As a business owner and also a consultant to start-ups, I believe in taking a positive approach but it must be balanced with a devil’s advocate-type slant.
Earlier this week I wrote about the real reasons small business fail, and took the view of approaching it as an entrepreneur and particularly, pre-meditated expectations, mindsets and sound governance of your strategy. I am acutely aware of the risks one takes in launching a start-up, and the lack of support we have experienced in Australia due to the frameworks (and sometimes lack of) set up to govern small businesses. The other element to this is the external factors and conditions that potentially impact our businesses in a damaging and negative way.
My first thought is always about international competition, market positioning and the lack of capital available in Australia. I recently discussed this with a friend and he came up with a very simple answer as to why most small businesses fail in Australia: lack of capital, resources and experience. The risk is that once the experience has come, the capital has already run out. It is a simplistic yet resoundingly true statement. And while I will still defend my stance that it is a good time to start a business, it is disheartening that very often the biggest barriers small business face are unfair and archaic.
Funding options in Australia remain limited and, if secured, are difficult to truly take advantage of as demonstrated by the reality of many of our tech start-ups moving overseas fast.
This is not because there isn’t a great start-up community in Australia, but because the latitude to move out of start-up mode let alone scale a business is harder and more costly here.
Examples such as the reduction of R&D tax breaks, payroll tax for SMEs and employee share option tax create further barriers for SMEs, which simply will be unable to remain competitive as Australia shows itself to be a costly environment with little incentives to stay.
Convoluted frameworks, excessive red tape and a lack of support to entrepreneurs are very often not only a hindrance but a kiss of death to an otherwise fantastic concept backed by a solid team.
Very often, business owners don’t even consider the implications on their business structure, how they hire their staff, operation restrictions and how their taxes and subsequent legal liabilities are managed. I have seen huge errors, and made many myself, where small business owners have relied solely on a third-party adviser, perhaps an accountant or lawyer but ignored the intricacies of protecting cash flow for small business.
Using a professional does not negate your own need to become familiar with the ins and outs of your small businesses’ financial health, and while you won’t be an expert on many issues, you at least need to be able to know the right questions to ask and also endeavour to pick up any errors that could become costly and damaging to your business.
This has happened to me and it caused a lot of money to rectify the issues with ASIC and the ATO and ultimately woke me up to becoming far more cognisant to what was being prepared and lodged. Errors like this, in conjunction with external factors, heighten already risky operations that could have otherwise been avoided.
In 2013, when the Coalition initially promised to “reduce the red tape burden and compliance costs” to small businesses, key focus areas included providing an easier and better way to pay super, a $1 billion red tape reduction per year and ultimately promising to make small business a portfolio for the Department of Treasury.
Coming into 2014 we have seen the addition of $484 million dollars for entrepreneurs in this year’s budget, with mixed reactions from business-owners across Australia about the reality of such implications, and $8m towards a Small Business and Family Enterprise Ombudsman. All this on the surface sounds promising, but I am not holding my breath for an entirely level playing field any time soon. I will continue to operate and make decisions for my company aware of the restrictions and obstacles I will inevitably encounter.