tag:theconversation.com,2011:/au/topics/small-and-medium-enterprises-1277/articlesSmall and medium enterprises – The Conversation2021-05-19T14:45:44Ztag:theconversation.com,2011:article/1593782021-05-19T14:45:44Z2021-05-19T14:45:44ZMaking intellectual property rights work for small and medium businesses<figure><img src="https://images.theconversation.com/files/399974/original/file-20210511-14-1xmspqn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A certification mark, such as Coffee Kenya, can be used by small businesses to indicate a guarantee of quality</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>SMEs are considered <a href="https://academicjournals.org/journal/AJBM/article-abstract/10B0E3226503">engines of growth</a> - creating a diverse labour force, low to highly skilled jobs and supplying goods and services. But often SMEs fail to deliver on this potential. This is because they lack adequate resources to <a href="https://www.econstor.eu/bitstream/10419/184606/1/fman-2016-0019.pdf">market</a> their goods and services. The ability of SMEs to grow is constrained by their inability to do market research, by the low quality goods and services, and by insufficient advertising.</p>
<p>A possible solution to the marketing related challenges lies in appropriate use of intellectual property rights. These are collective marks, certification marks and geographical indications. They are used to distinguish goods and services in markets. Examples of certification marks include the <a href="https://www.fairtrade.net/about/fairtrade-marks">FAIRTRADE logo</a>, which certifies that agricultural products are ethically sourced and the <a href="https://www.woolmark.com/">Woolmark logo</a> which certifies pure wool products.</p>
<p>I have been researching <a href="https://openair.africa/person/charlene-musiza/">intellectual property and SMEs</a> for my PhD. My research explored trademarks and geographical indications as tools for advancing economic development in Africa. It focused specifically on how SMEs can use intellectual property rights to gain market access and effectively market their products. The findings of my study were that collective marks, certification marks and geographical indications can be used by SMEs to scale the limitations of size and resource constraints. </p>
<p>The key advantage of such distinguishing marks lies in their collective nature. They can be used by clusters of SMEs, associations of SMEs or other collectives of producers of similar or related goods and services. They are suitable for producers that face size and resource constraints such as SMEs. Research also shows the potential of collective marks to <a href="https://academic.oup.com/jiplp/article-abstract/4/1/57/836035?redirectedFrom=fulltext">create clusters</a>, enabling SMEs to form networks that help them scale resource limitations. </p>
<h2>Size and resource constraints that challenge SMEs</h2>
<p>Characterised by small scale production and service provision, oftentimes SMEs find it difficult to market their goods and services effectively due to resource constraints, financial or human. Marketing factors include poor product <a href="https://www.ajol.info/index.php/sabr/article/view/178567">variety and branding</a>. SMEs are unable to adequately employ product branding which can attract customers.</p>
<p>The challenges SMEs face also arise from their <a href="https://www.jbrmr.com/cdn/article_file/i-26_c-262.pdf">size and isolation</a>. SMEs struggle to achieve economies of scale and seize market opportunities that require standardised production, large and regular supply. They are therefore at a disadvantage in accessing markets for their goods and services, and that is exacerbated by <a href="https://www.tandfonline.com/doi/abs/10.1080/09765239.2015.11917617">small distribution networks</a>.</p>
<p>SMEs find it challenging to build a recognised brand name and establish a reputation among customers. A brand name would be useful not only in distinguishing the goods and services from others, but also in creating an association of the products or services of SMEs. Using distinguishing marks can therefore help SMEs establish brand names and overcome marketing related challenges.</p>
<h2>Key functions of distinguishing marks</h2>
<p>An effective marketing strategy creates consumer awareness of SME goods and services. Distinguishing marks such as collective marks, certification marks and geographical indications can be useful <a href="https://academic.oup.com/jiplp/article-abstract/4/1/57/836035?redirectedFrom=fulltext">advertising devices</a> for associations or groups of SMEs. Distinguishing marks indicate the source of goods and services. They enable product differentiation which trigger in consumers’ minds an association between the source of goods or services and the quality or value of those goods or services.</p>
<p>A <a href="https://www.wipo.int/edocs/pubdocs/en/wipo_pub_489.pdf">collective mark</a> distinguishes the material, mode of manufacture or other common characteristics of goods or services of different enterprises under an association. It distinguishes the goods or services of the members of the association from non-members. The association of producers sets out the requirements for use of the collective mark by the members of the association.</p>
<p>A certification mark usually serves as a guarantee of quality. It indicates that goods or services comply with specific standards. A certifying authority sets out the rules of certification and controls the use of the certification mark. An enterprise that complies with the rules can be allowed to use the certification mark. Examples include <a href="https://www.karoomeatoforigin.com/">Karoo Meat of Origin</a> for lamb from the Karoo region of South Africa and <a href="https://ipkenya.wordpress.com/2015/01/15/registration-of-the-coffee-kenya-certification-mark-by-the-government/">Coffee Kenya</a> for Kenyan coffee.</p>
<p>A geographical indication indicates a link between the local environment and the characteristics of goods. It identifies the origin of goods which have a certain quality, reputation, or unique characteristics, which is derived or influenced by the geographical origin. This can be the climate, geography, and human factors (such a local knowledge and skills) of the place where the goods originate which give the goods their unique qualities. An example is <a href="https://academic.oup.com/jiplp/advance-article-abstract/doi/10.1093/jiplp/jpab014/6134836">Oku white honey</a> from Cameroon.</p>
<p>These distinguishing marks can be used by SMEs. However, lack of <a href="https://www.wipo.int/edocs/pubdocs/en/wipo_natstudy_sme_tanzania.pdf">sufficient knowledge</a> about intellectual property rights and inadequate access to legal information limits them from taking advantage of distinguishing marks. For that to change it is important to raise awareness and identify SMEs that can benefit from using product branding.</p>
<h2>Are clusters a solution?</h2>
<p>Collective marks, certification marks and geographical indications can be marketing devices for associations or groups of SMEs. By developing clusters to improve the quality of products of SMEs and strengthening producer associations, governments can set the framework to develop capacity to use distinguishing marks for access to markets.</p>
<p>Clusters foster collaboration among producers and are a way to overcome size and resource constraints. They enable the standardisation of quality of <a href="https://mpra.ub.uni-muenchen.de/37039/1/MPRA_paper_37039.pdf">common goods</a> and therefore an opportunity to use collective and certification marks. Already clusters are a feature in many <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/2546/588500PUB0Indu101public10BOX353816B.pdf?sequence=1&isAllowed=y">urban areas in Africa</a> and facilitating their use of distinguishing marks can help SMEs engage in marketing and scale the limitations they face.</p>
<p>Producer associations or collectives of producers of similar or related goods can benefit from branding strategies. Members of an association can craft the rules that govern the use of the collective mark by the SMEs. An independent body can establish rules for compliance for a certification mark to be used by SMEs that comply. And for products that have given attributes due to the geographical origin, SMEs can register a geographical indication.</p>
<p>The collective nature of these intellectual property rights can be useful and transformative for SMEs, especially given the characteristics of SMEs and the marketing related challenges that they face. This can be an effective way to make intellectual property rights work for SMEs.</p><img src="https://counter.theconversation.com/content/159378/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charlene Musiza does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Small and medium-sized businesses play an important role in economic growth and development but are hamstrung by their lack of adequate resources to market their goods and services.Charlene Musiza, PhD Candidate Faculty of Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1485282020-11-05T02:30:42Z2020-11-05T02:30:42ZHow fintech can help Indonesia’s small and medium enterprises survive the COVID-19 pandemic<p>In Indonesia — Southeast Asia’s largest economy — small and medium enterprises (SMEs) contribute to <a href="https://www.thejakartapost.com/academia/2020/07/17/smes-safeguard-economy.html#:%7E:text=SMEs%2C%20which%20account%20for%2060,and%20communities%20across%20the%20country.">around 60% percent of the nation’s economy and absorb 97% of its domestic workforce</a>. However, while there are <a href="https://www.thejakartapost.com/academia/2020/07/17/smes-bailout-not-enough-demand-is-key.html">more than 60 million SMEs in Indonesia, only 12% can get financing or bank loans</a>.</p>
