2 in 5 small businesses struggle with profitability: ASBFEO report
The economic contribution of small business is steadily rising but three in four self-employed business owners still earn less than the average adult wage, according to a recent report.
The value of small business to the economy surged 15 per cent in the 2021–22 financial year but around 43 per cent of small businesses are still failing to make a profit, according to report by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Bruce Billson.
Three-quarters of self-employed small business owners working full-time earn less than the average full time adult wage, the Small Business Matters report said.
Mr Billson said while owning and running a small business can bring meaning and purpose, it can be “a hard slog and not always as rewarding as people might hope”.
Around a third of self-employed business owners took less than $500 home in total weekly earnings in the 2020–21 financial year.
The report also found 55 per cent of small business owners working full-time with 1 to 19 employees earn less than the average full-time adult wage.
Many smaller companies are also struggling to make a profit with 43 per cent of micro and small companies non-profitable.
This is the lowest proportion since 2012–13 when 43 per cent of micro and small companies were non-profitable.
This compares to 15 per cent of medium and large companies which were non-profitable. This is the lowest proportion since the Global Financial Crisis.
The value of small business increasing
The value of small business to the economy surged by 15 per cent in 2021–22 to $506 billion and accounts for one-third of Australia’s GDP.
The report found small business adds more value than other business sizes across the industries of construction, agriculture, forestry and fishing, rental, hiring and real estate services.
Employment by small business increasing
Australian small businesses now provide jobs for 5.1 million people, which accounts for two out of every five private sector jobs.
The number of people employed by small businesses increased by 120,000 over the 2021–22 financial year.
The report also highlighted the significant role small businesses play in providing training with small businesses employing 42 per cent of all apprentices and trainees in-training. This is nearly double the amount supported by big business.
The number of apprentices and trainees in-training employed by small businesses was 167,328 for the previous financial year, an annual increase of 12 per cent.
Average business owner age steadily climbing
Statistically, the average small business owner is a self-employed man, aged 50, who works full-time and earns below the average full-time wage.
However, the report shows female ownership is growing fast and accounts for 35 per cent of all small business owners – almost double the rate from the 1970s.
Mature age people are more likely to be a business owner than an employee. Nearly half of all small business owners are now over the age of 50. The average age of a small business owner has been steadily climbing
Only 8 per cent of small business owners are under 30. In the mid-1970s this age group accounted for around 17 per cent of all business owners.
“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.
"We need to understand why it is not as appealing as it perhaps should be for younger Australians to own a small business.”
Mr Billson said the report shows the flexibility of self-employment was a particularly attractive livelihood option for women and older people.
“Small business owners are more likely than the general population to perform unpaid childcare and have other caring responsibilities particularly for those with a disability, health condition or old age,” he said.
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