70%), human resources (24%) and strategic/planning

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Strategic / planning expertise 19% 54% 17% 10% 3835

Sales and marketing expertise 15% 55% 18% 11% 4023

Human resources expertise 24% 56% 12% 7% 3633

Financial expertise 14% 56% 14% 17% 4103

Exporting expertise 70% 23% 4% 2% 3003

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Question 6. Decision-‐making

How are key management decisions made by this business? (n=3881)

Most businesses (54%) rely on a single person for management decisions. 41% used a

management team and few drew in a board (13%) or employees (15%). Very few (3%)

consult with an advisory board.

Note: There is some overlap in the percentages in that respondents have selected more

than one answer.

Question 7. Shareholder Agreement

Does this business have a written shareholder's partnership agreement that includes the

following? (n=3,588)

Most businesses (around 85%) did not have a written shareholders agreement that

includes a procedure for introducing or exiting shareholders or dealing with disputes.

In the shareholder's agreement No Yes

Agreed process for business valuation 85% 15%

Bringing in new shareholders 86% 14% Procedures for dispute resolution among shareholders 83% 17%

Process for exit of shareholders 84% 16%

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Question 8. New Ideas

Which of the following best describes this business's adoption of new ideas?

Most new businesses (71%) constantly seek new ideas. For only 12% idea adoption is a

passive process.

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PLANNING

Question 9. Business Plan

Does this business have a written business plan that includes the following? (3497 < n < 3712)

Written business plans are held by approximately 40% of businesses. These businesses

hold plans for revenue, expenditure, marketing, and cash flow, which are commonly

contained in a plan. 13% of plans include export intentions. Just 25% of business owners

had written plans for business financing / investment.

Between 20% and 30% or respondents had in writing external or internal analysis or

operating targets.

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Question 10: Business Plan Review

How often does this business review its business plan? (n= 3709 )

About half of businesses owners regularly review their business plan (49%). Many

business owners may differ in their definition of a business plan, and may not recognize

their actions as business planning, per se. It is clear that many business owners do not pay

regular attention to their business plan and 35% indicate that they do not review it at all.

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CUSTOMER & MARKET

Question 11: Point of Difference

How do this business's products or services differ from those of its competitors? The majority of respondents are able to articulate the differentiation that their business

offers. Business owners indicate that service and quality are major benefits of their

offering. Only 26% of respondents compete on cheaper price terms. 32% of businesses

trade on the New Zealand made brand.

Method Number Percentage

service is better than competitors 2560 67%

products or services are customised to specific customer requirements 2367 62%

products or services provide additional benefits to customers 2127 55%

products or services are unique 1702 44%

New Zealand made 1231 32%

better availability than competitors' (e.g. bigger range, better distribution) 1060 28%

prices are cheaper than competitors' 983 26%

unsure 280 7%

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Question 12: Sales Channels

How does this business promote its products or services to its customers? (n=3823)

The majority of businesses promote their services face-‐to-‐face. Yet 66% of business

owners also use electronic means of promotion and 61% of business owners advertise

their services.

Question 13: Selling

How does this business sell its products or services to its customers? (n=3774)

Similarly to business promotion methods, 59% of business owners have an electronic

means of selling. 31% use agents or distributors.

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Question 14: Revenue Stream

How many customers are responsible for 80% of this business's revenue? (n=3723)

Many business owners have a diversified client base; 60% have more than 10 customers.

7% of businesses have just one customer.

Question 15: Market Revenue

Estimate the percentages of this business's revenue currently obtained from the following markets: Business revenues are dominated in influence by their local areas. 69% of business owners

get more than 75% of their revenue from local markets.

Few business owners have a significant share of earnings from international markets. But

many have some level of export. 18% of respondents indicated a business with some

export revenue (i.e. >0%) but many responses were in the 1-‐5% range.

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1 - 25% 26 - 50% 51 - 75% 76 - 99% 100% n

Local markets in NZ 14% 9% 8% 18% 51% 3236

Nation-wide market in NZ 50% 22% 10% 11% 6% 1631

Australian market 82% 15% 2% 1% 0% 889

Other overseas markets 60% 17% 10% 10% 3% 1066

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Question 16: market Analysis

How often does this business analyse its target markets? (3124 < n > 3598)

Just 28% of businesses in the assessment analysed their local markets. Given the size of

the local markets to SME businesses, this may indicate a low perceived value in local

analysis or a lack of access to this information and effective tools to carry analysis out.

