Small business profit concerns as costs rise

The latest Small Business Matters report published by the Australian Small Business and Family Enterprise Ombudsman shows profits for small and medium businesses are declining.

According to the data, 43 per cent of small business are non-profitable, which is the lowest proportion since 2012-2013 when the number was 48 per cent. This compares to 15 per cent of medium and large companies which were non-profitable. This is the lowest proportion since the Global Financial Crisis.

The report shows that the majority of small business owners are earning less than wage earners, in some cases less than their own employees. Three-quarters of self-employed small business owners working full-time earn less than the average full-time adult wage, and 55 per cent of small business owners working full-time with 1-19 employees earn less than the average full-time adult wage.

As the total personal income of small business owner-managers increases, so does the proportion whose main source of income is from their own unincorporated business income and investments. For those on an income of $10,000 or more, 48 per cent received most of their income from their own unincorporated business and 34 per cent from investments.

The report also indicates small business owners are working more hours. Forty-five per cent of self-employed businesses owners or those with less than 19 employees work more than the Australian median of 38 hours per week.

Data shows 97.5 per cent of Australian businesses are small businesses, employing more than 5 million people. In total, small businesses contributed 33 per cent to Australia’s GDP (2020-21), with the construction industry the largest contributor adding $74.2 billion to the economy.

Small business owners are getting older, with nearly half (47 per cent) aged 50 or more, and 22 per aged 60 or more. The median age is 50. Only eight per cent are younger than 30 – down from a peak of 17 per cent in 1976.

To download the report. Click here.

See the SPLASH! article on Maintaining Profitability and Avoiding Insolvency.

To find more information and resources, click here.

Also, see a new free Beyond Blue initiative for small business owners to help them handle stress.