<p>The COVID-19 pandemic has made the situation worse for these SMEs, as almost 50% (around 30 million SMEs) have been forced to <a href="https://money.kompas.com/read/2020/07/28/170100126/kadin--sekitar-30-juta-umkm-tutup-karena-pandemi-covid-19#:%7E:text=Mereka%20mengatakan%20bahwa%20hampir%2050,%3A%20Kami%20Akan%20Lacak...">close temporarily, as demand plumetted due to the pandemic</a>.</p>
<p>That’s where <a href="https://www.bloomberg.com/quicktake/financial-technology-companies-disrupt-comfy-banks-quicktake">fintechs</a> can help. This term refers to a combination of financial services and technology that aim to make it easier for people to save, borrow and invest online.</p>
<p>Lending services offered by fintech companies like <a href="https://www.investree.id/">Investree</a> and <a href="https://www.tunaikita.com/">Tunaikita</a> could help these small firms to get loans at a lower cost with <a href="https://theconversation.com/traditional-banks-are-struggling-to-stave-off-the-fintech-revolution-124201">digital-friendly services</a> that outstrip conventional banks. </p>
<h2>Peer to peer lending</h2>
<p>Data from Indonesia’s Financial Services Authority showed almost <a href="https://www.thejakartapost.com/news/2020/09/24/fintechs-role-in-financial-inclusion-rises-but-infrastructure-literacy-challenges-loom.html">25%</a> of the country’s population doesn’t have access to banks. </p>
<p>SME entrepreneurs suffer greatly from limited access to banks, which makes it difficult for to obtain loans and fund business expansion.</p>
<p>Currently, there are about 157 fintech lending firms in Indonesia, with a total asset of almost Rp 3.2 trillion, according to the country’s <a href="https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/fintech/Pages/-Statistik-Fintech-Lending-Periode-Agustus-2020.aspx">Financial Services Authority’s Report in August 2020</a>. </p>
<p>One lending services offered by fintech firms is called peer to peer (P2P) lending. Under this loan mechanism, an individual or a company can lend money to others in return for an interest. </p>
<p>At least 54% of 12.8 million P2P borrowers are SMEs. The lending accounted for 55% from Rp 54.71 trillion of loans that the fintech sector <a href="https://event.tempo.co/read/1399891/kemenparekraf-gelar-finback-2020">disbursed last year</a>.</p>
<p>A <a href="https://www.thejakartapost.com/news/2020/07/03/p2p-lending-helps-smes-earn-more-scale-up-business-research.html">study</a> by Universitas Indonesia shows P2P lending helps SMEs scale up their business, eventually helping them qualify for bigger bank loans.</p>
<p>Online sellers that borrowed from the P2P lending platform were able to increase their income from the initial average of <a href="https://www.thejakartapost.com/news/2020/07/03/p2p-lending-helps-smes-earn-more-scale-up-business-research.html">Rp 807 million (US$57,046) to Rp 3.5 billion</a>.</p>
<h2>How the government can boost fintech expansion</h2>
<p>The government needs to support the expansion of fintech so they can help more SMEs access loans and scale up their business. Supporting SMEs is important for the Indonesian economy, given their massive contribution. </p>
<p>Indonesia’s Financial Services Authority (OJK) also recently launched its <a href="https://www.ojk.go.id/id/berita-dan-kegiatan/publikasi/Pages/Publikasi-Materi-Digital-Finance-Innovation-Road-Map-dan-Action-Plan-2020-2024-serta-Digital-Financial-Literacy.aspx">“Digital Finance Innovation Road Map and Action Plan 2020-2024”</a>. </p>
<p>This road map complements a “<a href="https://jakartaglobe.id/context/fintech-startups-vs-conventional-banks-will-win">regulatory sandbox</a>” operated by OJK, in which fintech startups can conduct live experiments to trial new products or business models in a controlled environment.</p>
<p>It also allows OJK to receive immediate feedback and test upcoming regulations. With a more diverse range of loan products, SMEs stand to benefit by finding products best suited to their business.</p>
<p>However, the government still needs to support this with the appropriate infrastructure, such as high-speed, affordable, and reliable internet connection.</p>
<p>The government must also ensure all SMEs are well informed about financial service options available for them, including those offered by fintech companies.</p>
<p>What’s needed is collaboration between all parties — including fintech firms, the banking industry and government — to support Indonesia’s SMEs during the pandemic.</p><img src="https://counter.theconversation.com/content/148528/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Para penulis tidak bekerja, menjadi konsultan, memiliki saham atau menerima dana dari perusahaan atau organisasi mana pun yang akan mengambil untung dari artikel ini, dan telah mengungkapkan bahwa ia tidak memiliki afiliasi di luar afiliasi akademis yang telah disebut di atas.</span></em></p>Fintech can help small and medium enterprises in Southeast Asia’s largest economy access funding and expand their businesses.Nurhastuty K. Wardhani, Tutorial Fellow, The University of QueenslandMarc Bohmann, Consultant and Casual Lecturer, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1453102020-09-01T00:09:17Z2020-09-01T00:09:17Z4 things governments can do to help small business<figure><img src="https://images.theconversation.com/files/355447/original/file-20200831-17-1rzf4ae.jpg?ixlib=rb-1.1.0&rect=0%2C23%2C5308%2C3504&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">James Ross/AAP</span></span></figcaption></figure><p>So much for the <a href="https://theconversation.com/the-reserve-bank-thinks-the-recovery-will-look-v-shaped-there-are-reasons-to-doubt-it-138213">v-shaped recovery</a>.</p>
<p>Australia is set to record its biggest quarterly fall in GDP in history this week. The federal government will extend its JobKeeper wage subsidy program by six months. About <a href="https://theconversation.com/victoria-will-have-more-people-on-jobkeeper-in-december-and-march-quarters-than-the-rest-of-australia-combined-145301">1.75 million workers</a>, including about 1 million Victorians, are expected to rely on it till March.</p>
<p>But there’s more to be done, particularly to help the small and medium-sized businesses taking the brunt of the COVID-19 economic impacts.</p>
<p>Small and medium enterprises employ about <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/8155.0Main%20Features42018-19?opendocument&tabname=Summary&prodno=8155.0&issue=2018-19&num=&view=">two-thirds of the workforce</a>. They are crucial to the prosperity of local communities. </p>
<p>A full third are pessimistic about <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5676.0.55.003Main%20Features3August%202020?opendocument&tabname=Summary&prodno=5676.0.55.003&issue=August%202020&num=&view=">making it through</a> the next three months, according to the Australian Bureau of Statistics’ most recent survey of <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5676.0.55.003Main%20Features3August%202020?opendocument&tabname=Summary&prodno=5676.0.55.003&issue=August%202020&num=&view=">COVID-19 business impacts</a>. By comparison only 18% of large companies (those employing more than 200 employees) expect difficulties in meeting their financial obligations.</p>
<p>Even at the best of times many small businesses struggle. Yet <a href="http://dx.doi.org/10.1108/ijebr-01-2020-0031">our research</a> on 223 Australian business owners highlights failure (or success) isn’t just the result of individual entrepreneurs’ personal resources and capabilities. The local business environment plays a significant role.</p>
<p>As Malcolm Gladwell puts it in his book <a href="https://www.goodreads.com/book/show/3228917-outliers">Outliers: The Story of Success</a>:</p>
<blockquote>
<p>The tallest oak in the forest is the tallest not just because it grew from the hardiest acorn, it is the tallest also because no other trees blocked its sunlight, the soil around it was deep and rich, no rabbit chewed through its bark as a sapling, and no lumberjack cut it down before it matured.</p>
</blockquote>
<p>The same is true for businesses. Even the most resourceful business owners struggle to get ahead when the environment stifles their efforts.</p>
<p>This is a thorny problem for governments as they turn from emergency measures to chart longer-term recovery policies.</p>
