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Category: Business, Economics and Finance / Small Business

How hard is it to start your own business?

Tuesday, 18 Oct 2016 15:06:54

One major challenge for small business owners is accessing finance. (ABC News: Margaret Burin)

Q&A panellist and industrial relations expert Grace Collier suggested unemployed people should start their own businesses to get back into work.

"Nobody has an entitlement to a job. Society doesn't owe you a job. The Government can't get you a job. The Government shouldn't have to get you a job," she said on Monday night's program.

When Greens leader Richard Di Natale pointed out there were fewer jobs than people in Australia, Ms Collier replied: "People can start their own businesses."

"It's terrible, isn't it? Wouldn't it be awful to have to start your own business because someone else has to give you a job?" she said.

Australian Chamber of Commerce and Industry chief executive James Pearson has told the ABC Ms Collier's suggestion "may be the right option for many people, including those who are currently unemployed".

Australia would become "a more prosperous place" if we could encourage more Australians to start their own businesses, he said.

But how hard is it, really, to start your own business and are retrenched workers really in the financial position to be doing so?

Let's start with the good news about opening your own business

Mr Pearson said it was easier to start a business in Australia than in many other parts of the world.

"According to the World Bank it takes less than three days to complete the formal processes, compared to more than eight days in comparable countries," he said.

"But we should strive to make it easier for businesses to comply with government regulation by cutting red tape where possible."

Barista Emma Bertoldi Photo: One major challenge for small business owners is accessing finance. (ABC News: Margaret Burin)

Now for the bad news about starting your own business

You need money, or you need to know someone who would be willing to lend you some.

"One major challenge faced by new businesses is accessing finance," Mr Pearson said.

"Last year the Productivity Commission found that new business-owners mainly relied on their personal savings and then on family and friends.

"This suggests that people who want to go into business need to have a secure financial position or at least family and friends who are willing to take a risk on them."

Mr Pearson suggested the process could be made easier if there was better access to "non-traditional funding" methods, such as crowd-sourcing for new business owners who lack collateral.

How many new businesses succeed and how many fail?

The Australian Bureau of Statistics released a report in February this year which showed there were 287,521 new businesses in 2011-12.

Of those, 74.3 per cent survived until 2013.

Less than 60 per cent (170,262) survived until June 2014.

In June of 2015, three years later, 50 per cent of those new businesses had closed.

"This shows that the big challenge faced by businesses is to survive the test of time by achieving a regular cash flow through adapting to changing consumer demand and shifting economic conditions," Mr Pearson said.

The same report found the number of actively trading businesses had increased overall for the second year in a row, but partnerships and sole proprietors were on the decrease.

AustraliaPlus


 

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