Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Tim Webster.

ABC Radio Sydney

Subjects: Small business conditions, small business help, tips for small businesses using social media platforms, 3G switch-off.

Tim Webster

The burden of regulation, the prohibitive barrier of high cost now getting in the way. How do we turn around the ageing demographic of small business owners and get people to start up a small business, invest in a small business. But there are a number of problems, that's for sure. Well, on the line, I have the Small Business Ombudsman to have a chat to us about all of this. Bruce Billson. G’day, Bruce.

Bruce Billson

Tim, happy to be with you and your listeners.

Tim Webster

Luke (Achterstraat from COSBOA) was describing a lot of issues with small business... they're saying there’s too much regulation. How do we make it easier for them?

Bruce Billson

One is actually talking about it, so bouquets to you, sir, and raising the awareness that there's over 5 million livelihoods dependent on our 2.5 million small businesses, and that's a real vital part of our economy, particularly in rural and regional areas where small businesses really are driving so much economic activity and the opportunities that come from it. 

We would like to see small business more front of mind. There's been quite a number of additional, and in some cases, quite demanding regulatory changes. It kind of makes sense for a big corporate where you might have 20 people in a compliance department and a few technical specialists. But for a small business that's doing its compliance work at 10 o’clock at night, it's really tough. That's at a time when getting it wrong can have really significant consequences. Parliament says, this is important, we want you to get it right. It might be about care for your workplace, consumer and warranty obligations, all the way through to making sure people are paid correctly. And no one challenges that, Tim. I think overwhelmingly small businesses want to do the right thing.

It can be really hard to know what that is sometimes. Then to see even big corporates, for example, taking a misstep on what they're paying people, that's tough for a small business to navigate that space. We're just urging people, to engage, right-size those regulations. More particularly, let's really focus on energising enterprise. Really getting those settings right so that small and family businesses have every prospect to succeed.

Tim Webster

Yes. As we keep saying, and it's true, small business is the major employer of everybody in Australia, so it needs to be looked after. Last time we spoke about it a lot of small business people said exactly what you just said then. It's just really tough. Their costs are going up. They don't want to pass them on. If they can get employees to work for them, and that's hard too, sometimes they have difficulty keeping them, and as you say, they're up at midnight doing the books.

Bruce Billson

And Tim, you and your listeners have spoken a lot about cost-of-living pressures, and that's rightly a real concern for many people. For businesses, it’s their cost of input pressures. Rents are up, energy costs up, the payroll is up, the cost of any funds that they've borrowed is up. We know from even the GDP figures today that the economy is pretty flat. You're seeing a real margin squeeze, you know, that little bit left that you hope looks like profit, that's getting squeezed more and more. We've shared with Luke, and I know he spoke about it last time you had him on, 43% of small businesses for the last full tax year where information is available, 43% weren't profitable. When you think about the self-employed people, where they are self-employed, that's their full-time livelihood, nearly three quarters of that really important group are taking home less than average weekly wages. 

So, you start thinking, where's that risk-reward balance? What can we do to really put wind in the sales of small business, not just working hard to make sure we're reducing the wind in their face. That's really what we're calling for policymakers and elected representatives to focus on.

Tim Webster

Yes. Other side of the coin, and I see a lot of stories, usually on ABC TV, about really successful business people who do everything right. It could be a bakery, it could be a small winery, it could be somebody who's making olive oil. There are successful businesses. I know it's very broad, but are there basic keys there to make you a success?

Bruce Billson

It is a mixed picture and I think it's always a good point not to think all businesses are tracking the same way. Some are able to adjust their prices because they've got something the customers really want. Others might be supplying supermarket chains where there's real pressure on the cost they sell to the supermarket chains because the supermarkets don't want to get offside with their customers. We're also seeing a lot of businesses really relying on digital technology, Tim. I remember when my wife and I had our business, you take out a commercial lease for five years. We were about year two and a half and thought, Oh, there's too much red ink here. We need to exit this business. But we couldn't actually exit the obligations of the lease. We'd signed on for five years. We needed to hang on to that and carry the responsibility for the tail of that lease. 

For a lot of businesses today, they're really looking at what their fixed costs are, what's the money that's going out the door regardless of how busy they are. And trying to really minimise that, looking at those fixed costs, squashing those down, really having their cost-base grow while their revenue grows to try and keep profitability in the business, and really using technology where they can, to do that yucky stuff, the business of running the business. Who doesn't love a good BAS? But if you can automate a lot of that back-end of the business and really focus on your jam, what really is the value and the passion that you bring, that's been part of the formula for some of the people that have been successful.

