The ability to successfully and sustainably develop a dynamic entrepreneurial culture that includes innovation and ease of doing business as guiding principles is critical to any country’s economic well-being.
A key research into Australia’s small business sector revealed that Australia’s small business boom is expected to continue over the next ten years, with an additional 3.5 million new small businesses expected to be established.
The report, ‘Where Opportunity Lies: Australia’s New Small Business Boom,’ by Xero conducted in collaboration with Accenture, also shows that small businesses will support over one million new jobs over the next decade.
According to Joseph Lyons, Managing Director Australia and Asia, Xero, the landmark report arrives at a hopeful chapter in our nation’s pandemic journey: one that sees a surge in small business creation as Australians adapt to uncertainty.
“Conditions are favourable for Aussies seeking to strike out on their own. We’ll see this play out with an expected 3.5 million small business registrations contributing a total of $370 billion to the Australian economy over the next 10 years,” Lyons said.
The pandemic business boom
While the pandemic disrupted thousands of businesses in the retail and hospitality sectors, it also created opportunities for new businesses in a variety of industries. For example, while brick-and-mortar stores were bleeding, e-commerce reached new heights.
Similarly, Fintech and Edtech companies saw a significant increase in their consumer base. According to the report, new small business registrations are at an all-time high, increasing 34% from 225,000 in 2019 to over 300,000 in 2021.
Prior to the pandemic, small businesses accounted for 99.8 percent of total businesses, 66 percent of employment, and 55 percent of value added in Australia. This rapid growth in response to an economic crisis is unprecedented, and it is the polar opposite of what happened after previous periods of economic uncertainty, such as the 2007-09 Global Financial Crisis.
According to the study, the following external factors are likely to have contributed to the increase in new business registrations:
Job uncertainty: reduced hours, redundancies, limited opportunities for pay rises
Great resignation: Australians re-evaluated their job satisfaction and sought greater enrichment, control, and flexibility in their work.
Digitalisation: increased use of technology and digitalisation has decentralised many workplaces creating opportunities for business owners to work in regional areas.
New opportunities: the rise of the gig economy, digital ways of working, and favourable business lending have created the conditions for more budding entrepreneurs to take the plunge.
“The pandemic allowed many Australians to re-evaluate their careers and take advantage of a decentralised and digital workplace to start their own small businesses.
“More than ever, entrepreneurs are charting a new path in search of meaningful careers – from those who experienced redundancies to the burned out workers ditching the corporate grind, the next generation of resilient changemakers are leading our economy forward – and they’re not looking back,” added Lyons.
Surge in investing for future growth
According to a separate Commonwealth Bank of Australia survey, Australia’s small businesses are investing in their recovery, with a 17 per cent increase in financing for equipment and machinery financing among small businesses.
The Federal Budget included provisions that allow small businesses to receive a $120 tax deduction for every $100 spent on employee training or technology investment, up to a maximum of $100,000 per year.
Grant Cairns, CBA’s Executive General Manager for Business Lending, expects the growing rate of investment to continue, backed by a variety of incentives, including new interest rates from CBA for its SME Recovery Loans; the extension of the Federal Government’s instant asset write-off scheme to mid-2023; and new tax incentives announced in the Federal Budget to encourage small businesses to invest in technology and training.
“Government incentives have played a significant role in lifting business investment over the past few years. Since July last year, we’ve seen continued growth in asset finance in the small business sector, with the instant asset write-off scheme providing a good reason for customers to upgrade equipment and technology,” Mr Cairns said.
Here’s the full CBA report.