Governments can help small business – here’s how

“Small business” is a term that governments, economists and policy makers love to toss around, usually in the same sentence as such cliches like ‘the backbone of the economy.’ We hear them so much so that they have become empty words, as evidenced by the lack of real action, innovation and leadership by governments on small business. Pardon my cynicism, but we can see from afar that they can smell the votes in those 2 million or so business owners as much as the genuine desire to make real investment into the sector.

Along comes Joe Hockey, Budget 2015. Well done Joe for making small business a public priority, at least in the only way that governments seem to know – with tax. Whilst any measure is welcome, I am not convinced that this politicians’ solution is the best use of that money in the long term. Company tax rates are down a smidge, which is welcome, but for those small businesses that have companies (which is not all), getting a tax bill less 1.5% is akin to a football player getting an extra slice of orange once the game is over. Many small business owners won’t have tax money sitting in the bank waiting for the ATO anyway, nor will they be sure how much that tax bill might be until the final accounts are done, somewhere late in the calendar year. Most will never even know the exact value of that incentive.

Then there’s the new $20,000 asset write off policy. It sounds good as a headline, and will be a useful incentive for business owners, to help them cut down their tax bills in the short term. My guess is that most business owners would be bringing forward purchases that they would be making anyway later or else borrowing to make the purchase, where interest charges could easily extinguish any gains. Any net cash into the small business will come when returns are made at some point later in the year, reducing tax liabilities – again that most businesses won’t have sitting in the bank anyway. There’s no extra money in the businesses to buy new assets, just moving the dates or debts around. This policy is as much for the general economy as it is for small business. Well played politically.

How can governments really help, and get the most bang for their buck? The aim should be to have the small business sector humming, innovating, creating jobs and making future Facebooks, Apples or Googles. Very soon there will be some big holes in the ground when Ford, Holden and Toyota uproot, so it’s time to plant lots of seeds that will be the seedlings of future industry, or at least fertilise those that are there already.

After 20 years in small business and 12 working with business owner, I think the answer is in the training and education of business owners. Smalll business owners are already motivated, work harder than anyone else and innovate more. But where they lack is business management skills. In the daily juggle that is business ownership, knowing how best to use their precious time and money is a fight they usually lose. They often aren’t able to access good affordable advice on financial management, sales, marketing, social media, strategy or HR – advice that could really make their businesses flourish. Most have never had a business plan of any type. Should we even make a basic business plan mandatory with every ABN?

For the billions of dollars in government spending on the latest round of tax incentives, would we get a better outcome long-term by upskilling our business owners? We should be releasing a small army of business gurus to show them how to have better businesses, to teach them how to better many their money, to get more clients and to innovate. I have seen it in the clients I work with – you show them what to do and their business doubles and triples. That means more tax, more assets purchased and more jobs.

Small business is a sleeping giant within our economy, a part that has the power to transform it. Most business owners would rather be earning more money (their own money), paying tax and buying assets because their businesses are flourishing. Let’s give them the tools, which will ultimately help everyone.


Dr. Warren Harmer

Posted on 06/26/2015 in Small Business

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