<p>There will, no doubt, be much debate over the usual areas – of subsidies and grants, tax breaks, red tape and industrial relations changes. But we suggest four less obvious priorities to create a favourable environment for small business.</p>
<h2>1. Government procurement</h2>
<p>Small businesses should be given a real advantage in procurement. Procurement policies and processes must be clear, protective and accessible to the small guys, <a href="https://www.smh.com.au/business/small-business/incredibly-traumatised-small-businesses-facing-bushfire-insurance-maze-20200122-p53tkp.html">not a maze</a> that ends up helping only the big corporations.</p>
<p>The <a href="https://www.asbfeo.gov.au/about/the-ombudsman">Australian Small Business and Family Enterprise Ombudsman</a>, Kate Carnell, has proposed that federal government contracts worth up to A$10 million <a href="https://www.smartcompany.com.au/coronavirus/small-business-ombudsman-calls-for-small-business-procurement-panel/">go through a small business panel</a> as part of the tender process. “Lowest cost is not always the best value for money,” she said. We agree, with state and local government procurement policies being equally important.</p>
<h2>2. Ensure they get good advice</h2>
<p>One of the biggest decisions many small business owners will face will be whether to borrow money to keep their business going or cut their losses. That’s something for which they should get sound professional advice. </p>
<p>But when small businesses are cash-strapped, cutting back spending on advisers such as lawyers and accountants can be an obvious way to save money. </p>
<p>State and local governments offer some (limited) support to small business advisory services. Western Australia’s <a href="https://www.businessnews.com.au/article/The-Small-Business-Development-Corporation-helping-to-support-your-local-business-community">Small Business Development Corporation</a>, for example, provides free advice to local government for encouraging small business.</p>
<p>What we need now is a national program to ensure all small business owners can get good, free professional advice.</p>
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Read more:
<a href="https://theconversation.com/melbournes-second-lockdown-spells-death-for-small-businesses-here-are-3-things-government-can-do-to-save-them-142173">Melbourne's second lockdown spells death for small businesses. Here are 3 things government can do to save them</a>
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<h2>3. Encourage localism</h2>
<p>Encouraging consumers to “buy local” is a pillar of regional development strategies. “Buy Australian” campaigns have been around since the 1980s with the latest incarnation <a href="http://www.buyaustralianmade.com.au/">Buy Australian Made</a> campaign launched in June. Its slogan: “It’s never been more important to buy Australian than right now.”</p>
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<figcaption><span class="caption">Australian Made, Australian Grown campaign 2012.</span></figcaption>
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<p>The success of these campaigns is <a href="https://theconversation.com/why-businesses-arent-buying-it-when-it-comes-australian-made-3022">open to debate</a>, but the general principle appears sound. A <a href="https://doi.org/10.1016/j.jclepro.2017.07.039">2017 analysis</a> of foodstuffs, for example, found greater localism associated with more resilient and sustainable local economies.</p>
<h2>4. Promote mental health</h2>
<p>The last measure is more psychological support. This has been a neglected area in the past, but improving business owners’ mental health is as effective as building a stronger network or increasing cash flow.</p>
<p><a href="http://dx.doi.org/10.1108/ijebr-01-2020-0031">Our calculations</a> suggest developing hope, optimism, self-efficacy and resilience can improve firm performance by 38%. That’s the same as building a stronger social network (38%), and twice as much as formal entrepreneurial education (15%).</p>
<p>With growing recognition of mental health issues, and the effects of COVID-19 crisis, government policies to promote small business should include a focus on business owners’ mental health.</p>
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Read more:
<a href="https://theconversation.com/as-lockdown-fatigue-sets-in-the-toll-on-mental-health-will-require-an-urgent-response-143817">As 'lockdown fatigue' sets in, the toll on mental health will require an urgent response</a>
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<h2>So what does it all mean?</h2>
<p>Together, these key factors determine whether business owners can leverage their own resources to drive performance and ride out the recession.</p>
<p>In the words of motivational speaker Alexander Den Heijer in <a href="https://www.goodreads.com/book/show/40203003-nothing-you-don-t-already-know">Nothing you don’t already know</a>:</p>
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<p>When a flower doesn’t bloom, you fix the environment in which it grows, not the flower.</p>
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<p>Hopefully that will be enough.</p><img src="https://counter.theconversation.com/content/145310/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrei Lux receives funding from the Centre for Innovative Practice. He works for Edith Cowan University and is a Director of the Australian and New Zealand Academy of Management.</span></em></p><p class="fine-print"><em><span>Flavio Romero Macau is affiliated with the Australasian Supply Chain Institute - ASCI. </span></em></p>Helping small businesses survive isn’t all about tax breaks, red tape and industrial relations changes. Here are four other things governments can do.Andrei Lux, Lecturer in Leadership and Organisational Behaviour, Edith Cowan UniversityFlavio Macau, Senior Lecturer in Supply Chain Management and Global Logistics, Edith Cowan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1421732020-07-07T10:14:26Z2020-07-07T10:14:26ZMelbourne’s second lockdown spells death for small businesses. Here are 3 things government can do to save them<p>The reimposition of stage 3 restrictions on metropolitan Melbourne is, as Victorian premier Daniel Andrews says, a matter of life or death. That’s also true for small businesses. </p>
<p>A further six weeks of stay-at-home orders for the city’s 5 million residents will kill off many small and medium sized businesses unless there are critical changes to federal and state government assistance policies.</p>
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Read more:
<a href="https://theconversation.com/six-week-lockdown-for-melbourne-as-record-191-new-cases-in-latest-tally-142171">Six-week lockdown for Melbourne as record 191 new cases in latest tally</a>
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<p>Even with assistance many will not survive. But ensuring those that are viable are not lost is crucial to the recovery of both the Victorian and national economies. </p>
<p>Small businesses are the engine of economic growth. They are typically the first to innovate and respond to economic changes. The abnormal economic shock wrought by the necessary public health response to the COVID-19 pandemic means they have generally been hit hardest. Without policies and money to address their core needs, this second wave of restrictions will be a killer blow.</p>
<h2>Three fundamentals</h2>
<p>These fundamentals are absolute to the success of small business. </p>
<p>First, and most obviously, they need customers. Those providing essential local goods and services, such as groceries or health services, may cope. But those offering discretionary goods and services, such as hospitality, will suffer both from loss of foot traffic and suppressed consumer spending, as people save more in uncertain times.</p>
<p>Second, they need access to credit. This is much harder for small businesses to obtain than large businesses with assets. Small businesses are typically started by entrepreneurs who finance their endeavours with their own savings, through mortgaging their homes, or taking out personal loans. </p>
<p>They typically have extremely limited cash reserves to ride out tough times. Many juggle their bills from month to month to stay afloat. </p>
<p>Third, they rely on momentum. They grow by acquiring both customers and knowledge of their market. When repeat business stop, they lose that momentum. If they have to shed employees, they lose “business knowledge”, which sets them back even further in their recovery.</p>
<h2>Calamitous damage</h2>
<p>All economic slowdowns typically reduce demand, but this health/economic crisis has calamitously damaged all three aspects. </p>
<p>The federal government’s Job Keeper program and subsidies being provided through the Australian Taxation Ofice to <a href="https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/">boost business cash flow</a> has enabled business to hold on to employees for now. But without customers or credit, even extending these measures beyond their scheduled September 30 end won’t be enough.</p>
