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An open letter to Brendan O'Connor - how to ‘get’ small business

A few tips for the new minister for Small Business, Brendan O'Connor. AAP

This is an open letter of welcome to Brendan O’Connor, the newly appointed Federal Minister for Small Business.

Dear Minister O'Connor,

We congratulate you on the new appointment and welcome you to the small business portfolio. Our letter is written in a spirit of good faith from two people who have a long history of working with small businesses as educators, counsellors, consultants and researchers.

Many previous small business ministers have been criticised for their lack of understanding of this large and complex part of our economy. So how do you “get” small business? Here is our guide to the things you should focus on.

Small Business is important to the economy

We suggest that you and the Cabinet first recognise the sheer importance of small business to the economy. Small to medium enterprises comprise over 99% of all businesses in Australia and employ around 65% of the workforce. This translates into a community of around 2 million small business operators employing about 5 million people. All are voters and all have a direct interest in the policies your government implements towards small business – let’s just keep that in mind as we go on.

Small business is not a sector, it is about people

Think about small business as a community, not as a sector. Small businesses are found across all industry sectors. The only common element between small business manufacturers, retailers and services firms is that they are small.

Small firms are very closely knit groups of people working together to make a living, take care of their employees, pay their bills, look after their customers and find time to spend with their families. Most small business owners work long hours. For example, 64% of small business operators work over 40 hours a week and 36% work over 50 hours.

Small businesses are not like corporations, they are just people seeking to earn a living via hard work and enterprise. Over 62% of small businesses are micros that employ only the owner. Their owners take risks and create wealth and employment, and generally ask for little more than a fair go. Think of them as people, not organisations.

It’s not about fighting “red tape” it’s about fighting for a fair go

You should avoid getting trapped into thinking that the biggest challenge facing small business is “red tape”. This approach was taken by many of your predecessors. It is the mantra advocated by small business lobbyists, journalists and radio announcers. Yet while you might think small businesses hate red tape, most don’t really see it as the problem.

Regulations, compliances, licencing systems and taxation are all part of the reality of running a business. Compared to most other countries Australia has some of the most efficient systems of government. According to the United Nations we are a leader in e-government.

If you wish to tackle red tape a first step would be to address the continuing lack of alignment between state and federal jurisdictions. Each industry sector will have its issues and your role should be to ensure that the interests of small business are looked after in any reforms.

The ability of small businesses to access bank financing at competitive interest rates should be another priority. Our major banks received strong support from your government during the Global Financial Crisis. They remain among the most profitable banks in the world, yet they could do more to help lower the cost of capital to small businesses.

Bridging the digital divide and skills gaps

The roll out of the National Broadband Network is another potential opportunity for you. In the March 2012 Sensis Small Business Index “increasing digital presence” via online technologies was the most important priority for this year.

Future government policies should target helping small businesses get online and develop their e-business potential. Using online technologies to develop single entry points for Federal and State agencies will help reduce compliance costs. Make available more data for free that can help small business owners with market research, industry benchmarking and networking.

There should also be increased funding support for well-designed small business training and development programs.These should include individual and group mentoring and coaching support.

Cease the current overlapping of Federal and State programs and push the funding down to the community level via existing small business support agencies. Encourage more small business education and training within universities and colleges.

Get information and develop small business impact assessments

We also encourage you to get more reliable data on our small business sector. This should be longitudinal in nature and serve as a guide to the shaping of future small business policies. Too many decisions are being made without the benefit of well-founded evidence.

Finally, Minister we suggest that any policy decisions likely to impact on the business community are subjected to a small business impact assessment before they are implemented. This is akin to the environmental impact assessments that are made prior to major resource investments.

Don’t just listen to the special pleadings of big business. Small businesses are the backbone of our economy. There is a lot of evidence that says that net jobs growth in the economy comes from small business start-ups, not from corporate business expansion, but all the attention is paid to the large end of town.

So there you have it, Minister. Remember, when you are discussing around the Cabinet table how you spend our money, it is all created by the activity of business, and about 33% of GDP and 60% of value added is being generated by small firms. So a little recognition to small business for the role they play, and a little more attention when it comes to supportive policy, would be a nice way to say thanks.

All the best in the new job.

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.

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