Almost half of business owners analyse their nation-‐wide and Australian markets.

Question 17: Competition Analysis

To what extent does this business analyse its competition in its target markets? ( 3169 < n > 3648)

Business owners are significantly more likely to analyse their competition than their

markets, but it is rare that any formal analysis is used (3-‐6%). 67% of businesses use

informal means of analysis with competitors in local markets.

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Question 18: Customer Satisfaction

How does this business measure customer satisfaction? Few business owners have formal measures of customer satisfaction (7%). Very few

businesses (5%) acknowledge no measures of customer satisfaction. Informal means

dominate which is consistent with face-‐to-‐face businesses who deal directly with

customers.

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Questions 19-‐22: Growth & Decline

60 % of business owners reported that their customer base increased in the previous year.

For the business owners who reported a decrease (12%), they were asked if they know

why customers had decreased.

90 % of business owners knew why their customers had decreased and 81% of them were

taking action because of it.

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Question 22: Customer Relationship

How does this business manage its relationships with key customers? (n = 3755). By far the most prevalent means of managing relationships with customers is

through informal contact (79.5%). 8.3% of business owners use formal contracts to

manage these relationships

Question 23: Suppliers Relationship

How does this business manage its relationships with key suppliers? (n=3516). Businesses are more likely to engage suppliers in formal contract (16.9%) than

with customers (8.3%). Relationships are still generally managed informally with 70.1% of

businesses selecting this. 7.9% of businesses manage supplier relationships through

regular contact.



PRODUCT & PROCESSES

Question 24: New Products & Services

In the last financial year, has this business developed or introduced any new or markedly improved: ( 3380 < n < 3606 )

71% of businesses have introduced new products or services. 57% have introduced new

marketing methods or channels and a similar number have developed managerial,

organizational or operational processes.

Question 25: Product Development

Were any of the products, services, processes or methods referred to in question 24: (n = 3180)

77% of businesses developed new offerings or processes within their own business. 36%

of businesses involved others in partnership and 22% were obtained from others which

resulted in improvements. 13% of businesses used others without significant

improvements.

Note : these answers are not mutually exclusive, therefore there is some cross-‐over in

answers.

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Question 26: Intellectual Property

Which of the following does this business use to protect its ideas, goods or services? (n = 3717 )

44% of businesses took no prescribed steps to protect the intellectual property in their

businesses. 24% of businesses used formal means to protect themselves and 46% used

informal means.

Note : these answers are not mutually exclusive, therefore there is some cross-‐over in

answers.

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FINANCE & BENCHMARKING

Question 27: Performance Reports

How often does this business internally report against performance measures for the following? ( 3480 < n < 3644 )

Businesses were most likely to review revenue, expenditure and profitability targets. The

average scores for this set were 37% of businesses reporting on these at least monthly and

25% reporting less often than monthly.

Lowest scores were for efficiency, sales and marketing targets. Between 58% and 49% of

businesses do not report on these at all.

Question 28: Performance Tracking

How is this business currently tracking against those performance measures? ( 3386 < n < 3539 )

11% of businesses are achieving better than target revenue and 8% report better than

target expenses and profit.

Revenue, profit and new sales are the most likely categories for businesses to be

performing worse than target (average 26% score for these 3 areas).

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The scores for ‘don’t know’ are nearly identical to those who do not report internally on

targets in the pervious question.

Category better than target

meeting target

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Revenue 11% 28% 26% 35% 3539

Profit 8% 25% 29% 38% 3490

Expenditure 8% 37% 17% 38% 3498

Marketing 5% 25% 15% 54% 3393

New sales 8% 21% 22% 49% 3406

Pricing 4% 39% 9% 48% 3407

Efficiency 4% 28% 12% 56% 3386



Question 29: External Comparison

Does this business compare itself against external measures in the following areas? Generally business owners do not compare themselves to external measures of

performance. 20% compare themselves to financial measures and 23% non-‐financial.

Question 30: Business Issues

Does this business have any problems obtaining: (n= 3630, 3684)

26% of businesses have problems with payments within standard terms. 25% of

businesses do not receive payment from 80% of their debtors within 30 days.

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Question 31: Contingencies

Does this business set aside funds that allow for the following? (3542 < n < 3709)

71% of businesses set aside funds to pay all bills on time. 56% of businesses set aside

funds to meet debt obligations. 26% of businesses set aside 3 months of salaries and

wages.

Question 32: Employees

Does this business have any employees? (doesn't include working proprietors) (n=3913). Almost half of businesses owners in the assessment have no employees (49%).

