Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Leon Delaney on Radio 2CC Canberra.
Subjects: National Family Business Day, small business trading conditions, family business succession issues, government procurement, government definition of Australian business.
Leon Delaney
Today is National Family Business Day, and the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, is encouraging us all to celebrate the achievements of family businesses. Bruce, good afternoon.
Bruce Billson
Leon, great to be with you and your listeners. And what a great day to celebrate National Family Business Day.
Leon Delaney
There's also a report today from Creditor Watch that the number of businesses who are unable to pay their bills is increasing and the number of insolvencies is also increasing, and we're seeing businesses facing ever, ever more challenging conditions right now. So, while we celebrate the achievements of family businesses, they're facing an uphill battle at the moment, Bruce.
Bruce Billson
Plenty of headwinds, and I think we've spoken before about what we're seeing, which is increasing challenge to profitability. In fact, 46 per cent of small businesses weren't profitable in the last full tax year, where data is available. And the connection with family businesses is for those businesses that are a family enterprise, so often, there's so much more involved than simply the viability of the business.
We know half of all small business lending is secured by a family home. So, this is really significant, and why we should take a moment to recognise and to support these family businesses with some of their custom. Put some hard-earned money into these businesses, because for the family businesses there's so much more involved. Many livelihoods that can be dependent on it. There's much at risk. In fact, it's more than a job in so many respects. It can be the identity, the way in which people know of that family in their community and the vast contribution they make supporting sporting clubs and community organisations. Really worth honouring that and getting behind family businesses where we can.
Leon Delaney
Absolutely. Now, a lot of the small cafes, coffee shops and things of that nature that we go to, they're often family run businesses, aren't they?
Bruce Billson
Yes, they are. And you've touched on some unique areas where there's a strong prominence of family businesses. Cafes, accommodation. Construction industry, we've talked about that before, just the particular challenges that are being faced there. And in the retail trade area. But also think about where family members are contributing so much to the business without necessarily being directly paid. They’re all in because it's in the interest of the of the family. We think of agriculture, forestry, fishery. These are just some of the examples where, you know, there are two or three contributing family members in addition to whomever may be, the business leaders, who are making a contribution to the success of that enterprise.
Leon Delaney
So as a proportion of the overall business community, how big a piece of a pie is represented by family operated businesses?
Bruce Billson
Well, it's a big piece. I mean, seven out of 10 businesses are family owned. And 40 per cent are actually run by a combo, a couple team, typically a husband and a wife, and they are making a very significant economic contribution. But it's also really important to understand that entrepreneurial endeavour can often be passed down to the next generation. So, when we think about refreshing the entrepreneurial gene pool, family businesses can be a place for that. But that also brings about some fairly unique challenges.
A business in a corporation sense, well, of course it'll have a boardroom, and people will be clear on roles and responsibilities. Think about that in a family context where the dining room table becomes the boardroom table. And beyond the peer-to-peer business relationships, you have all of the influences, pressures and whatnot you have in a family unit, and that can make for interesting discussion. And that's why accessing trusted advisors and thinking about what support the family business would benefit from is an important part of the leadership of those businesses.
Leon Delaney
You know, there's a conventional piece of wisdom that I've heard from time to time that you should never lend money to a family member, and you should never go into business with a family member, because if things go south, it does so in a very bad way. And yet people still take the gamble, don't they?
Bruce Billson
They do. And you see the spark of a business idea may be happening around that very same dinner table. Or you might be there together at a family gathering, and someone identifies a way that they've solved a problem that they have been experiencing, and another family member says, hey, I've had that problem, maybe there's a business idea in that. And then you can see it take off. So often what people characterise as side hustles or smaller endeavours may well grow when you see the family members getting more and more involved and are often important sounding blocks.
And it's worth recognising that from the corner store, you then reach up into some of the largest businesses in Australia also happen to be family businesses as well. And you know, they have to deal with things like succession planning, like who's going to take over? What if one of the kids is interested, another one's not. The skill sets that they bring. There's a lot involved, and that's why we think it's really important to acknowledge family businesses on this national day and I'm urging people to get behind those businesses.
Leon Delaney
Well, one of the best-known family businesses in the world is at this very moment in a life and death legal struggle over exactly that issue, succession. News Corporation, the Murdoch family.
Bruce Billson
I’ve seen the series, it’s gripping viewing. But that is playing out in the supposedly quiet jurisdiction of Nevada, where there's all sorts of tensions around succession. And that can happen all the way through to a farming operation. You and I have spoken before about the challenges of certain family businesses. And occasionally, when we're on the road meeting with businesses we will meet a family, and the kids will look at me and say, you know, Bruce, I'm not sure what I want to do with my life, but I know it's not what my folks are doing. We can get that side of it as well because they’ve seen first-hand how challenging it can be.
Leon Delaney
I was going to say, we don't immediately think of the Murdochs when we talk about small family businesses, do we? But it's interesting how these similar dynamics can play out. But when we look at the contrast between smaller businesses and big corporations, there's a huge power imbalance there isn't there.
And I know at the moment, the Federal Government is looking at ways of better defining what constitutes an Australian business, so that Commonwealth procurement can more properly recognise local businesses. Does there need to be a similar sort of strategy to deliberately provide Commonwealth procurement opportunities to small businesses that might have the wherewithal to actually take it to the big guys.
Bruce Billson
Leon, I love your dexterity in moving between current affair topics. Spot on, sir. I mean, in fact, that's the very point that we'll be making as our submission to that current Department of Finance led process where they're looking at what is an Australian business for the purposes of Future Made In Australia, and those sorts of big policy initiatives. But many of your listeners would know there's a thing called the Commonwealth Procurement Rules, which is fancy speak for the Fed's way they buy and purchase goods and services. And it has certain exemptions and certain encouragement for small businesses and indigenous businesses. And one of the big challenges is that definitional one that you point to, and how can you readily identify those smaller firms?
We think there's a greater role to be played by smaller firms supplying the Commonwealth. It's good value for the taxpayer because it really tests the proposition of those big, established, often multinational firms. It supports innovation, and most businesses would probably like to have the Commonwealth Government as a customer. But what comes with that are a lot of reporting and governance obligations. These are things that in our work, we've been seeking to identify ways of making it easier for small and family businesses to supply the Commonwealth and not have that procurement space occupied by the familiar ‘in crowd’ that can so often be larger firms.
Leon Delaney
Absolutely. Bruce, thanks very much for chatting today.
Bruce Billson
Good to be with you, Leon. Take care.