How to Start a Business in New Zealand - 2022-23 Edition

We outline important tips, resources and must-know facts to give your business the best chance of success

Updated 16 March 2022
COVID-19 has fundamentally changed everything, and in a crisis, many people look for opportunities. Great companies are often founded in dark times, and there is never a wrong time to start a business if you believe in your product or service, and it makes sense economically.

​Know this first: New Zealand is a small country, and the market opportunities are limited compared to the USA, UK and even Australia. TV shows such as Shark Tank and Dragon’s Den don’t work in New Zealand because there aren’t tens or hundreds of millions of people to market to. While the NZ government makes starting a business incredibly easy, getting traction and customers to make your business viable can be a struggle.

Important: Sales (and cash flow) are everything - if you're not comfortable to sell goods or service and then chase up money you're owed, running a business will be near-impossible
A business can have the best product or service, but without customers, it’s pointless. The only problem a business has is a lack of sales. Anything else can be solved (shortage of staff, issues with the product). But sales are everything and a business is nothing without them.

A passion for what your business does is going to make things so much easier
For almost every new business, the owner will work endless hours to get sales and grow the reach of the business. To make it work, you have to have a passion for the product or service you're selling. If your main goal for getting into business is to get rich, things may be more difficult than you think. Valuable businesses take time to build which means you'll need to be patient to turn a profit.

Our guide covers:

Six Business Basics You NEED to Understand First

​Understanding our six important terms, and why they are essential to running a business, will give you the best chance of business success

"Leads"
  • Whatever you’re selling, ‘leads’ mean potential customers who you’re working with to ‘convert’ into sales. For example, if you’re selling home installation or solar panels, a lead is someone who has browsed your website and made contact with you asking for a quote.
  • While food and beverage businesses like cafes and coffee trucks don’t have leads per se (other than customers who walk into the store), for everyone else, leads are the most important relationship to manage in any business.
  • If you’re selling soap online, a lead is someone browsing who adds three bars to their cart but doesn’t check out. Turning a lead into a sale needs persistence and confidence, and an established sales process to underpin it. To know more, look at this comprehensive guide which gives helpful tips you can use to nurture leads and turn them into sales.

"Turnover"
  • Turnover is the total revenue/money your business brings in.

"Cash Flow"
  • Cash flow is defined as the money that goes into and out of a business. Cash flow (or a lack of money coming in) is the #1 cause of business collapses. Getting cash into a business is essential; having product/services in demand, shorter payment terms, reliable customers (who pay) and reducing overhead costs are all ways to help cash flow. 

"Debtors"
  • Debtors are the people who owe you money. For example, you supply coffee to a number of cafes. You send them the coffee and an invoice and they pay you later. It sounds simple, but it is not.
  • It’s a fact of business that your customers will pay late. This isn’t as much of an issue for the likes of restaurants, cafes and shops, but service-based businesses most often send invoices after work is completed and then wait to be paid. Our guide on Chasing Debtors helps get paid as quickly as possible without losing customers or wasting time.

"Secured and Unsecured Creditors"
  • Creditors are people your business owes money to. For example, if you’re a restaurant, your creditors are likely to include the landlord, food suppliers, accountants and alcohol merchant.
  • Secured creditors are organisations who have lent you money but have some rights over your business, such as banks or finance companies. If you don’t pay a secured creditor, they can petition to have your company liquidated (meaning wound up). This is why keeping up to date with your bills is very important.

"Net Profit"
  • Net profit is what is left over after you pay all of your costs. For example, if your business turns over $100,000 and all of your costs add up to $80,000, your net profit is $20,000. If you apply company tax to this, which is charged on the net profit (currently 28%), you are left with $14,400 (as $5,600 is paid as company tax). The long-term aim of your business is to report a net profit.
  • Many businesses aren’t profitable, i.e. Uber, WeWork and, most recently, Air New Zealand, but they continue to trade as the losses are funded by their investors and/or borrowing from banks and other lenders. As a small business, you won’t have access to the borrowing opportunities that big businesses have.
  • This means you’ll need to rely on cash flow to fund your operations. If your sales are less than your costs for a sustained period of time, you’ll run out of money and go bankrupt. Sadly, it's a lack of profit and financing that means 90% of new businesses go bust after five years.