<p>It’s my view it will take three to five years for consumer confidence and spending to return to pre-COVID levels. This assessment is based on past recessions where high unemployment prevailed compounded by the novel problem that health fears will suppress consumer confidence long after the coronavirus is contained and things return to “normal” (or at least a new normal). </p>
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<strong>
Read more:
<a href="https://theconversation.com/forget-jobseeker-in-our-post-covid-economy-australia-needs-a-liveable-income-guarantee-instead-141535">Forget JobSeeker. In our post-COVID economy, Australia needs a 'liveable income guarantee' instead</a>
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<p>The Melbourne outbreak of COVID-19 underlines there is no quick fix to the COVID-19 crisis. The only light at the end of tunnel is a possible a vaccine, which might take years, or never be found. The economy must therefore adjust. Not all businesses are viable. To continue indefinitely to pump public money into direct grants to prop them up is unsustainable. </p>
<p>To do so will lead to “perverse” consequences – providing windfalls to businesses that would have failed anyway – as many small business ventures do – while providing inadequate support to those that are important and would have survived but for the crisis. </p>
<h2>Three suggestions</h2>
<p>Therefore I offer three suggestions.</p>
<p>First, continue JobKeeper and the tax office’s cashflow boost for as long as COVID-19 restrictions are in place. Businesses would need to apply for this on a month-by-month basis, and need to meet set criteria.</p>
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Read more:
<a href="https://theconversation.com/forget-jobseeker-in-our-post-covid-economy-australia-needs-a-liveable-income-guarantee-instead-141535">Forget JobSeeker. In our post-COVID economy, Australia needs a 'liveable income guarantee' instead</a>
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</em>
</p>
<hr>
<p>Second, the government should ensure easy access to low-interest loans for the next two to three years. Loans are more efficient than direct grants or subsidies. The fact the loans have to be repaid will encourage only those businesses with a good chance of being sustainable of seeking them.</p>
<p>Getting a loan is slow and hard for small businesses because banks scrutinise them due to the risk. Few small business have the skills to prepare the extensive documentation banks require. Banks will be motivated to lend faster and to more businesses if governments remove the risk by buying those loans.</p>
<p>To speed up the lending application process, there should also be subsidies to licensed financial advisers to prepare those applications.</p>
<p>Third, a system of subsidised vouchers for financial management advice from accountants and financial advisers (who are also mostly small businesses).</p>
<p>Financial services are critical for small businesses. In tough times it might be tempting to dispense with these services. But sound financial advice will be critical to business owners making the right decision – including whether they should be borrowing money to sustain their businesses or making the hard decision to cut their losses and move on.</p><img src="https://counter.theconversation.com/content/142173/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Vaz does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Without policies to address the core needs of small business, Victoria’s second wave of restrictions will be a killer blow.John Vaz, Senior Lecturer, Department of Banking and Finance, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1145182019-03-29T14:09:06Z2019-03-29T14:09:06ZMore than a million UK small businesses see Brexit as major obstacle to success<figure><img src="https://images.theconversation.com/files/266534/original/file-20190329-70999-1y7rlhs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Alarm call. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/illustration-clock-brexit-great-britain-leaving-1181478619">Sebestyen Balint</a></span></figcaption></figure><p>When it comes to how Brexit will affect business, much of the debate in the UK has focused on large firms, particularly international ones such as <a href="https://www.theguardian.com/commentisfree/2019/feb/19/the-guardian-view-honda-closure-of-course-its-partly-about-brexit">Honda</a> and <a href="https://www.bbc.co.uk/news/business-47115753">Nissan</a>. The CBI, which mainly represents big business, has been tirelessly <a href="https://www.theguardian.com/business/2019/mar/25/city-optimism-falling-at-highest-rate-since-financial-crisis-brexit-cbi">warning</a> of the economic <a href="https://uk.reuters.com/article/uk-britain-economy-retail/uk-retail-sales-fall-most-in-17-months-as-brexit-nears-cbi-idUKKCN1R815R">dangers</a> of a no deal in the coming weeks. </p>
<p>The likely impact on small and medium-sized enterprises (SMEs) has received much less attention by comparison. We have published a <a href="https://www.tandfonline.com/doi/full/10.1080/00343404.2019.1597267">new study</a> in the journal Regional Studies that looks at this in detail. We found that well over one million UK SMEs, around a quarter of the total, were concerned about how Brexit would affect the success of their business. We also examined how Brexit uncertainty varies according to the size and location of companies and their business orientation.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=653&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=653&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=653&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=821&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=821&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266538/original/file-20190329-71021-1xe0twb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=821&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The life of pie.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/meeting-tax-lawyer-business-man-company-1122992849">phushutter</a></span>
</figcaption>
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<p>SMEs represent a <a href="https://www.nesta.org.uk/report/the-state-of-small-business-putting-uk-entrepreneurs-on-the-map/">core part</a> of the UK economy, accounting for 99% of all UK firms and 60% of total private sector employment. They are crucial for innovation and productivity growth and have disproportionately driven job creation since 2010. They <a href="https://link.springer.com/article/10.1007/s11187-014-9614-0">are also</a> particularly affected by institutional and political uncertainty and <a href="https://theconversation.com/brexits-impact-on-small-businesses-the-experts-may-be-spot-on-after-all-90561">less resilient</a> when it comes to unforeseen events such as Brexit.</p>
<p>To find out what they thought about Brexit, we investigated a large survey of 15,867 SMEs that had been compiled by the UK Department for Business, Energy and Industrial Strategy in 2016 and 2017. The 25% who viewed Brexit as a major obstacle to their success – some 1.25m businesses – was a significant increase on the 16% who were of this view immediately after the referendum in 2016. </p>
<p>These fears will almost certainly have escalated as the UK moves ever closer to eventual exit from the EU: a recent <a href="https://specialistbanking.co.uk/article-desc-6741_30%20per%20cent%20of%20SMEs%20cite%20Brexit%20impact%20as%20biggest%20concern%20for%202019">survey</a> of SMEs by the Cooperative Bank, for instance, found that Brexit’s effect on the economy was their top concern for 2019, with 30% drawing attention to it. Meanwhile, <a href="https://www.heraldscotland.com/business_hq/17536101.firms-split-by-size-on-the-impact-that-brexit-will-have/">a new survey</a> has found that 57% of Scottish SMEs believe Brexit will be negative for their business, compared to only 41% of the managers of bigger companies. </p>
<h2>Worriers in chief</h2>
<p>Our study found that larger SMEs that were internationally oriented and/or innovators, such as tech firms, were particularly concerned about Brexit – as were those located in major cities. <a href="https://link.springer.com/article/10.1007/s11187-014-9584-2">Worryingly</a>, the firms most concerned by Brexit – these innovators and exporters – are the same SMEs deemed most important for generating productivity growth.</p>
<p>We found that the single largest factor concerning SMEs was uncertainty regarding future regulatory change, with 74% citing it. Smaller businesses were particularly worried, as were exporters. Other major concerns included increased import costs (52%) and uncertainty regarding future access to EU markets (59%). </p>
<p>Around two-thirds of SMEs had scaled back plans for future capital investment to 2020, while as many as 77% were less focused on increasing export sales over the same period. The study also found that SMEs’ concerns about Brexit were considerably higher in devolved areas like Scotland and Northern Ireland. This is despite the fact that these jurisdictions are best equipped to deal with any negative ramifications through the likes of their enterprise and export agencies and, at least in the case of Scotland, devolved government. </p>