Tim Webster

I'm speaking with Bruce Bilson, the Australian Small Business and Family Enterprise Ombudsman. Michael's joining us on the line from the Blue Mountains. Good day, Michael.

Caller - Michael

G’day. How's everyone?

Tim Webster

We're good. What have you got for us?

Caller - Michael

Small business is rewarding, but it It's extremely hard. I've been in business most of my life. I encourage young people to go into business and follow their passions. But at the same time, I explain to them to be realistic and to understand that it isn't a pot of gold. It's bloody hard work.

Bruce Billson

Michael summed it up there. And maximum respect to you, Michael. That kind of drive, but also you explaining that it's not always just about the money. A business can give you flexibility, it can give you real purpose and meaning in your life. We see so many small and family business owners, their own identity and sense of their contribution to their community is interwoven in their business. 

But Michael's right, it is a big responsibility and people need to be realistic about that. We're seeing the age of the average business owner increasing. 50 is now the average age, and only about 8% are under the age of 30. Now, back in the '70s, it was 17% were under the age of 30. So, what are we doing to make this an attractive option for people who want purpose, some flexibility? But it is hard yards. That's the stuff that we focus on and thinking about what we can do to energise enterprise and share the stories like Michael's and maximum respect to him.

Tim Webster

You're still in business, Michael? 

Caller - Michael

I'm doing part C of my day being in business, which is I'm picking up stock, I'm running around seeing customers. The main thing is that I come from an analogue background, not a digital one. I've learnt to spend the shoe leather first. It's not going to you because you put an ad on the internet.

Bruce Billson

A really good point, Michael. Those relationships you probably have with your key customers are really durable, and you invest time, and you're part of their success story as well. But, Tim, I'm taking over your programme here.

Tim Webster

No, you go for it.

Bruce Billson

What would be the one or two things you'd tell Michael thinking about starting out? What are the keys that you encourage people to think about, Michael?

Caller - Michael

I can only express myself. If you want to go into small business, don't try to measure the outcome. You've just got to start and take it on the chin, whatever happens, and learn from it. But keep your passion.

Tim Webster

Yeah, that's it, Michael. I mean, if you're going to be in small business, it occurs to me, and I've never been in small business, you'd have to be passionate about it. Otherwise, it wouldn't work, would it?

Caller - Michael

No, it doesn't work.

Bruce Billson

You need that spark. You need that spark. Michael's a great example of it, Tim.

Tim Webster

Good on you, mate. 

I'm speaking with Bruce Billson. This on the text, Bruce, from Watson in Dubbo. Policies of government meant to have encouraged competition, they seem to have resulted in less hardware stores, butcher shops are closing, and you've got Bunnings, you've got Coles and Woolworths. Why don't government admit that it's been a failure because they have zero accountability for their actions. 

Yeah, look, the big places like Bunnings and Coles and Woolworths, people go to them. Look, I know people are doing it tough financially, aren't they, Bruce? But just If you can afford to do it, support your local butcher, your local baker, your local coffee shop, any of them.

Bruce Billson

Spot on. The best thing you can do, if like me and you and others, you value small and family businesses, putting your hard-earned into them is part of it because there's no substitute for customers. But your text message really reveals an interesting point. We celebrate, as we should, the 2.5 million small businesses, and they employ over 5 million people. That's 40% of every job in the private sector. That's fantastic. And one-third of Gross Domestic Product, everything that's generated in the economy. That's worth celebrating. 

But when we look back just to 2006, the small business share of private sector employment was over 50%. So not 42, was over 50, and the contribution to GDP was over 40%. So, we're seeing this contraction in the small business economy. I fear we're actually sleepwalking into a big corporate economy where the bigger businesses can navigate the complexity of regulation. They can make the most of new digital opportunities and really spread their wings and flex their muscles. And that's why we're part of what I do - small business help is what really motivates us every day. We put advice to government on policies that are supportive of small business, that give a small and family enterprise every prospect of success.

It's not our gift to make sure all can succeed, Tim, but we get out of bed every day to make sure none fail because they didn't know about something that might have helped.

Tim Webster

Here's John Tim from the North Shore. G'day, John.

Caller - John

How do you do, Tim, and your guest.

Tim Webster

G'day, mate. Good. Yeah, thank you.

Bruce Billson

Hey, John.

Caller - John

I'll have to breathe in and out here because I'm absolutely apoplectic about what's happened to this country. How can it ever be an egalitarian country again when 2% own the wealth and the poor are being bled dry and we're having people coming from overseas escaping what they're now being thrown into, which is a society where the rich rule and the poor are getting poorer.

