Small Business Conditions and Finance
Proceedings of a Conference, Sydney 2015, Editors : Angus Moore & John Simon
For the past four decades, governments, researchers and a broad range of professional associations have focused on the small business sector, primarily from an economic and policy setting perspective. This focus recognises the important role small businesses play in the Australian economy – 97 per cent of businesses, as at June 2014, were classified as ‘small’.
However, this classification is based only on employment, which lumps small firms into one homogenous group. In fact, small businesses are mainly unique extensions of their owners’ capacities, goals and aspirations. The single classification of ‘small’ does nothing to assist in understanding the complex mix of segments in the small business sector, or the factors that affect these different segments. This paper focuses on unpacking the sector to provide insights into the segments that make up the small business sector in a way that policymakers and other agencies can support and understand.
In Australia, the Wiltshire Report was the first systematic review of the effect of small businesses
on the Australian economy and on the factors that influence and affect the sector (Department of
Trade and Industry 1971). The Wiltshire Report has been followed by myriad government inquiries and reviews, often with a focus on a single issue, such as: access to finance; regulatory compliance; or succession planning issues for family-owned businesses. There has also been much published research in the academic and professional literature; however, it is constrained by relatively small sample sizes and a focus on single issues rather than on the complex mix of factors that influence the sector. Many of these factors are internal and they often flow from the individuals that own and operate the business; others are external, such as those created by the economy or governments.
The outcomes of the cycle of ongoing single-issue inquiries rarely provide a comprehensive
understanding of the interrelated multiplicity of factors affecting small business performance.
This paper proposes a novel and comprehensive method for collecting information, focusing
on both internal and external factors. The data analysis draws on a representative survey of firms and a new method of data collection. This approach provides a visual map that explains the combination of factors that matter most to business owners, rather than focusing on the elements of a single issue.
The paper identifies five key segments within the small business sector. These segments vary
significantly in terms of the factors affecting them and how these factors relate to the aspirations, goals and performance of firms. This information is an important start in moving to a constructive information-based discussion concerning policies directed at removing the impediments identified for each segment of the small business sector.
Importantly, the paper sets out to address not what the small business sector looks like – these
data are readily available – but why it is configured in such a way at both the individual firm
and macro levels. This information can foster a constructive information-based discussion. This
is a uniquely different approach compared with the prevailing single-issue, and often anecdotal,
approaches that have occurred to date and provides a platform for an effective alternative policy
framework.
The paper proceeds as follows: Section 2 outlines the differences between small businesses
and other firms, and explains the importance of adopting the approach taken in this paper for
understanding small businesses. Section 3 outlines the survey methodology and data used in
the paper. Section 4 outlines the factors that the survey identifies as affecting the small business
sector as a whole. Section 5 details the five segments of the small business sector identified by
the survey analysis. Section 6 offers concluding remarks.
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