Small biz is hurting: Here’s how we fix it

The first half of this year has been characterised as a ‘test of endurance’ for many small businesses but I’m encouraged by the enduring optimism and the promise of improvement, writes Small Business and Family Enterprise Ombudsman Bruce Billson.

A greater focus on the ‘exceptional grit’ of small businesses that are our economic foundation is essential. Courageous and committed small business owners have been contending with a prolonged challenging operating environment. It is essential we recover lost ground.

We start the new financial year with continuing challenges of cashflow and margins, and input cost pressures still facing many small businesses, and with the remarkable and continuing optimism and resilience displayed in recent years.

Regulatory changes

There are a number of changes happening as of 1 July and many of them will impact small businesses around the country.

There’s updated tax rules, increased superannuation payments, changes to minimum and award pay rates, commitments to renew instant asset write-off tax incentives … and more.

Talk to your trusted advisers such as accountants and bookkeepers to make sure that the ‘business of running your business’ is on track, and check your payroll and accounting systems are up to date.

It is important to get this right and make sure you start the new financial year with your best and ‘the right’ foot forward.

One of the changes to keep an eye on is the increase to the national minimum wage. You’ll be aware the Fair Work Commission (FWC) has announced a 3.5 per cent increase to the national minimum wage and minimum award wages. This change applies from the first full pay period starting on or after 1 July.

This change has received a lot of media coverage as the FWC sought to balance the recovery of employee spending power after the corrosive impact of prolonged inflation and the reduced capacity of employers, particularly smaller employers, to cope with another cost impost at this challenging time. But we cannot forget that small businesses are also fighting to stay afloat in the current economy – cost of living pressures are also cost of doing business pressures!

The impact on small businesses

Small businesses lack the market power to push back on cost increases, they can’t easily cut costs, and often can’t or won’t pass cost increases to their loyal customers. So what ends up happening is that small businesses can face grim choices over what this all means for their business – its viability, the scale of their operations and their staffing levels.

The modest incomes of many small and family business owners is too often overlooked. The ATO has just released their most recent annual tax stats (2022–23) showing 45% of small companies were not profitable – an ever so slight improvement on the previous year (46%). The ATO also reports no improvement over the same period for the three-quarters of self-employed small business owners working full-time that earn less than the average full-time adult wage.

That’s why I keep urging governments and regulators to consider the cumulative effects of numerous decisions that add pressures on small businesses – and to acknowledge the benefits small businesses deliver for the Australian economy and community.

Small businesses provide jobs for approximately 5.2 million Australians and support 43% of all apprentices and trainees, almost twice the amount supported by big businesses. Costs of living pressures are crippling, for employees and employers alike. But if small businesses go under, that’s devastating for the owner. Its livelihoods lost and an economic and social contribution that will no longer benefit the community and the national economy more broadly.

These enterprising women and men, and their businesses, need more than hope to recover and thrive.

Time to reduce costs and red tape

We need to reduce costs for small businesses and need to push down the costs of doing business in a way that doesn’t weigh on the small business owners or their employees. One way to do that is to double down on tackling the complexity of compliance and regulatory requirements. We know that these requirements put operational, emotional and financial pressure on smaller businesses and take their focus and resources away from delighting customers, innovating and creating new value.

We need to recommit to right-sizing regulation for small business and end the false assumption that smaller firms are ‘shrink-wrapped’ versions of larger corporates with all the technical expertise, sophisticated systems and specialist advisors, just on a smaller scale. We need to prioritise making it easier and more intuitive for small businesses to comply with regulatory and compliance impositions, instead of leaving smaller respondents confused, overwhelmed and anxious about what they might not know. Most businesses want to do the right thing – they want to pay their taxes, suppliers and employees fairly and in a timely way. Let’s support and recognise that ‘good business pays!’

Over the past year, we’ve been tirelessly advocating for exactly that: conditions that reward, empower and support small businesses to keep building our economy, enabling livelihoods, driving innovation and supporting communities.

Our 14 steps to boost Australia’s small and family businesses | ASBFEO  illustrate how much more we can, and should do to nurture the best possible ecosystem within which small and family businesses can flourish. These steps and the needs and interests of small and family businesses need to be front of mind and the focus of any discussion about reforms that can lift productivity, living standards and the economic and social vitality of communities across Australia.

The Government could do a lot worse than to start with our ’14 steps to energise enterprise’ as the agenda for economic reform roundtable – practical and constructive initiatives that will genuinely enable enterprising women and men to ‘get down to business’

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