Theodore Roosevelt once observed that the best thing to do is the right thing, the next best is to do the wrong thing and the worst is to do nothing. While there’s been some justifiable debate along those lines with respect to the makeup of the first Abbott cabinet, by giving cabinet status to small business the new government has done one unequivocal right thing.
From time immemorial, sanctimonious rhetoric about small business is given voice during the flush of election campaigns and inevitably it amounts to a mask for doing nothing. Creating a single dedicated cabinet position signals a long overdue move away from mere tokenism.
When Bill Shorten announced the opposition portfolios last month, he located the shadow minister for small business in his office. The numbers speak for themselves. Well over 2m small enterprises are trading in Australia compared with just 6,000 large businesses. Enterprises employing under 19 staff account for 96% of all businesses and employ 46% of all private sector Australian workers. By contrast, big businesses with more than 200 employees account for 0.3% of businesses and employ 30% of workers.
According to the Department of Industry, small businesses also contribute 34% of private industry value added, 20% to the GDP, and they employ around 4.8m Australians. In addition, around 18,000 small business exporters ship $1.2bn of goods, which amounted in 2010-11 to 41.6% of all goods exporters and 0.5% of the total value of all exported goods.
Just as big business needs to do well if the nation is to prosper, small enterprises need to flourish. But unfortunately those exercising power need constantly to be reminded of the centrality of start-up enterprises and small entrepreneurs, and to be mindful also of their precariousness.
Recent Mccrindle research reveals that of new businesses started four years ago, more than half are no longer trading. The most encouraging results are in health care, agriculture, forestry and fishing, as well as rental, hiring and real estate services, all with survival rates of around 70%.
But the attrition rate in many other industry sectors is seriously problematic and is the cause of significant hardship by small business owners and employees. Small businesses are especially susceptible to cash flow crises and lag times while they wait for marketing initiatives to get traction and turn into sales.
They are also exposed to the grubby behaviour of some big competitors that dominate markets at the expense of suppliers and honest traders. The callous destruction of small traders through unfair competitive practices is not in the interests of national prosperity. In times of suppressed demand and flagging confidence, it is up to all of us to contribute to a polity and an economy that is characterised by a widespread readiness to invest and consume. The big end of town will not thrive if small enterprises fail in large numbers.
As a case in point, Bruce Billson’s speech to the Industry Leaders Forum of the Food and Grocery Council this week made a very valid point about some of the issues around buyer power and how big players use that power. He signalled his intention as small business minister to contribute to a review of Australia’s competition laws so that small suppliers have genuine incentives to invest and innovate in the supply chain.
As the head of the HR institute in this country, and with most of our members working in larger businesses, I am mindful that another reason for the failure of small businesses is that they do not enjoy an advantage that big business takes for granted: good management of their people.
Issues around staff disengagement can swiftly destroy small businesses.
As customers, most of us can tell when we deal with employees who are surly or incompetent. Business owners who do not take steps to win the hearts and minds of their employees will inevitably risk having people in their midst who not only fail to work for the good of the enterprise, but who actually work against it.
There are well tried techniques for recruiting the right people, training them well and keeping them engaged. These fundamental techniques tend to be neglected by small business owners whose minds are often elsewhere, usually on the cash flow or the marketing campaign.
I look forward to watching and reporting how Billson goes about implementing the enlightened small business policies that the Coalition took to the election. Small businesses face obstacles securing government contracts, and small suppliers are very often at the bottom of the list when it comes time for invoices to be paid. The Coalition policy has undertaken to remedy those types of practice and I for one am keen, on behalf of my board, to play a part in helping make those things happen.
Lyn Goodear is the chief executive of the Australian Human Resources Institute. This is an edited version of an article that appeared in The Guardian on 1 November 2013.