Small Business Counts report predicts a shake-up of the aging SME sector

According to a new report released at the Council of Small Business of Australia (COSBOA) Summit last week, 61% of employing small business owners are approaching retirement age.  This statistic coupled with the fact that the majority of small business owners are aged between 45 and 59 years could lead to a significant shake up of the sector in the coming decade.

“The small business landscape will be transformed over the coming years with a significant number of older small business owners expected to retire, sell or move on,” Ms Carnell said.  “This generational shift presents a number of challenges for the sector and the economy more broadly.”

How could an aging population impact the SME sector?

As the small business population ages and wishes to retire, they may plan to either pass their business on to family members or sell.  This could pose problems for the sector as there may not be enough younger generations willing to take on the perceived risk and lower earnings of a small business (the report found that 50% of small business owners earn below the minimum wage).

In addition to this, potential younger business owners may have difficulties accessing the finance they need to start up or take over a business.  We are seeing a decline in home ownership (a traditional pathway for securing finance) particularly in the 25-34 age bracket.  In addition to this, the fallout of the Banking Royal Commission has seen a significant tightening of lending practices with 92% of finance brokers believing it is harder for SME’s to access finance than it was 12 months ago.  In February 2019, lending to businesses decreased by 2.4%, and since February 2018 it has decreased 3.3%.

“We know access to funding continues to be a barrier to small-business operators, so some of the business owners looking to sell may find it difficult to attract a buyer.”  Kate Carnell.

Payment times and cashflow remains a key concern

The report also found that late payments are responsible for 43% of cashflow issues faced by small business.  Cash flow problems can impair the performance of a business as well as its revenue and opportunities.  Statistics show that over half of small businesses are paid late (on average 23 days after they are due).  More than 50% of businesses needing to ask multiple times for their invoices to be paid.  This contributes to the viability of small business.

Keeping things moving

While the report, which draws on a number of Australian Government sources reveals challenges, the growth and dynamism of the sector is not to be underestimated.

As Ms Carnell puts it;

“Overall, the Small Business Counts report shows the small-business sector is surprisingly large and vibrant, which is vital to the health of the Australian economy.”

The SME sector employs almost half the nation’s workforce; entrepreneurial and adaptable by nature we can anticipate a rise to the challenges.  In fact, we are already seeing an increase in alternative finance options being sought by the sector.  Using invoice finance for example has the power to provide finance to a business by leveraging their own accounts receivables.  In the current market, a finance option that does not ask for personal assets as collateral and help keep cash flowing, could be a real enabler to keep the sector moving in a period of change.

To find out more about how invoice finance can help SME’s thrive and grow contact Apricity today.