10 Ways to Save Money Running Your Business and Form Great Habits

Setting up a business costs money, but RUNNING it day to day can be even more expensive. If your sales are less than your costs, it will get stressful very quickly. Ultimately, being lean and mean with your expenses from day one gives your business the best chances of success.

Know this: When you’re starting out, it’s tempting to buy everything you (think) you need. The reality is that money will soon be in short supply, and unless you’ve got big investors, your sales need to cover your costs. Our top 10 list of ways to save money from the outset are:
  1. Invest in Xero (or a similar accounting firm) – it costs around $60/month but manages all of your revenue and expenses, so you can see where every dollar goes. You can set up automatic notifications that re-send invoices to clients who haven’t paid you after your due date.  
  2. Don’t overspend on a website – you can build your own using great tools like Weebly, or hire a small business web designer (we have listed some here). Make sure the hosting is good value as well, and you can self-edit your website so you’re 100% in control.
  3. Don’t sign up for subscriptions you don’t need – it’s tempting to get all the latest tools but focus on the essentials and save money.
  4. Be stingy with marketing expenses – Facebook ads and Google ads can cost thousands of dollars a month and deliver very little unless you’re an expert. To learn how to advertise effectively, look at Neil Patel’s guide. The most effective way to bring traffic to your website is to publish useful content. MoneyHub, for example, spends $500/month on advertising but receives well over 200,000 visitors. Advertising can easily suck up your money and leave you with nothing. For guidance about how to create content Google loves, read Brian Dean’s Backlinko guidance.
  5. If you need a car or work vehicle, look at leasing rather than buying. It can save you money upfront and protect you from expenses – our vehicle leasing guide explains more.
  6. If you’re looking for business insurance, compare providers – our guide to business insurance and public liability insurance has you covered.
  7. Business banking is not all the same – many banks offer better deals to attract new customers. Our guide to the best business accounts and credit cards outlines the best offers available right now and everything you need to know.  
  8. Know what’s involved when it comes to screen printing, graphic design and web design before committing to any provider. This way, you’ll know how to negotiate and save money.
  9. Get a business email for around $5 a month with Google. We think Google’s GSuite (formerly known as Google Apps) is the best provider, with simple integration into any domain. It also makes your business look much more professional, i.e. [email protected] is an arguably more professional email address than [email protected]. You pay monthly automatically with a debit or credit card and have access to Google’s support helpline should any problems arise. You can integrate the email into any phone or device just like a Gmail account.

8 Steps to Start a Business in New Zealand

Make sure your idea is viable

Our Product Market Fit guide is a good starting point if you already have a product or service. If you don't, writing a business plan is a good place to start, and the excellent Xero business plan template guide helps you work through the essentials. Still, what’s on paper doesn’t really map on to the real world. To best evaluate your business idea, look at the potential competitors and see how they operate. You’ll need to know as much as possible about the specifics of what you’re operating and where it will be located.

For example, if you’re planning to open a café, spend a day or two making time to count the number of customers who visit other cafes in the area you want to open in. You need to measure footfall to get a reliable estimate of potential customers, as well as count the number of neighbouring parking spaces ascertained. To make an informed decision, you’ll need to know rent costs, the number of competing neighbours (i.e. other cafes), busy times (for staff planning) and countless other factors. Starting a new business takes considerable time and effort, and no decision should be rushed.

Bonus tip: No matter what your business is, an online presence is really important. You’ll want to be as close to #1 on Google as possible with a website.

Essential information: how popular is my business idea?
Before you go ahead, it’s useful to know how many people use Google each month to find a business like the one you’re proposing, and how much competition there is.
  • The Google Adwords tool is free to use – just register and navigate on the ‘search volumes’ functionality, setting the location to ‘New Zealand’. You can then search by any keyword to see the volume. For example, ‘Screen Printing Auckland’ receives between 1,000 to 10,000 searches a month, whereas ‘Chiropractor Tauranga’ gets 100 to 1,000 a month.
  • While this isn’t a science, it does help you plan if you’re planning to start a standard trade or service-based business.
  • This excellent guide explains the entire process in detail.

