5 things to consider if you’re left wanting more
If you run a small business, chances are you’re running a micro-business. But what exactly does that mean and how do you measure up? It’s one of those things that everyone wants to know, but is afraid to ask.
Today, I thought I’d give you the goods on all things small business including micro business. Before we get too much further, I should point out, that businesses (as outlined in the report mentioned below) are differentiated from ‘hobbies’ by the presence of having registered an ABN, even though they may not necessarily be registered for GST. So let’s dig in.
What is a small business in Australia?
Small business is quite literally the engine room of the country’s productivity and GDP making up 97% of all businesses in Australia. We deliver a whopping 8 million jobs and around one-third ($ 170 billion) of GDP. As a group, we’re pretty nimble in terms of being agile and able to adapt quickly to bring innovation and diversity to the market. Plus, a lot of what we do has a strong community impact in that we’re more likely to provide the local services that contribute to local economies, and we’re great at understanding our clients’ needs.
The ATO and ABS define an Australian small business as employing up to 20 people and with a turnover of less than $10M.
Now before you despair that your turnover is nowhere near $10M or 20 employees for that matter, let’s look at what that really means.
A new report by the The McKell Institute and NRMA estimates that 89% of all businesses are actually a microbusiness. It sounds tiny doesn’t it – almost like it doesn’t matter. However, not so fast. Microbusinesses matter a great deal to the Australian economy. They’ve been growing at record numbers to 2.28 million (growth of 14% over the past four years – the fastest growth anywhere in the economy) – even during Covid – which speaks volumes about Aussie resilience – when one door closes, those with an entrepreneurial spirit find another one to jimmie open.
Women currently own around 35% of businesses in Australia. And in the small business sector, there are just over 800K of us.
Okay so enough about the basic stats; have you ever wondered about how your business turnover measures up though? And yes, we’re talking turnover, not profit or owner earnings here.
90% of small and microbusinesses in Australia have revenues of less than $200,000 a year.
So if your business is turning over more than $200K a year, congratulations, you’re in the top 10%.
Surprised? I know I was and frankly, I get to see business’ financials all the time. There seems to be a bit of tall poppy syndrome around business owners and what they earn. Sure, we’ve all read the media stories about the 60 or so people earning bazillions a year and paying no tax. However, when you look at that in the context of the tax-paying population, it doesn’t even scratch the surface.
I did a quick Google search to see what the ‘average’ business owner earns and it varies wildly depending on what you read (and where that info came from). Indeed has the number sitting around $154K, but Glassdoor says around $110,000 – which probably isn’t too far off (remembering that most businesses don’t turnover much more than that). But also, if a business is turning over $150K, it’s also got outgoings thrown in there too – rent, car expenses, staff if you’ve got any, professional fees, website management fees, etc. I’m wondering if a number of folks looked at what the business earned and said that was their take-home – it’s a mistake that many people make. What’s in the business’ bank account, never equals what you earn.
However, the fact that 90% of turnover less than $200K, tells me there are a whole host of business owners who are entirely satisfied with where they’re at revenue-wise. They’ve, in essence, bought themselves a job that pays at least the majority of their bills and lets them do their do with more flexibility than they might otherwise have as an employee. And that’s as it should be. You should run your business, it doesn’t need to run you.
But what if you want more turnover than $200/yr?
Well, there are some pretty unique challenges business owners face in terms of having limited access to resources (staff and finances), administrative load and cybersecurity – especially for those with an online presence – which should be almost everyone now. Of particular importance is protecting your business’ digital assets (including your digital reputation) and your customer data (which has legislated requirements in place now).
Places to start might include:
- Investing in staff – There’s a great book called Buy Back Your Time by Dan Martell. Where he talks about hiring staff, not to grow your business, but to buy you more time to do the stuff that only you can do (rather than you trying to do it all – and let’s face it as a business owner, there’s a lot of ‘all’ for you to do). Hiring an assistant or VA to help you out might be exactly what you need.
- Leveraging digital tools to streamline your operation. Martell also talks about automating wherever you can. Things like using Xero as your cloud accounting package (and that you can save your receipts to), makes your reconciliations and invoicing so much easier. But you might also consider using software/apps to make your Google Adwords easier or your social media easier. Or even using ChatGPT to help you with your research.
- Collaborating with your network. If you’re looking to grow, reach out to others in your network, either locally or further afield, and think about how you might best work together to grow something new.
- Plan for things going awry – put a risk management plan in place. I’d warrant that the majority of business owners have never really thought about what would happen if their business burnt to the ground, or their loans were recalled or whatever the worst is that you might imagine could happen. However, if you allow yourself to think through what might be, as awful as it seems, you will come up with ideas for how to get things back on track sooner rather than later. These things can and do happen. Best formulate a plan before it happens.
- Ask your accountant to be your ally on your growth journey. They can help you with how to better manage your finances, and run budgets and cash flow forecasts for you – so nothing catches you off-guard. Plus they can identify areas within your business for cost savings so that you can use that money better. Not to mention helping with your tax planning and compliance – and as we’ve said before, tax planning isn’t something you do when your returns are due, they’re something to think about well in advance of the financial year’s end.
Of course, if you’re looking for an accountant to be your ally, or you need good, qualified advice, or transition your business to cloud accounting with Xero so you have a clearer handle on your business’ tax affairs, we’d love to help.
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