For many Aussies, a job in a small business is a part of growing up. A teenage job at the local fish and chip shop, a part-time job at a shoe store in your university years, or a bartending job at the local pub after starting a family. While these may not be your experience with employment at a small business, there’s no doubt you’ll know friends or family working for them.
As the beating heart of the economy, small and medium enterprises (SMEs) face challenges, much like any other business. The transformative impact of the recent pandemic has forced businesses to reimagine what’s possible, and many small businesses have had to adapt to the times, perhaps by upskilling through qualifications such as an online MBA.
What does the future hold for Australian small business in 2024? From the headwinds of artificial intelligence and automation to tax incentives, let’s discover the ways that small and medium enterprises can grow in the year ahead.
Economic Battlers – The Power of Small Business
It can be challenging to start a business – in recent years, data revealed by the Australian Bureau of Statistics found that more than half of all new businesses fail within the first five years of operation – highlighting just how difficult it is to start a small business.
No matter the size of the business, getting started is always tricky – even global retailers such as multinational hypermarket chain Kaufland have felt the perils of trying to operate in a competitive marketplace. If a multinational company spends six months designing a distribution centre but leaves never opening a store, what hope is there for small businesses?
Fortunately, the plight of Kaufland is not the same as the pressures faced by small businesses. Small and medium enterprises face many challenges upon starting up, however, there is a wealth of evidence to suggest that some of the primary reasons for small businesses failing include poor quality market research and a lack of understanding about the industry you’re stepping foot into.
Small businesses are a valuable contributor to the economy – in fact, government reports estimate that as much as 44% of the private sector workforce (excluding government and financial services businesses) is made up of individuals who work for small businesses. For five million Aussie battlers, working for a small business is just part of the day-to-day.
The Headwinds of SME – Climate Change and AI
While small and medium enterprises are the powerhouses of the Australian economy, that’s not to say that they’re immune to challenges. From supply chain pressures to the impacts of inflation, flood, and fire, small businesses can sometimes face challenges that would seem insurmountable for all but the mightiest of organisations.
Much can be said of the impact of climate change on business. Adverse weather events such as fire and floods can destroy agricultural properties, ruining businesses and changing the lives of owner-operators forever. In recent times, it was estimated that the cost of the Black Summer bushfires of 2019-20 totalled as high as $5 billion from businesses, largely agriculture and farming operations.
Climate change isn’t the only challenge facing business. There’s a wave of new technology sweeping across the digital landscape, transforming the way that everyday Aussies interact with computers. From online shopping platforms to powerful new AI platforms such as ChatGPT, small businesses are being challenged by new incumbents from both domestic and international.
These new technologies may seem like they’ll be a challenge for small businesses, however, they present an immense economic opportunity for those who wield them correctly. Small businesses can open new international shipping opportunities with a few clicks of a button, allowing for a global reach for their product. On the AI front, the 38% of businesses that are investing, or expected to invest in AI over the next twelve months, can enjoy the benefits of generative AI to streamline and improve business operations.
Climate change and technological advances present headwinds for business – however, being able to understand their impacts and work to address them where possible can best position a small business for long-term success.
Tax Incentives for Small and Medium Businesses
It may sometimes feel like small and medium businesses operate on an uneven playing field when it comes to taxation. From GST to fuel excise and other operational expenses, it can seem difficult for a small business to get ahead, particularly when large multinational organisations are known for obfuscating or minimising their domestic tax obligations.
Fortunately, successive governments have recognised a need to invest in the success of small businesses – and as such, many policies have passed which encourage small and medium businesses to invest in assets that are vital to the long-term success of a business. Policies such as the Instant Asset Write-Off have provided small businesses with the ability to receive a tax break on large asset purchases without having to deal with the complexities of long-term depreciation schedules. This allows small business owners to invest with confidence, knowing that at tax time, the asset purchase is simply managed in tax affairs.
Broader government policy also provides a wide range of tax breaks that small business operators can take advantage of, from deductions on everything from accounting costs to the cost of certifications such as working with children checks. This can help a small business manage expenses and provide them with an even footing against much larger organisations that they compete against.
A Bright Future for SMEs
It is, without a doubt, a challenging time for small and medium enterprises. There are challenges afoot, whether they be from the competitor next door, the emerging technologies that one must adopt, or the threat of severe weather.
For many, the challenge of running a small business can feel insurmountable. However, small businesses form a critical backbone of the economy, employing millions and helping to keep the economic engine that is Australia alive and kicking.
To rise to the occasion, small businesses must embrace the challenge and attack it with the ingenuity that makes Australian business great. Whether it be utilising the benefit of taxation policies for small businesses or taking advantage of deductions, businesses can make their operating expenses go further, allowing them to play on an even footing when compared to their much larger competitors.
It’s a bright future ahead for SMEs – as the next generation looks to keep the entrepreneurial flame alive, we excitedly await new innovations in the small business space.