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PLANNING & DOCUMENTATION

Question 33: Training & Development

Does this business have methods in place to identify and meet the training or development of: (n=3920)

It is interesting that business owners have processes for training and development of

employees, with 68% of respondents selecting ‘yes’. This figure is higher than for

management where only 55% of businesses have these methods. If one assumes that

employees are doing the technical work of the business, this may be explained by the

availability of such training and development.

Question 34: Contingency Plans

Does this business have plans in place to prepare for the following? (n=1960)

58% of business owners plan for staff cover, and 43% for changes in seasonal demand

however just 22% plan for key staff leaving. The data appears to indicate solid planning

for anticipated events of the business operation but low levels of preparation for

unanticipated ‘shocks’ that could potentially affect the business. 20% plan for a decrease

in headcount and 28% for the loss of a business owner.

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Question 35: Documentation

Does this business have the following documented for its employees? (n=1994)

Employee documentation of job descriptions and contract are generally completed by

businesses (84% and 79% respectively). However, remuneration and performance are

less-‐often documented; in about half of cases.

Question 36: Staff Issues

Does this business have any problems with: (n=1970)

27% of business owners had problems with recruiting staff and 10% identified problems

with absenteeism. Health and safety and employee grievances were less common, at 4%

and 5% respectively.

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changes headcount for seasonal demand

Key staff leaving flexibility in covering staff roles

Decreases in headcount

Significant Increases in headcount

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Question 37: Business Process

Are this business's work processes: (n=3522)

Many businesses do not document their business processes. 76% of business owners do

believe that relevant employees understand them, although just 55% documented these

processes. 56% of business owners reviewed their processes at least annually.

Question 38: Process & Product Development

How are products or processes developed or improved by this business?

(n=3731)

Many businesses use a single person to develop processes and products (51%). As almost

50% of business owners have no employees, this may be appropriate to their

circumstances, or it might be an indication of management style for SME business owners.

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Note : The table below indicates the data as this question may need revision. Although

the question asks how they mainly improve processes, business owners were permitted to

tick more than one answer, which may distort these results somewhat. The answers are

included for information but this question will be reworded in future Business Assessment

builds.

Attribute Yes No Yes (% of attribute)

Yes (weighted % of yes)

mainly by a single person 1758 1973 47% 51%

mainly by a management team 951 1228 44% 28% mainly by an internal development team

746 806 48% 22%

Grand Total 3455 4007

Question 39: Consultation

Who does this business consult with when developing products and processes? (n = Processes 3174 ; Products 3073)

Approximately half of business owners consult with their employees; 45% on products and

51% on process. External advisors are less common, with 34% and 39% respectively using

them. 60% of businesses consult with customers and suppliers on their products, and 37%

involve them in their processes also.

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Means Processes Products Processes Products

Developed in consultation with customers or suppliers

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Developed in consultation with external advisors

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Developed in consultation with relevant employees

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No consultation undertaken 722 575 23% 19%

n 3174 3073

Question 40: Risk Management

Does this business identify and manage risks associated with the following? (3504 < n <3589)

The below information delves into which elements of business operations risk is identified.

On average 30% of businesses identified risks in a given area and had processes in place to

manage this. An average of 38% of businesses had identified these operational risks but

not established processes. An average of 32% had no risks identified in a given area.

Risks external to the business were least likely to be identified (39%) or have established

processes (39%).

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Question 41: Disaster Recovery

Are all of this business's disaster recovery processes? : Disaster recovery processes are tested regularly in 33% of the businesses surveyed. 30%

of businesses have these processes evaluated for prevention.

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Question 47: Staff FTE

In terms of Full-‐Time Employees (FTE's), how many people worked for this business at the end of the last financial year? (n = 3531)

56% of businesses have one working proprietor. 12% of businesses have more than 2

owners working in the business. 21% of businesses had greater than 5 employees.

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Question 48: Export Status (n = 3999)

60% of businesses are not suitable for exporting at present. 24% of businesses are

interested in exporting but not exporting yet. 16% of businesses are presently exporting

to at least one market.

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Appendix A : Questions not analysed

Question 42 What were this business's results at the end of the last financial year?

Question 43 What are this business's results for the current financial year to date?

Question 44 For how many months do the figures in question 43 apply?

Question 45 In the next financial year, please estimate this business's expected revenue growth? (%)

Question 46 What is the ratio of all assets to all debt (equity)?

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