<p>With the <a href="https://theconversation.com/brexit-q-a-theresa-may-offers-to-stand-down-as-british-prime-minister-but-theres-a-catch-114414">uncertainty</a> around Brexit now arguably greater than at any time since the 2016 referendum, the findings in our study suggest that SMEs will potentially be the firms hardest hit by Brexit. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266537/original/file-20190329-70989-2e4k7d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Nope.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-october-20th-2018-british-1210610329">nrqemi</a></span>
</figcaption>
</figure>
<p>The UK government has done little or nothing to ease these uncertainties. There are several lessons here that it could learn from Scotland. The Scottish government is <a href="https://news.gov.scot/news/preparing-business-for-brexit">offering grants</a> of £4,000 to helps SMEs to export, for instance. It has also set up a <a href="https://www.insider.co.uk/news/100-scottish-enterprise-staff-focused-14117333">national helpline</a>. </p>
<p>In the absence of better support, we are seeing the private sector taking steps to support SMEs: Barclays Bank, for instance, has <a href="https://www.bmmagazine.co.uk/news/barclays-unveils-14bn-fund-to-help-uk-smes-with-brexit/">just announced</a> a new £14 billion lending fund for SMEs to help cope with the uncertainty, and has been holding Brexit clinics around the country. </p>
<p>Constitutional paralysis or not, the UK government needs to recognise that SMEs are the backbone of the economy and crucial for future productivty growth. It must act now to alleviate the anxieties of these businesses so that whatever form of Brexit comes to pass, they are as well placed as possible to navigate the choppy waters ahead.</p><img src="https://counter.theconversation.com/content/114518/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While everyone frets about the fate of big corporates, the little ones are growing agitated.Ross Brown, Reader in Entrepreneurship and Small Business Finance, University of St AndrewsJohn O.S. Wilson, Professor of Banking & Finance, University of St AndrewsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/749212017-03-22T06:05:26Z2017-03-22T06:05:26ZAustralia finally has crowd-sourced equity funding, but there’s more to do<figure><img src="https://images.theconversation.com/files/161961/original/image-20170322-31180-oj2unj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will equity crowdfunding work in Australia?</span> </figcaption></figure><p>The Senate has <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5766">passed a bill</a> to allow companies to access crowd-sourced equity (CSF). But its conditions make 99.7% of Australian companies ineligible and the lowered governance requirements that some companies may qualify for may not outweigh the costs of accessing CSF. </p>
<p>CSF is similar to other forms of <a href="https://theconversation.com/explainer-what-is-crowdfunding-9444">crowdfunding</a> in that it enables companies to raise funds through an online portal. The difference is that investors receive a share of the company rather than a product or service. They can now buy up to A$10,000 of equity in a company through a licensed CSF platform. </p>
<p>Eligible companies will be able to raise up to A$5 million a year this way. The government sees this <a href="http://www.budget.gov.au/2015-16/content/glossy/sml_bus/download/Growing_Jobs_and_Small_Business.pdf">as a remedy</a> for a shortage of finance for small and medium enterprises (SMEs) and start-ups.</p>
<p>Over the 15 months since the idea was first touted – a different bill was <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5588">introduced in 2015</a> – the legislation has undergone a series of changes and proposed amendments. This include fundamental aspects such as the size and type of companies that are eligible. </p>
<p>The bill that passed was introduced in late 2016 and contains improvements on the original. But there is still more to do to create a thriving CSF culture. </p>
<h2>The safeguards</h2>
<p>The bill that <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5766">passed the Senate</a> introduces three safeguards to protect investors.</p>
<p><strong>1) Regulation imposed on companies seeking capital from CSF</strong></p>
<p>At first glance, the regulation imposed on companies seems reasonable. Eligible companies are able to raise A$5 million through CSF. This is generous when compared to other countries that have <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;query=marina%20nehme%20SearchCategory_Phrase%3A%22committees%22;rec=0;resCount=Default">capped CSF at A$2 million</a>. Further, while companies must produce a disclosure document when they raise capital through CSF, it is not as onerous as those <a href="http://asic.gov.au/regulatory-resources/fundraising/what-disclosure-documents-do-you-need-to-give-potential-investors-when-raising-funds/">required for other methods of fundraising</a>. </p>
<p>However, one key feature of the legislation is that it restricts CSF to public unlisted companies that are limited by shares, and with less than A$25 million in gross assets and annual revenue. These criteria alone exclude proprietary companies and many public companies. <a href="https://theconversation.com/crowd-sourced-funding-australia-needs-to-learn-from-italys-mistakes-55130">More than 99.7% of companies will not able to raise capital through CSF</a>.</p>
<p>The legislation excludes foreign companies from raising CSF in Australia. It also excludes companies and their related parties from accessing CSF if their purpose is investment. This can be <a href="http://www.camac.gov.au/camac/camac.nsf/byheadline/reportsfinal+reports+home.html">contrasted</a> with other countries. In New Zealand, all companies can access CSF. In the United States, United Kingdom and Canada, only a small proportion of companies are excluded.</p>
<p>The more inclusive approach adopted by these countries allows CSF to achieve the aims of promoting innovation and remedying the shortage of finance that SMEs face. </p>
<p><strong>2) Regulation imposed on crowd-sourcing platforms</strong></p>
<p>Crowd-sourcing platforms, and Australia already has <a href="https://www.businessinsider.com.au/companies-are-queueing-to-use-australias-new-equity-crowdfunding-laws-2017-3">a few</a>, must have a <a href="http://asic.gov.au/for-finance-professionals/afs-licensees/">financial services licence</a>. The platform also must comply with a range of obligations specified in the 2016 bill, such as vetting the companies seeking capital through CSF. This allows the intermediary to act as a gatekeeper, but compliance will be onerous. </p>
<p>The fact that only a small pool of companies can access CSF will lead to ferocious competition. The platforms could find it challenging to generate profits. This would affect the viability of platforms and create a barrier to entry. </p>
<p>We have already seen examples of overseas intermediaries struggling in this sphere. For instance, in Italy, where very few companies can use CSF, <a href="http://www.crowdfundinghub.eu/current-state-crowdfunding-italy/">only one CSF intermediary now exists</a>. In New Zealand, a number of intermediaries were quickly established but some <a href="http://www.crowdready.com.au/news-1/2016/10/nz-equity-crowdfunding-2nd-year-in-review">have already withdrawn</a> from the market. </p>
<p><strong>3) Regulation imposed on investors</strong></p>
<p>Australia has not imposed a general cap on investment as other countries have. </p>
<p><a href="https://www.sec.gov/news/pressrelease/2015-249.html">The US</a> caps investment by those with less than US$100,000 of income or net worth to US$2,000 or 5% of the annual income or net worth (whichever is greater) within a 12-month period. If annual income or net worth is equal to or greater than US$100,000 they can invest 10% of their annual income or net worth (to a maximum of US$100,000) within 12 months.</p>
<p><a href="https://poseidon01.ssrn.com/delivery.php?ID=200072070066113007018121028031096006059017001061057056022127071122003125070090105098100005023023018037116126070005001126124104015000017021052097094089119074073101095070060032082080114117071014020092010079067066118017101065109094071000083091019117090008&EXT=pdf">In the UK</a>, an investor should not invest more than 10% of their net assets in <a href="https://www.handbook.fca.org.uk/handbook/glossary/G3363.html">non-readily realisable securities</a> (such as equity in an unlisted company) in a 12-month period.</p>
<p>The Australian legislation adopts a more balanced approach. It only limits the amount investors can invest in each company to A$10,000. </p>
<p>One contentious issue in the 2015 bill was the duration of the cooling-off period that allowed investors to withdraw their offers if they changed their mind. A cooling-off period can be a boon for investors but problematic from a business perspective as it could result in market manipulation. Industry contested the proposed five-day cooling-off period.</p>
