Small businesses are the backbone of Australia’s economy. Take a look around your local community. Everywhere you look, there are small businesses providing a service you probably can’t live without. The artisan coffee shop that sells the best decaf espresso in Melbourne, the local florist with the most amazing bouquets, or the wine bar/pizzeria where you hang out with your friends every Saturday night and the bartender created a cocktail especially for you.

Of all the actively trading businesses operating at the end of 2017, 98% of them had an annual turnover of less than $2 million. Before July 2017, the turnover threshold for a small business was $2 million. It has since increased to $10 million, so even more Australian businesses now fall into this category.

All of these businesses are integral to our everyday lives. We might not realise it, but they also have important economic significance.

ABS small business stats

Figures from the Australian Bureau of Statistics (ABS) are very revealing. The number of sole proprietor businesses went up by 4.5% to the end of 2016/17, which indicates businesses are thriving in Australia. There were 868,000 employing businesses in operation at the end of the same period; 70.1 per cent of them employing between one and four people. This makes small businesses a major employer.

Small business is a big employer

Statistics reveal that businesses that employ less than 20 people account for 45 per cent of private sector jobs. They can’t compete with big businesses in terms of employment growth, but an awful lot of Australians rely on local businesses for a job. Without small business employers, rural communities would be economic wastelands. Australia’s population is dispersed over a huge landmass and many rural communities rely on small businesses for everything.

The rise of home-grown entrepreneurs

Entrepreneurship is booming in Australia. ABS figures show that there were 2.24 million registered private sector businesses in June 2017, an increase of 3.1% in 12 months. It has never been easier to start a small business. Technology solutions allow small businesses to compete in the global marketplace. Entrepreneurs these days use low-cost cloud-based SasS to run their businesses and capture new customers. Everyone, from e-commerce stores to online stock trading entrepreneurs can start a business from their front room; a fancy office is optional.

Xero, a well-known accounting solution for small businesses, surveyed its customers and discovered that 20% of them had customers off-shore. This would have been impossible 20 years ago. Now, technology makes it easy to reach people in different countries.

Small businesses contribute to Australia’s GDP

Research carried out by the National Australian Bank (NAB) found that SMEs contribute 57% to Australia’s GDP. It’s clear how important small businesses are, which is why politicians love them. In any given election campaign, showing the small business community some love is political gold.

The federal government has pledged $300 million to help small businesses grow. Red tape throttles small business growth, and with many small business owners struggling with cash flow problems due to Australia’s late payment culture, anything government can do to help is vital.

Without economic input from small businesses, the Australian economy will struggle to maintain forward momentum. If the government makes it too difficult to start and run a small business in Australia, talented entrepreneurs will take their skills and leave Australia.

Is that really what we want?


Content supplied in collaboration with IG Markets.