Have passion, and perseverance will follow
To build a successful business, you need to have sales and passion for what you’re doing. If you’re going into real estate because you think that’s where the money is (but don’t care about homes and property), then it’s probably going to be hard to attract customers. The same applies to cafes – a passion and love for creating atmosphere and great food means you’ll enjoy what you do and strive to be the best. Starting a business to make money as the number one priority is, arguably, tricky to do.

​Choose a business name and register the 'right' domain name for your website

We can’t offer much guidance on how to select a name, or what names are better than others. However, we do suggest making your business name memorable and relevant will help. Once you've come up with a few names, the useful onecheck tool lets you see if the business name, trademark, domain name and social media username are available.

Don’t rush a domain name
We suggest spending a lot of time coming up with a name but don’t overthink it. Before this website was known as MoneyHub, our founding team contemplated names like ‘MoneyWizard’, ‘Wizard of Money’, ‘MoneyMaster’ and other non-starters. While we settled on MoneyHub, we sounded out a number of business names with friends and family. This is a process that shouldn’t be rushed.

Selecting the right domain name (and extension)
  • When it comes to a domain name (i.e. the website address), having a .co.nz (known as an ‘extension’) is better than a .com unless you plan to sell or trade overseas. This is because .co.nz targets New Zealanders and is more identifiable as a local business, rather than a generic .com.
  • MoneyHub’s research team also believes .co.nz works better for ranking in Google than any other domain for like-for-like search terms and underlying websites.
  • We don’t like using hyphens in domain names, as they become hard to explain and write. For example, Money-Hub.co.nz or Auckland-Quality-Blinds.co.nz don’t quite work as well as 'streamlined' domain names.​

Choose a business structure

Know this first - you don’t have to register as a company when you start a business. You can operate your business as a Sole Trader, Partnership or Limited Liability Company. A company offers the most protection, but it might not be necessary, depending on your business needs and plans. We’ve outlined the pros and cons of each business type below:

1. Sole Trader
Pros:
  • Simple to set up, with no registration fees. You invoice your customers either in your name or the name of the business. 
  • No company tax - PAYE is how you pay tax, and you can deduct relevant business-related expenses.

Cons:
  • No limited liability - you'll be liable for all debts if your business fails
  • Harder to raise money, take on business debt and expand

2. Partnership
Pros:
  • Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return.
  • Easy to establish.
  • There is an increased ability to raise funds when there is more than one owner.

Cons:
  • No limited liability - you and your partner will be liable for all debts should your business fail
  • Partnerships aren't as easy to grow as companies if you need to borrow or bring in additional capital. 

3. Limited Liability Company
Pros:
  • No liability for debts (unless personal guarantees are held over your business). Unlike a sole trader or partnership structure, you won’t be liable for the debts. Usually, when a business goes bust, their usual creditors are
  • Professional presence – being called ‘McNeill & Co Plumbing Ltd’ is more professional than being known as ‘Matt McNeill the Plumber’.
  • Easier to raise money and grow (compared to sole trader and partnership structures)

​Cons:
  • More compliance; you’ll have to manage company accounts as well as make your own tax return. There is also an upfront registration fee (around $200) 
  • Be aware that expanding your business using debt will mean you'll need to give personal guarantees. Per this Stuff.co.nz article, the true nature of the personal guarantees on things like bank debt, business contracts, property leases, car leases and even printer leases that have rendered the term "limited liability company" largely meaningless.

Once you've decided the best structure, register your company, partnership or sole trader operation. You can do that here:

Register your trademark

​This is really important to protect your business name. The process is quite straightforward, but you need to get it right from the outset to save time, hassle and money. Once your trademark is accepted, it will be advertised and, if no one objects, it will be approved within about six months. Until then, you can use it as you would as if it has been approved.