<p>As a result, the 2016 bill <a href="http://www.camac.gov.au/camac/camac.nsf/byheadline/reportsfinal+reports+home.html">shortened the period to 48 hours</a>. This would be similar to the cooling-off period applied in the Canada. However, after debating this matter in the Senate, the final legislation was amended again and <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansards%2F276adda7-0801-4128-8471-554c56960766%2F0030%22">the cooling-off period is back to five working days</a>. </p>
<h2>The trade-off</h2>
<p>Like its predecessor, the 2016 bill attempts to remedy the issues raised by the fact that only a small percentage of companies are able to access CSF. For instance, it <a href="http://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/r5766_first-reps/toc_pdf/16179b01.pdf;fileType=application%2Fpdf">reduces</a> corporate governance requirements for newly registered or converted public companies if they wish to access CSF.</p>
<p>Consequently, if a proprietary company desires to raise funds through CSF it can convert to a public company and be exempt from certain compliance requirements imposed on public companies for a period of five years:</p>
<ul>
<li>It is not required to hold an annual members’ general meeting for five years.</li>
<li>It is only required to provide online financial reports to shareholders for a period of five years. No hard copies are required to be sent out. </li>
<li>While public companies have to appoint an auditor within one month of registration, for the first five years companies eligible for limited governance requirements do not need to do so until they raise more than A$1 million from CSF or other offers requiring disclosure.</li>
</ul>
<p>At first glance this may be appealing, but the concessions do not outweigh the significant costs of converting from a proprietary to a public company. </p>
<p>For instance, if the company raises more than A$1 million it will have to appoint an auditor. The company will also be deemed an “<a href="http://download.asic.gov.au/media/1241099/rg198.pdf">unlisted disclosing entitity</a>” and be obliged to continuously disclose information. This can be costly.</p>
<h2>How to make it work</h2>
<p>In the end, the small number of companies that can access CSF, as well as the regulatory burden on the companies and platforms, creates a barrier to a thriving CSF culture. But there are different models that may be used to remedy this issue. </p>
<p>One idea is to create a new type of company that allows SMEs to raise capital while at the same time limiting their governance requirements. </p>
<p>Another, more complex option would be to review all the types of companies that we have under the statute to see whether these forms of corporations fulfil their objectives. This review is overdue and may provide answers to a range of problems facing businesses and investors. It may, for instance, result in a simplification of the corporate structure.</p>
<p>The current legislation is just a first step to closing the funding gap for SMEs.</p><img src="https://counter.theconversation.com/content/74921/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marina Nehme receives funding from the Centre for International Finance and Regulation</span></em></p>Investors will soon be able to invest A$10,000 in a start-up through a crowdfunding platform. But parts of the law are still too restrictive.Marina Nehme, Senior Lecturer, Faculty of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/323702014-10-15T19:28:07Z2014-10-15T19:28:07ZAustralian industry can learn from its manufacturing ‘outliers’<figure><img src="https://images.theconversation.com/files/60984/original/wzntm335-1412645063.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australian manufacturing outliers demonstrate the need to invest in technology and management.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?page_number=1&position=29&safesearch=1&search_language=en&search_source=search_form&search_type=keyword_search&searchterm=innovation&sort_method=relevance2&source=search&timestamp=1412643058&tracking_id=FufZBQhKkEHaTfi3UP6YVQ&version=llv1&page=1&inline=174475871">www.shutterstock.com</a></span></figcaption></figure><p>Australia’s manufacturing industry is in decline. Yet some businesses are managing to buck the trend. The question is what do these “outliers” do differently from their competitors? And what does each thriving business have in common?</p>
<p>The Australian Department of Industry commissioned the University of Melbourne’s <a href="http://www.workplaceleadership.com.au/">Centre for Workplace Leadership</a> to find out.</p>
<p>We studied 1,054 small and medium-sized manufacturing enterprises across Australia to investigate what leadership techniques led to increased productivity. We also studied a series of high performing manufacturing businesses to understand how they manage to thrive in a challenging environment.</p>
<p>What we found is top performing organisations place equal emphasis on technological and management expertise. They also aren’t afraid of investing in innovative technologies, processes and products. </p>
<p>Practically, this translates into significant research and development spending as well as regular reviews into business models and leadership teams. </p>
<h2>The Redarc case study</h2>
<p>Some surprising examples emerged as part of our study. One unlikely turnaround story was a company that started as an electronics battery charging manufacturer operating out of the back of a tin shed. </p>
<p>When young engineer Anthony Kittel bought <a href="http://www.redarc.com.au/">Redarc Electronics</a> with his father-in-law in 1997, the business was shrinking. It had reputation problems and was facing a dwindling customer base. What forced a rapid turnaround in the company’s direction was an astute decision to concentrate on quality, backed by the introduction of a “no questions asked” warranty on its products.</p>
<p>Now the business wins awards in recognition of its success and is an innovative leader in its field. Redarc designs and produces patented vehicle-based electronic power products for “anything with a battery that moves” worldwide. This includes trucking and mining machines to “grey nomad” recreational vehicles and caravans. </p>
<p>A major turning point for the company was its decision to build a new innovation-focused facility in 2005, helped by a A$1.6 million government grant. Redarc has a global and rapidly expanding customer base and its expected revenue by 2017 is A$50 million. </p>
<h2>Strategies for success</h2>
<p>We found Redarc’s success hinges on three key factors.</p>
<p>First, its leadership team places strong emphasis on technological innovation. The company reinvests 15% of its revenues in research and development each year. It also allocates 20% of its employees to focus on rapidly developing its technological expertise. This in-house research is backed by strong partnerships with four universities specialising in advanced manufacturing. Through these partnerships, Redarc is also able to access new talent by employing bright engineering graduates.</p>
<p>Second, innovation within the business extends far beyond new product development to the manufacturing facility itself. The company commissions an independent review of the entire facility every two years. Leading technology consultancy firms are regularly brought in to advise on development projects.</p>
<p>Third, a high performance leadership culture is carefully cultivated. This starts at the very top. Chief Executive Mr Kittel has continued to developed his own leadership skills. Not content with a MBA that launched his management career, he enrolled in a three year strategic leadership course at Harvard Business School. He has also handpicked an impressive advisory board to act as his mentors. These board members provide a forthright and ambitious sounding board. As he told us:</p>
<blockquote>
<p><em>“The outcome is always not exactly what you expect, but I always run with their advice. It’s very open – every time I meet with them it’s like holding up a mirror and looking at other ways to do business.”</em></p>
</blockquote>
<h2>Developing different management techniques</h2>
<p>For Australian manufacturing to make a similar transition from decline to sustainable growth, we need to make greater effort to understand and learn from these outliers. </p>
<p>Redarc’s remarkable change of fortune is neither shrouded in mystique, nor based on especially favourable markets. Instead, Australia’s highest performing manufacturing businesses have developed complementary strategies using technological and leadership expertise. </p>
<p>We found some variants of these techniques present amongst our other outliers. For example, <a href="http://www.dowell.com.au/">Dowell Windows</a> adopted <a href="http://en.wikipedia.org/wiki/Lean_manufacturing">lean manufacturing techniques</a> to improve their work systems. When regional manager Darin Dinneen trialled these techniques, the company discovered they were ideally suited to its need for rapid change. This management strategy emphasises talent or processes that directly add value to the business. As Mr Dinneen told us:</p>
<blockquote>
