TRANSCRIPT
Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Glen Bartholomew.
ABC News Radio
Subjects: Micro, Small and Medium-sized Enterprises Day, Insolvency Figures
Glen Bartholomew
Small business is worth more than half a trillion dollars to the Australian economy. That data was released on what is World Micro, Small and Medium Enterprises Day by the Small Business and Family Enterprise Ombudsman Bruce Billson, who joins us now. Good afternoon.
Bruce Billson
Glen, fab to be with you and your listeners, sir.
Glen Bartholomew
People may be surprised to know that 98% of our businesses are a small business, that is it employs fewer than 20 people. How is the sector faring after what's been a difficult couple of years for many?
Bruce Billson
Well, the statistics point to an interesting picture of still enthusiasm. We've seen a significant growth last financial year in small businesses contribution to the economy. Still, we see increasing numbers of people forming small businesses. More so in areas that have been more affected by COVID. But we also pick up that there's a lot of small businesses not making a profit. And interestingly a lot of your listeners might not appreciate this immediately, about 70% of small business owners earn less than average total male weekly earnings. It's not super profitable, but their motivation maybe for some of the other reasons that people get into business. They've got a real excitement about what they're doing, a purpose to their life, they like the flexibility, the mode of engagement. So, a bit of a mixed story there, Glen.
Glen Bartholomew
But the value to the economy surging by 15% in 21-22 more than $500 billion, a third of our GDP. And not surprisingly, a pretty big employer too.
Bruce Billson
Yeah, that's right. That half-trillion dollar contribution is something that deserves to be celebrated on this International Micro, Small and Medium Enterprises Day. And when we look at the more than 5 million jobs in the economy that small businesses generate, that's a really significant economic contribution. But also, let's not lose sight of the self-employment story here. There's about 1.6 million Australians that don't work for somebody else. They work for themselves. They're self-employed, they go about their livelihoods through that mode and often they're not seen brightly enough on the radar screen. And that's something we also want to highlight and celebrate. That's an extraordinary contribution to the economy.
Glen Bartholomew
More than 5 million people employed, as you say, nearly double the amount supported by big business. So does the sector get the recognition it deserves or is it often drowned out by big business?
Bruce Billson
Well, there's never too much recognition for small and family businesses because let's remember these are the community-based entrepreneurs that are providing livelihood opportunities and vitality to the neighbourhoods and communities and regions that we live in.
They're also least likely to have lobbyists, big industry association and big voices. So, what we aim to do is bring their story, their issues and concerns and opportunities to improve the environment within which they operate to government, as well as being an ally in resolving disputes they may have with other businesses, with big corporates and with government.
So that's our contribution and it's a chance for us to recommit all of us as citizens of Australia to the vital contribution enterprising men and women of small business make.
Glen Bartholomew
What then are the biggest issues facing small business right now? Is big business finally paying its bills on time yet?
Bruce Billson
Well, they haven't peaked early on that one, Glen. Still, we've got about one in four big businesses taking more than 120 days to pay their small business suppliers and only about a third that are paying in within a month. Now payment times within a month, that's hardly spectacular. That's not too much to ask. Yet we've got about a third achieving that outcome.
And so what we say to big business is play your part. These small and family business suppliers are vital to your supply chains. There’re cost pressures in businesses, margin squeeze there that many are feeling. And I mentioned earlier that there's a number that aren't particularly profitable and there's many that aren't earning a large income from their entrepreneurial activities.
Glen Bartholomew
Can I ask you about that? Around 43% failing to make a profit. Three-quarters of small business owners taking home less than the average wage. So how are they surviving?
Bruce Billson
Well, this is the thing. They are motivated by their business. They have their personality in many respects and their identity interwoven into their enterprise. But they are also not living an income blessed life. They're really having to deal with the cost-of-living pressures that households are feeling. And let's remember, half of all small business loans are secured by a mortgage over the person's home. So, all those pressures that consumers are feeling are also there for small business off the back of, in many cases, quite modest incomes. But they're probably thinking look, we are optimistic we small business people, they're looking forward to the future. There's still some optimism about improvement in their circumstances. So, they're probably looking to trade their way out and delight more customers as a way of improving their income in years to come.
Glen Bartholomew
But on the downside, I guess perhaps some of them aren't surviving. Giving the latest figures from ASIC showing the highest rate of business insolvencies in more than seven years. More than 7100 companies collapsing in the 12 months to June. On track to exceed the pre-pandemic levels of such collapses. How concerned should we be that these failures now are spreading beyond construction to other areas like childcare, retail and healthcare?
Bruce Billson
We should be concerned because it does reflect many headwinds that small and family businesses are facing. It also reflects a change in posture, Glen. We knew during the COVID era and shortly after it, the Tax Office, big lenders, other financiers, others with trade credit were in a support and assist mode, trying to be as helpful as they can be. Now, there is a time of those arrangements being brought back to a more regular setting. That does mean for people that have had those accommodations previously that they may have now the time to deal with those debts that may have accumulated during COVID.
We're also seeing businesses trading with other businesses making more inquiries about the financial resilience of those that they're doing business with, just to make sure the terms and conditions that they're engaging on with those small businesses reflects their financial strength as well.
So, there's clearly a heightened sense of awareness about that financial vulnerability. It's why the best thing we can do is get behind those small and family businesses on this international day, show them that we value that community and do our bit to help vitality in those businesses.
Glen Bartholomew
Perhaps a little message for the Reserve Bank ahead of the next meeting in a week's time as well. Of course, there was a government inquiry into insolvencies. I know you've made a submission to that. Let's see where we go in that direction. But for the moment, Bruce Billson, thanks very much for your time.
Bruce Billson
Glen, great to be with you and your listeners, sir.