But how do trademarks work, and how can you get one? We outline the process below:

Step 1: Decide on your business name and do a search
This will show you if your name is used by another business. It may not matter if it is – what you need to check is the ‘class’ it’s registered under. This is what matters when classifying your business's goods or services, as the IPONZ guide explains. For example, the trademark ‘MoneyHub’ is registered under 'providing online financial information from a computer database or the internet’. The 'class' is basically the area your business operates in. It is daunting to select the most appropriate class for your trademark, given the number of options and many overlaps. To explain it better, let’s work through some examples using the IPONZ tool:

Example 1: Registering a trademark for ‘SmartCat’, a cat GPS tracker for people to know where their cat is.
Our suggestion: Class 9: "GPS navigation device" and related goods and services

Example 2: Registering a trademark for ‘IceBlocka’, a frozen snack aimed at children.  
Our suggestion: Class 30: "frozen confections" and related goods and services

Example 3: Registering a trademark for ‘Farm Fresh Eggs’, a free-range egg company.  
Our suggestion: Class 29: Eggs and related goods and services (such as "hens eggs" and "birds' eggs and egg products")

Please note: The above examples do not constitute legal advice in any form.

Step 2: Register the trademark (or pay a fee for IPONZ to ensure there is no conflict)
Once you’re happy with the class you’ve selected, you can apply for the trademark to be approved ($100) or pay a fee for it to be checked ($50) before you apply. If you’re unsure about your selection, it’s best to pay the checking fee to give you certainty and avoid wasting money.

Step 3 – Wait for confirmation from IPONZ and use the trademark when it is tentatively approved
IPONZ will let you know if they tentatively accept or outrightly reject your trademark application. If they accept it, then you can use it right away. If it’s rejected, you can appeal or apply under a different category or different word.

If you’ve been tentatively accepted, after a few months your trademark will be formally accepted (if there’s no objection) and IPONZ will send you electronic copies of the trademark certificates. You will then need to renew the trademark every ten or so years, which can be done by paying a nominal fee.

Why is this important?
Owning a trademark gives your business a valuable asset which no one can challenge. You won’t have to change your business or product name (unless you want to) and you can use it on your website, marketing, signage and everywhere else without restriction.

Our story: When MoneyHub registered its trademark, we were initially rejected by IPONZ because there was a business called ‘WealthHub’. We appealed the rejection, arguing the names are distinctively different. After reconsideration, we were approved for the use of MoneyHub under "financial advice relating to pension planning", "providing online financial information from a computer database or the internet" and many others. 

But, sometimes the law doesn’t work in your favour, and a legal challenge can be a big hassle. For example, the Australian clothing company Showpo was previously known as 'ShowPony'. After building up a brand and millions of hits on the website, there was a legal challenge over a trademark for the word ShowPony. Ultimately, the clothing company was forced to re-brand. This means getting a new domain name, changing all the clothes tags and re-designing the website and social media channels, among other things. While it didn’t ruin the business, it’s an unnecessary expense and business disruption that can be avoided by registering a trademark right away.

Understand regulations and compliance requirements

​New Zealand, fortunately, doesn’t have a lot of red tape and compliance, so you’ll usually be able to run your business without too much hassle. However, there are some main pieces of legislation to get familiar with, including the Fair Trading Act, Consumer Guarantees Act and food preparation standards governed by the local council. Most businesses will never (knowingly) breach consumer-protection legislation, but being familiar with the basics is a good idea.

​The excellent Compliance Matters resource helps you find out what matters for your business.

Set up your banking, insurance, email and website

MoneyHub has the latest guides to help you save money and find the best deals, covering:
​Most importantly, don't rush a decision on any of the above. A website is an expensive investment, and if you are setting up a services-based business, it may not be the best investment right away. However, a domain name and business email is an essential purchase and won't cost more than $100 per year in total. 

Google My Business (free) is a must, and consider other social media accounts

Social media is hyped up as 'essential' for businesses, but in many cases we don't believe the return justifies the return. The exception being Google My Business and Facebook, which are both free and well worthwhile.