Tim Webster

John, as it applies to small business, what you're saying is broadly, I find it very difficult to argue with that, Bruce, because I'm hearing it more and more often, the rich are getting richer, and the poor are getting poorer.

Bruce Billson

The numbers kind of back that up a little bit. We've had a look at profitability. John's obviously talking about things way beyond my pay grade, but it's good of him to share those thoughts. If I can take that as a comment, I know that's another program.

Tim Webster

Are you a small business person, John?

Caller - John 

About as small as you can get. It's a self-employed building type.

Tim Webster

It is still a business.

Caller - John

There's richer and richer people moving into the area, but retail is dying, except for Woolworths and Coles.

Bruce Billson

That's one of the things we've spotted as well, John. For the bigger corporates, they've seen profit grow about 13% year-on-year for a number of years. But for the small businesses, if they're fortunate enough to be profitable, the growth is around 3%. There's something going on there. John, I often remind people that there is a million and a half people like you, John, that are self-employed, that are making their own opportunities, that are creating wealth and prosperity through your own endeavours. We keep reminding government that not every business contributor is a large corporate. There's stories like John's that we need to have more featured in the policy discussion, I believe.

Tim Webster

John, do you employ anyone or is it just you?

Caller - John

On and off because insurances and so forth make it expensive for permanence. I employ lovely backpackers from South America and wherever.  But we've turned into almost a Communist state. Society doesn't operate unless everyone has enough money to spend and circulate. That's gone.

Tim Webster

Apprentices. Did you ever employ any apprentices in your business?

Caller - John

No, but I worked for a builder who employed me as an apprentice. I'm forever thankful to a person that was... It's the people who want to employ. That's small business. They need to employ people so they can actually create their own wealth. But the big boys are firing all their staff.

Tim Webster

Well, that's true. A lot of major corporations have fired a lot of their stuff to make sure their bottom line's okay. John, I'll leave you, but I thank you very much. I've got another one here, and we get a reaction to it every time, Bruce. I tell you, Josh, on the Northern Beaches. 

Small business owner here, not everyone is competent enough to run a business. If you're making less than the minimum wage, there's probably a lesson to be learned there.

Bruce Billson

Yeah, that's an observation I occasionally hear. It is a big responsibility. We look to things like whether people are doing a trade qualification, they might well know how to construct the frame on a home, but have they had as part of their training that business acumen, the financial know-how, how to price their work and their time well so that they've got a prosperous business. That's where a lot of the support services become really important. We try and offer some better practise know-how that can help address some of those challenges. Your excellent New South Wales Small Business Commissioner also provides those sorts of resources. But we're really looking at a way of getting that knowledge in the hands of people. That's not the spark, though. The spark is something else. Then the business of the running the business often comes as the follow-on, but some people are less well-equipped for that than others. That's why support services can play a really important role.

Tim Webster

Adrian, from Clontarf, again, on our very busy text line. Does anyone really think that a wide range of small business hardware stores or corner shops would have been cheaper or better supplied than Bunnings, Coles, or Woolworths? Consumers vote with their wallets. Yes, they do, Bruce. They do. You can't blame them for doing it.

Bruce Billson

And that's a fair observation. Then you see some of the smaller businesses saying, Look, I won't compete on scale, and I won't necessarily compete on price, but I will compete on specialist streams that no one can respond to, that is a real niche that I can make my own. My service will knock the socks off my customers, and I'll build that business that way. You see a range of different strategies that can really drive a business. 

The key thing is to know what that plan is and then commit to its execution, because we see so often people start a business without a business plan. In fact, I think only about one in five businesses have what's called a business continuity plan. That's where something goes wrong and knocks you off track. That could be anything from a pandemic to a natural disaster or even a really big health event. If the primary breadwinner in a business becomes really unwell, that can knock things around a bit. But that's the market. That's the challenging world. That's why you see businesses enter and exit. What we want to do is keep that entrepreneurial spirit alive because it's so vital for our prosperity, innovation, and productivity.

Tim Webster

Yeah, indeed. Just harking back to what Michael from the Blue Mountains said, he relies on the shoe leather. He's an analogue kind of guy, not digital. You've got a Guide to Using Social Media Securely, don't you?

