Small businesses suffer some great big problems
Is the small business dream being strangled by regulation and a cost of living crisis? According to the latest ABS data, small businesses are closing by the thousands and the number of new start-ups is steadily drying up.
In 2022-23 there was only an 0.8 per cent or 19,973 increase in the number of new businesses, the lowest in four years. While the entry rate stands at 15.8 per cent, the exit rate is 15 per cent. Non-employing businesses have increased by 2.3 per cent, suggesting that businesses are downsizing and struggling to maintain employment levels.
However, this pattern does not hold true for larger businesses which seem to be faring far better in the current climate, potentially because they can absorb any legislative changes and have hordes of experts to help them keep costs down where possible. Businesses with 20-199 employees increased by 8.8 per cent while businesses which employed more than 200 people increased by 8 per cent.
In contrast, smaller businesses with 1-4 employees have seen a decrease of 3.5 per cent. Without small businesses, we may end up at the mercy of large businesses and government making decisions on our behalf and cutting off the already struggling lifeblood that small businesses need.
The turnover figures are also revealing. While 91.9 per cent of businesses had a turnover of less than $2m, there’s been a hefty 9.7 per cent increase in businesses with a turnover of $2m or more. Data from the Australian Small Business Ombudsman shows 43 per cent of small businesses are making zero profit. Without a doubt these numbers reflect what business owners have been witnessing for some time and that I have warned would happen if the pressure on small business continued. Trading conditions are punishingly volatile while bureaucratic red tape continues to stifle progress. Small businesses are being crushed while large corporations consolidate their market position, sometimes even at their expense.
To make matters worse, small businesses are also being caught in the crossfire between the government’s ham-fisted attempts to regulate the actions of big business.
Ongoing efforts to pass the Closing Loopholes Bill are a case in point.
As Labor rushes through legislation meant to target wage theft and hiring practices, small businesses have been left with nothing but more red tape.
Another bill aimed at the gig economy and casual conversion rights is looming and the effects on small business could only be described as disastrous.
One study estimated Australian businesses waste an average of 81 days a year on admin alone. Rather than help struggling small business owners, the government’s industrial relations push is creating more obligations, more stress, and more barriers to thriving. Small businesses are a vital component of the Australian economy, responsible for hiring five million people or over 42 per cent of the private sector workforce. Yet small business owners rarely get a seat at the table in the conversation between big business and government.
Facing off against the high cost of living, regulatory burdens and competitive pressures, small business owners are struggling compared to larger businesses with more resources, better economies of scale, and fiercer advocates.
With the higher than average rate of small business failure hanging over their heads, small business owners are sitting on the brink of mental collapse. It’s a little-known fact that small business owners pocket less than the average Australian salary at just $80,000 a year despite working well beyond regular nine-to-five hours seven days a week.
On top of their huge workload, many business owners are being forced into the untenable position of working for little to no pay despite their profit margins dwindling by the day. Small business owners get no sick leave, maternity leave, holiday pay or any of the perks many workers take for granted and neither do they receive much support.
Proper support measures, regulatory reform, and initiatives to reduce the cost of doing business are critical in ensuring the health and sustainability of the small business sector which does so much to bring innovation and life to the Australian economy.