Google for Business - this is essential for placing your business on the Google map. You can also attract reviews, list your opening hours and upload business photos. It's easy, free and instant, although you may have to wait a couple of weeks to verify your address. The earlier you complete it, the sooner you will be on the Google map.

Business Facebook Page - The best approach is to set up a business page, exactly as this guide outlines, to maximise the visibility. 

People have different opinions on the effectiveness of Instagram, Pinterest and Twitter - it really depends on your business industry as to how essential (or effective) they will be.

Register for GST and understand your tax obligations

When you start a business, you'll usually have to manage GST and income tax returns:

GST
  • ​You don’t need to register for GST unless you trade (i.e. sell) above $60,000. But, even if you don’t, registering for GST lets you claim back GST-inclusive expenses which can be suitable for some businesses more than others, so it may be worthwhile to register right away.
  • For example, if you’re starting a food truck business, there are lots of expenses subject to GST before you even sell your first $5 or $10. For example, you’ll need to buy the truck, fit it out (i.e. install cooking appliances), buy packaging materials and, when you’re ready to sell, buy the food product.
  • All of these expenses have a GST element which you can claim back. For example, if your setup costs are $57,500, including GST, you’ll be able to claim $7,500 back in GST returns (which is 15% of $57,500).
  • But, if you’re going to work as a freelancer, work part-time or know you’ll turnover less than $60,000 per year, registering for GST may not be as beneficial. This is because you’ll also have to charge an additional 15% on your sales.
  • If you’re setting up a business as a self-employed babysitter, tutor, graphic designer or something that doesn’t have a lot of expenses and unlikely to turn over $60,000 in one year, registering for GST probably won’t be worthwhile. If you do register, you’ll have to charge 15% of your sales as GST, meaning your services are relatively more expensive and less competitive as a result.
  • To know more about GST and register using your business details, visit the IRD's dedicated resources.
  • Tax seminars, workshops and videos: The IRD runs free seminars and workshops across New Zealand on topics like getting started in business, GST, and becoming an employer. For more details, visit the IRD's dedicated new business page.

Income tax:
  • If you're earning income from a range of sources, run a business (or more than one), are a contractor or generally 'non-salaried', you'll need to organise your tax filings and make sure you do everything properly to avoid penalties and underpaying (or overpaying) your tax.
  • You can either hire an accountant that charges per hour, do it all yourself or use an app like Hnry. Whatever you decide to do, we argue that apps like Hnry put tax management 'out of mind', therefore allowing you to focus on managing your business.
  • Our tax guide walks you through your responsibilities as a New Zealand tax payer.

Starting a Business - Final Thoughts from MoneyHub Founder Christopher Walsh

There is never a bad time to launch a new business. The lockdowns of 2020 and 2021, and economic problems that followed, significantly impaired the New Zealand economy. However, every crisis leads to opportunities.

Many great businesses are yet to start and prosper. In our experience, the best businesses are those which set out to solve a problem. Xero solved the hassle of keeping track of paper-based invoices whereas PushPay solved the problem of churches being unable to collect stable week-to-week revenue. But your idea doesn't need to be technology-based. Successful product companies include Ethique, which works to reduce plastic bottle use, and A2 Milk, which makes healthier milk.

Of course, big businesses start small. I don't believe that venture capital is a reliable source of funding. Up until 2020, there had been a rise in the number of companies growing by raising money from investors (and asking for more when it ran out). In tougher times, venture capital firms are less likely to fund businesses without seeing traction first. Because of this, established businesses hoping to raise a further round of money in 2020 and 2021 are likely to have problems unless they are growing fast, profitable (or close to it) and stable. In short, control your own destiny and keep control of your business by being 'cheap' with your expenses and chasing sales hard.

Whatever business venture you want to start, we wish you the best of luck. It will be stressful, uncomfortable and challenging, but it will be a lot of fun. I started MoneyHub.co.nz with a $500 investment (logo and graphics, domain name and hosting) so anything is possible if you're dedicated to seeing your vision take off.

Christopher Walsh
Founder - MoneyHub.co.nz
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