Bruce Billson

Yeah, we do, and it's the fastest growing area of the assistance work that we do. Just without boring your listeners, Tim, we do a bunch of things. We provide advice and recommend policy improvements to government. We do what's called assistance work. Where there's disputes, so often the idea of a small business going to court to get a dispute resolved is just not realistic. We get alongside those businesses that have business-to-business disputes or disputes with the Federal Government and try and find a resolution, keep the relationships intact, hopefully, and then get business back to business. 

Now, in that area of work, we've seen a doubling over the last couple of years of the number of complaints involving digital platforms. We're talking about shoe leather, but many of your listeners might well have a Meta marketplace account and use digital channels as their primary way of contacting their customers. Now, that's fine, and that doesn't have the cost of, say, a fixed premise. It might be quite a flexible and scalable option. But if someone hacks your account and you're locked out, it can be the ultimate run-around where the platform say, Hey, Tim, get into your account to tell me that your account's been blocked. I mean, come on! 

What we're trying to do is equip small businesses with some tips about how to make sure their life on digital platforms is as pain-free as it can be, and they can secure the upside. Some tips around that that you can grab off our website, and hopefully that's a real use to your listeners.

Tim Webster

Yeah. Okay. Elise makes a really good point here. Would it make sense for particularly women, but also now men in their 20s, 30s, and 40s, to work for a large corporation, take advantage of the benefits like paternity leave, based on friends and family who work in small business, they don't receive any of that. She gets 12 to 14 weeks in the industry she works in. I suppose it is, Bruce, isn't it to many, more attractive to work for a larger corporation.

Bruce Billson

It can be, but it's also not entirely a one-way street. I mean, those issues around paid parental leave and the like, there’s now a government-backed program that sees a level of paid parental leave available to families with a newborn, regardless of the size of the business that you're in. In terms of flexibility, though, there's a lot of women, and let's pick this example, that are juggling a number of life objectives that find owning their own business and having the flexibility to put time into that business when it works for other life objectives is really attractive. We actually see for mature-age people, there's more mature-age people working part-time in their own business then are actually employed by other organisations. 

There's something in that around flexibility and multiple life objectives. You can't doubt the fulfilment of success in your own business. That's a key part. Also, a lot of young people are looking for purpose as well as good incomes. Your own business can be that as well. But it's a good observation. I think that's partly why we haven't seen as many new businesses when the job market is so tight and there's a real fight for talent. For some people, they can attract a good salary at this time, but the economy might turn and that picture might look different into their future.

Tim Webster

As I say, very often, all you're really after is everybody to be fair dinkum with one another. On the text, Mark here, he's a contract floor layer, and only gets paid when the flooring company pays. No avenue for us to set our price and no super paid by them. Yeah, look, everybody's in a different boat with all of this. I don't suppose there's any way, because it is so diverse, there could be any standardisation of this, or can there be, Bruce?

Bruce Billson

That's a tough one because so many circumstances are so different, and as many stories as there are about small business, that's just the tip of the iceberg of the variety of businesses that are involved. In some industries, small business suppliers are really without a lot of market power. We see this, and this is a lot of the discussion around the supermarket arrangement. If you and I want to be a cookie producer of any kind of scale, you virtually have to be a supplier to a major supermarket chain. Then that puts you in a precarious situation because you're dependent on it, but you're also a little bit vulnerable in terms of, what if things change. The key thing here, though, is when you're pricing your work, really take into account the value of your own time. Too often, business owners, they're not paying themselves adequately. In some cases, they're not actually providing for their own retirement. In other cases, they've counted on selling the business, being their retirement nest egg. If you and I were hiring out VHS videos and hope to sell that business as our retirement nest egg, you can see how that ended up.

Tim Webster

Exactly. One more thing – and the news is rushing up at me pretty quickly - you wanted to warn small business, and we've warned our listeners, too, to get ready for the impending shutdown of 3G.

Bruce Billson

This is really important. Most of your listeners would know by looking at their handset, whether that's going to be compromised by the shutdown of 3G. What's less obvious, Tim, though, is there's a whole bunch of kit in the economy that for its wireless communication uses 3G. Come the end of August, Telstra's shutting down their 3G network. In early September, it's Optus. Now, if you had an EFPOS terminal that relied on 3G, all of a sudden, it's not going to work, nor some security systems, surveying instruments, remote monitoring, like your rural listeners might track water level and microclimate in their paddocks or open gates to move cattle around. A lot of that kit has as its wireless communication, 3G. We're just saying to people, don't become a casualty of the shutdown. Check out the functionality of that kit and make sure you're not caught short.

Tim Webster

Yeah, indeed. Thanks for spending so much time with us. It's much appreciated. Thank you. 

Bruce Billson

Take care, Tim. Bye-bye.