Risk and reward balance ‘now more challenging’ for entrepreneurs
Small business owners are increasingly shouldering more risk for less reward as regulations and economic headwinds hit businesses, according to the Australian Small Business and Family Enterprise Ombudsman.
The appetite for Entrepreneurship in Australia is in decline with business owners facing more risks for often less reward, according to the Australian Small Business and Family Enterprise Ombudsman Bruce Bilson.
Speaking at the Tax Institute Tax Summit last week, Mr Bilson said taking on the risk of starting a business is now much harder to do than it was even a decade ago.
Mr Bilson said there were a range of factors behind that including a reduction in profits.
“The risk and reward balance is now more challenging. Forty-three per cent of small businesses didn’t make a profit in the last full year of reporting,” he said.
“Seventy to 73 per cent of small business owners are earning less than the average total weekly, full-time earnings. There are no ‘rivers of gold’ coming to businesses and yet the competitive landscape is challenging.”
Economic shocks also tend to advantage larger businesses as they have the resources to be able to navigate difficult economic times.
“They have better access to finance. Their resilience is enabled by scale,” Mr Billson said.
Increasing regulation is another factor impacting small businesses, he said.
“We regulate the wazoo out of everything and wonder why there’s not a great agility in the economy,” he stated.
“I spend my life getting out of bed every day, trying to make the case that a small business isn’t a shrink-wrap version of a big corporate. There’s no compliance team or 20 people in the HR department. There aren’t any house lawyers or product safety experts running around.
“Yet, those expectations of the economy and business are infrequently right-sized for smaller respondents.”
Mr Bilson said in many respects small businesses right now “are exhausted”.
“Their emotional reserves are diminished and financial reserves are straight. There are no sloppy margins to be found anywhere,” he said.
Recent analysis of ABS data by ASBFEO revealed that only 8 per cent of small business owners are under the age 30.
“In the 1980s there were actually twice as many small business owners aged between 30 and 49 as there were aged over 50,” Mr Billson said.
Until recently, the 30-49 age group dominated small business ownership, peaking at 59 per cent in the early 1990s. But the analysis showed more than one in five small business owners (22 per cent) were now aged 60 and over.
The most common age of small business owners across Australia was now 50 years, compared to 45 years in 2006.
Mr Billson said in some sectors youthful ownership was even lower. In the retail industry, just 6 per cent of small business owners are aged under 30 while in financial and insurance services the figure was only 3 per cent.
“We need to replenish and nurture the next generation of entrepreneurs, value self-employment and encourage and enable smaller enterprises and the livelihoods they make possible,” Mr Billson said.
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