<p>“We make sure we don’t put David Beckham in goal. If we’ve got a good player, we play to their strengths.”</p>
</blockquote>
<p>The significant lesson from our positive outliers is that promising management techniques need to be far more rigorously and systematically developed.</p>
<p>The implications for industry are that businesses and governments should take heed of these unlikely innovators already thriving. Understanding and replicating this performance is key to building a sustainable economic future for Australia’s manufacturing sector.</p>
<hr>
<p><em>Read the other pieces in our Reinventing Manufacturing series <a href="https://theconversation.com/uk/topics/reinventing-manufacturing">here</a>.</em></p><img src="https://counter.theconversation.com/content/32370/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Fischer is Senior Research Fellow at the Centre for Workplace Leadership, which has been co-funded by the Commonwealth Government and The University of Melbourne.</span></em></p><p class="fine-print"><em><span>Laura Good is a Research Assistant at the Centre for Workplace Leadership, which has been co-funded by the Commonwealth Government and The University of Melbourne.</span></em></p>Australia’s manufacturing industry is in decline. Yet some businesses are managing to buck the trend. The question is what do these “outliers” do differently from their competitors? And what does each…Michael Fischer, Senior Research Fellow in Organisational Behaviour & Leadership , The University of MelbourneLaura Good, Research Assistant, Centre for Workplace Leadership, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/58452012-03-20T03:22:07Z2012-03-20T03:22:07ZSmall business finally has a national profile, but will it have the power?<figure><img src="https://images.theconversation.com/files/8740/original/v8rcr27h-1332127131.jpg?ixlib=rb-1.1.0&rect=24%2C11%2C955%2C653&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Julia Gillard's announcement of a federal small business commissioner indicates a welcome interest in the sector, but its role is still undefined.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Prime Minister Julia Gillard’s decision to appoint a Federal Small Business Commissioner is a welcome move that signals an increasing interest in small business. </p>
<p>But what exactly should a new commissioner do? Small business advocacy groups are reportedly calling for the federal commissioner to “fight red tape”. There are also calls to work via the <a href="http://www.coag.gov.au/">Council of Australian Governments</a> to better align state and federal law. </p>
<p>They suggest that the federal commissioner should be a mediator in disputes between small business and federal government agencies.</p>
<p>While all of this is both reasonable and expected, it would be worthwhile looking at the roles of the current state-based small business commissioners. </p>
<h2>State roles</h2>
<p>Victoria has had a commissioner in place since 2003. This commissioner is tasked to “enhance a competitive and fair operating environment for small business” in that state. </p>
<p>Both New South Wales and Western Australia appointed commissioners in 2011. </p>
<p>In NSW the commissioner’s role is one of dispute resolution, advocacy and the review of state laws and regulations.</p>
<p>Other responsibilities include working with private and public sector organisation to remove unfair practices. The aim is to foster market practices that are friendly to small business.</p>
<p>Retail tenancy is also the responsibility of the NSW commissioner.</p>
<p>In WA, the commissioner oversees the working of the state’s Small Business Development Corporation. This commissioner also receives and investigates complaints about unfair practices that may impact on small business, while helping resolve complaints.</p>
<p>The commissioner in South Australia has a similar role. However, the SA commissioner has been given greater powers. Where they see activities under the state’s Fair Trading Act (1987) and relevant consumer laws as detrimental to small business, they can intervene.</p>
<p>This gives the SA commissioner more power to intervene and shape the way industry sectors work than is the case for the Victorian and WA commissioners. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&rect=361%2C22%2C483%2C624&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/8743/original/6rzkd3yx-1332127553.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New federal small business minister Brendan O'Connor.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>For example, the SA commissioner has the power to require information and documents from individuals that are needed to carry out this function. Failure to comply can result in prosecution and fines of up to $20,000. </p>
<h2>Powers</h2>
<p>It is currently unclear what the powers of the federal commissioner will be. However, for the role to be effective they should be appropriately empowered. </p>
<p>Any commissioner who lacks the type of power currently available to their SA counterpart would risk becoming something of a toothless tiger, a<a href="http://www.heraldsun.com.au/business/your-business/commissioners-office-needs-teeth/story-fn7ve51s-1226303572248"> point recently raised by Ken Phillips</a>, Chairman of the Council of Small Business of Australia.</p>
<p>From a practical perspective, the federal small business commissioner should collaborate with their state counterparts. They should explore the gaps that exist between federal and state legislation that have adverse effects on small business. </p>
<p>This can encompass a wide range of things including the trade practices/fair trading acts, franchising codes of conduct, taxation and labour laws. </p>
<h2>Regulation</h2>
<p>There are also a number of industries that are currently poorly regulated at the federal level, but dominated by small business owners. These include motor trades, newsagencies, service stations, community pharmacies and real estate agencies. </p>
<p>A key role for the federal commissioner would be to bring greater standardisation to these sectors, and ensure that they remain friendly environments for small business. </p>
<p>An important issue for small business policy development is to ensure that it is built on well-founded evidence. The federal commissioner should work with organisations such as the Australian Bureau of Statistics to collect data on Australia’s small business sector. </p>
<p>This data should be longitudinal in nature. It should allow the overall health of the sector to be monitored.</p>
<h2>Taxation</h2>
<p>Another urgent task is taxation. This is already being considered in Parliament, but it must be driven by facts not politics.</p>
<p>The federal commissioner should work closely with the Australian Taxation Office to review the tax codes that apply to small businesses. </p>
<p>Around 62% of small firms employ only the owner-manager. This means that there are overlaps between personal and business taxation that need attention. Changes here could foster entrepreneurship and assist the formation and growth of new ventures.</p>
<p>The emergence of a new type of corporate entity specifically for small business is another area for the new commissioner. In its concept this would allow small firms to get some of the benefits of big business, without the costs and compliance issues of incorporation. </p>
<p>While this is a good idea in theory, care will need to be taken. What defines a “small business” will need to be clarified. Currently there are too many confusing definitions. </p>
<p>It will also be important to avoid this new structure from turning into a ghetto for small businesses. If we desire our small firms to grow and build a competitive economy, they must learn from an early stage how to run themselves like larger businesses.</p>
<h2>Small Business Impact Assessments</h2>
<p>Finally, we believe that there should be small business impact assessments undertaken. These should occur before major new economic policies are implemented. They should include changes to federal laws and regulations that impact on a wide range of areas. </p>
<p>They may also need to be applied where major changes to a business environment occur with negative effects on small business. For example, where major retailers engage in price wars, or when major mining companies enter a regional area soaking up the skilled workers, pushing up real estate prices and not using local suppliers.</p>
<p>The new federal commissioner should be tasked to prepare these assessments and ensure that they do not result in outcomes that are adverse to small business operators.</p>
<p><em>Phil Kemp is a co-author on this article. He is the executive director of Business Foundations, a Perth-based not-for-profit organisation which provides training and mentoring advice to small businesses.</em></p><img src="https://counter.theconversation.com/content/5845/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Mazzarol receives funding from the Australian Research Council. He is affiliated with the Small Enterprise Association of Australia and New Zealand (SEAANZ) and the International Council for Small Business (ICSB).
