Small businesses and the next wave

KPMG Demographer, Bernard Salt explores the Aussie small business takeover. 

Speak to anyone in business and before long they will be lamenting the collapse of the mining boom. “Where is the next wave of growth going to come from?” they will ask.

Some will talk about the rise of health or education or something loosely known as professional services. Others will talk glibly about the rise of knowledge workers.

Regardless of what might underpin the next wave of prosperity in Australia, one thing is for certain: it will not be large international manufacturers coming to Australia employing thousands of locals on our terms.

Those days are over. Which kind of adds to the overall anxiety about how we will maintain prosperity.

The next wave for business, the new way of life

I have an answer to this question - and it isn’t knowledge workers or health or education of professional service workers. In fact it’s not an industry at all, it’s more of a way of life.

The next wave of business activity driving Australian prosperity will be not be tied to an industry, it will be tied to a type of business; it is in fact small and medium businesses, or SMBs to, be precise.

I won’t get into the nitty gritty of the numbers just yet; I’d rather spell out my logic. Remember: numbers follow logic.

The Australian economy, and to be fair other economies too, are shaped by a demographic lumpiness caused by a baby boom after WWII.

There are five million baby boomers now aged 52-70 straddling the Australian workforce. Some have retired, some are still working, some are scaling down.

Boom(er) time for businesses

Baby boomers are different to preceding generations for two reasons.

They are bigger: five million boomers follow-on from 2.6 million pre-boomers, meaning there’s a lot of them. And secondly the boomers as a life force are better educated than any preceding generation.

So it may be concluded that a large clump of educated, ageing baby boomers is fast approaching retirement. Do you think this lot will want to retire, or do you think this lot will want to remain in the workforce in a reduced capacity?

The fact is that many will likely indeed scale back and keep working; many will take a package and retire; some will retire and start their own businesses; some will resign and come back as a consultant or a contractor.

And that is precisely what is happening.

We are a nation of independently-minded people, and none more so than the self-confident baby-boomer generation looking to explore new lifestyles and new ways of earning a living. Let me give you some numbers.

The number of sole-trader businesses (say a one-man band consultant) in Australia increased by 2,900 per year over the six years to June 2015.

The number of small businesses employing 1-4 workers jumped by an average of 14,800 per year over this period. On the other hand businesses employing 5-19 workers, 20-199 workers, and more than 200 workers all contracted over this period.

The only business growth by number since the GFC has been in the sole proprietor and in the micro business category. Over this period the nature of work changed.

Fewer fulltime workers and more part time workers emerged. The workforce is casualising.

Business wants workers that are fluid and agile and that can respond to changes in market demand. Part time work fits this business model but so too do sole-proprietor and micro businesses.

And the kinds of businesses that are being developed also fit the bigger picture narrative that I sketched earlier with growth in the health, professional services and construction sectors.

This means that there has been in the immediate past, and there is expected to be in the short term future, small business growth in medical and aligned activities, e.g. yoga and Pilates and wellness instructors, in professional services like accountants, solicitors, architects, engineers, town planners and in construction services like builders, plumbers, electricians, carpenters and plasterers.

The bottom line is this: if Australia, and probably other select nations as well, are all moving in the direction of a nimbler workforce, and if baby boomers are indeed contemplating their future work stream en masse, then how does that play out?

I say that it plays out in the greatest surge in growth in the number of businesses that this nation has seen as boomers and others pursue their deeply-held Australian instincts of setting-up shop and operating on their own account.

And why not? Their kids have left home. They have some super as security. And they have always wanted to be their own boss. Why work in a big corporation when smaller, nimbler operating models are all the go?

And of course if this is the case then there will be heightened demand for the kind of technology that access to the nbn™ network can enable.

Put in a bid for that job. Check the payment status of that invoice. Download plans and photos from a client. Collaborate in virtual meetings with participants from various locations.

Store sophisticated datasets and access software applications using Cloud computing. And all done remotely on the go and between clients. 

What’s not to like about life on the go as a CEO of your very own SMB?

Bernard Salt is a KPMG Partner and is author of the report Small Business, Big Thinking, which was commissioned by nbn.

For more information, visit our Broadband for Business homepage.

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Last updated on 22 December 2016