Phil Kemp is a co-author on this article. He is the executive director of Business Foundations, a Perth-based not-for-profit organisation which provides training and mentoring advice to small businesses.</span></em></p>Prime Minister Julia Gillard’s decision to appoint a Federal Small Business Commissioner is a welcome move that signals an increasing interest in small business. But what exactly should a new commissioner…Tim Mazzarol, Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy , The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/49172012-01-22T19:34:52Z2012-01-22T19:34:52ZThe secret to running a successful small firm? Mind your own business<figure><img src="https://images.theconversation.com/files/6976/original/945pwbyt-1326766714.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Small-business owners need to recognise the particular needs of their staff and customers.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Why do some small firms survive and prosper, while others don’t? When you put this question to a business consultant, academic or even an experienced business person, their biases show immediately. </p>
<p>The answer may include: well-targeted marketing strategies, staff selection and support, outstanding customer service, a shared vision of the future … the list goes on. Lately the answer seems to be innovation. For small firms, the caveat may be how to best use limited resources to support innovation through, for example, collaborations. </p>
<p>While all these answers hold merit, the reality may just be a little more complex. In a recent survey of 2,100 Australian firms, we asked CEOs how they view success, and how they measure it. The results were insightful. </p>
<p>As expected, the answers were just as diverse as suggested above. Answers ranged from satisfying clients to increasing profit or growing and providing a quality product or service. Using a qualitative data analysis software package, Leximancer, maps were constructed to visually summarise the answers.</p>
<p>The maps summarise a count of the words that CEOs used most frequently. Words that appear in the same circle are used together frequently and the lines between words indicate a strong co-occurrence. Figure 1 summarises the responses. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=504&fit=crop&dpr=1 600w, https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=504&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=504&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=633&fit=crop&dpr=1 754w, https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=633&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/6892/original/3mvmtx6p-1326326269.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=633&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Figure 1: Australian firms’ views of success.</span>
</figcaption>
</figure>
<p>Comparing firms that reported growth intentions with those that did not provides a more nuanced view of what success means to small firms. Figure 2 illustrates the views of the firms that reported no growth intentions, typically called “lifestyle” firms.</p>
<p>These firms, focused on maintaining the status quo or even reducing their operations, viewed success as the ability to satisfy customers, make a profit and repay the initial investment. Besides this, family, lifestyle, happiness, and retirement provision were all important to the owners or managers. </p>
<p>The close proximity of words and phrases such as “clients”, “employees” and “happiness” suggests that success is very personal, and often emotional to the CEO. These lifestyle businesses represented 20% of the respondents, and formed a group that is crucial to employment and service delivery in the Australian economy. They have few aspirations to grow, innovate or export. Often situated in more sheltered sectors of the economy, they were however still profitable.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=483&fit=crop&dpr=1 600w, https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=483&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=483&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=608&fit=crop&dpr=1 754w, https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=608&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/6893/original/6j7rvwms-1326326294.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=608&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Figure 2: Success for lifestyle firms.</span>
</figcaption>
</figure>
<p>An analysis of the open ended responses from the firms that had moderate or high-growth intentions is summarised in Figure 3. A different picture emerged. The CEOs of these firms were more focused on a broad range of stakeholders, including customers, employees and shareholders. </p>
<p>They also viewed success as the accomplishment of a broader range of goals, including profitability, customer satisfaction, employee happiness, shareholder goals, product/service quality and growth. </p>
<p>Few comments focused on the personal circumstances of the CEO. Instead, the focus was on the firm and its stakeholders. From other questions it was also clear that growth oriented firms were also more likely to devolve decision making; have sales from innovation; be larger; train staff; perform and grow better. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=467&fit=crop&dpr=1 600w, https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=467&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=467&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=587&fit=crop&dpr=1 754w, https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=587&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/6894/original/4gx29tst-1326326310.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=587&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Figure 3: Success for growing firms.</span>
</figcaption>
</figure>
<p>What do these findings tell us? First, they do not suggest that either type of firm is more important to the Australian economy than the other. Both types are important employers.</p>
<p>The Australian Bureau of Statistics estimates that in June 2009, there were 1.2 million non-employing firms, and another 500,000 that employ between one and four staff. Together, these essentially lifestyle businesses employ a significant proportion of the approximately 11 million working Australians. They also provide essential products and services, especially personal services. Therefore, while little attention is paid to them in media and academia, their continuous survival remains important. </p>
<p>Because most lifestyle firms only employ the owner, and maybe a few others, they viewed success as more personal. The firm has to complement the owner’s lifestyle aspirations in terms of making a living, providing for retirement and satisfying customers with whom they often have a close relationship.</p>
<p>Firms with growth intentions, especially those that ultimately attain sustained growth, viewed success differently. They were focused on the needs of a broad range of stakeholders and their ability to satisfy these needs. To attain growth the use of innovation, internationalisation, training, devolved decision-making and other sound managerial practices were crucial. </p>
<p>This holistic approach to management was important to support growth objectives. Growing firms therefore measured success through attainment of a broad range of goals, and used multiple managerial practices to attain it. </p>
<p>Henry Ford once said that a business that only makes a profit is a poor business. The results reported here reinforce this. Success rests in the ability to work out what is important to your business, and then take the necessary steps to attain it. </p>
<p>Whether it is by maintaining a lifestyle and providing self-employment, or growing a business for future generations, having a clear vision of the future and linking it with the appropriate actions are key. </p><img src="https://counter.theconversation.com/content/4917/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martie-Louise Verreynne does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Why do some small firms survive and prosper, while others don’t? When you put this question to a business consultant, academic or even an experienced business person, their biases show immediately. The…Martie-Louise Verreynne, Senior Lecturer in Strategy, UQ Business School, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.