As Administrator Contreras-Sweet said the internet, and the rise of confidence in online selling, means no-one can tell how big or small you are from your website. Or what you’re wearing.
A small business can now get up and running and reach a broad customer base quickly. But technology also lowers the barriers to entry for competitors.
Technology-fuelled disruption is creating opportunities and challenges.
There are three key drivers that I believe can both enable SME growth and encourage a more entrepreneurial culture in Australia. I call them ACE.
Access. Connection. Education.
Access is not just access to capital but also markets and skills.
Both government and big companies could do more to give small business access to revenue streams, be that government contracts or corporate purchasing.
Small Businesses also need access to tools that allow them to run their business’s finances. At ANZ, we have been focused on building the sort of modern tools that allow small businesses to transfer money, view accounts and take payments - on their ipads, on their mobile phones, on the go, which is how many of them operate.
I know because apart from being a banker I do the accounts, the Business Activity Statements – with all the administrative headaches that involves – for my husband’s small business.
But I’m also aware many accounting packages are now making it easier to download transactions automatically and auto-classify those transactions based on previous history, saving small business owners time.
Meanwhile, at some point, many businesses will need access to bank funding.
I say ‘at some point’ because the reality is, in their earliest stages, most businesses choose to self-fund.
At the point where they need additional funding some turn to bank funding, and others, particularly when their business is more speculative, look to sources such as equity, venture capital or crowd funding – a funding source that needs more discussion in Australia.
We are well aware of the perception in the community that banks don’t lend to new small businesses. I can’t talk for the other banks, but this is a sector that we are certainly happy to back.
Last year, we pledged $1billion to support new small businesses in Australia. We oversubscribed this, approving seven out of every 10 applications from new small businesses, so this year we’ve extended that pledge to $2 billion.
But, as is the case with any loan, the fundamentals are a must. It’s not in anyone’s interest if a bank lends money to someone who can’t afford to repay it.
Consider a start-up we worked with recently here in Victoria. Founded by two women, they had worked in the beauty industry for over ten years but were made redundant when their employer closed down.
They were interested in starting up a beauty training business but didn’t know where to start. They had all the technical knowledge, and between them, over 20 years industry experience.
But they weren’t accountants. Or Compliance officers. Or marketers.
So they made an appointment with one of our bankers and before the meeting jumped on our Small Business Hub and downloaded business planning tools that helped them structure their business plan and cash flow forecasts.
This meant they were well prepared and could demonstrate how they would generate sufficient revenues to repay the lending. And they were successful in securing the finance required to get up and running.
The second part of ACE is connections.
Networks are critical to the success of small business. I am not talking about technological networks, but the human…people to people networks…that allow businesses to connect across Australia and across the world.
ANZ recently used our network to support an Australian Company, Australian Reproductive Technologies, to expand into China. The company entered a $40million joint venture with the Shanghai Dairy Group, with a large scale IVF plan to grow the number of milking cows from 60,000 to 230,000 in the next five years.
The owner Simon came to us seeking funding and we were able to put him in touch with our bankers on the ground in China, to support his operations there.
ANZ’s network in and understanding of the Chinese market meant we were well positioned to understand the JV and cash flows and provide funding.
We’re also using our network in the Agricultural sector back in Australia to help this same customer build local scale, which will further enable him to pursue other international contracts.
In talking to another small business entrepreneur recently he bemoaned the six months he’d spent trying to find someone who could manufacture the device he’d invented. What he lacked was the peer network he needed.
Social media is certainly fostering more peer to peer networking but if governments and big corporations can find ways to open up the networks we have to small companies I believe there is huge value to be created.
The third part of ACE is education.
When I listen to small business owners talk about their challenges beyond finding enough customers and suitable staff, the themes are common:
- I need advice, management tools and information
- I need to expand my skills and capabilities to cover the aspects of running a business that larger companies can hire the skills for.
Now there are a range of government resources to help with this and many large corporations like banks and industry associations have internet sites with tools to help - business planning templates, cash flow forecasts, benchmarking tools, and social media platforms to connect customers to like-minded businesses.
But I think we could do more. I don’t think we have yet begun to tap the potential of on line learning.
This week, Starbucks boss, Howard Schultz, announced a new benefit for his US employees who work over 20 hours a week. ….In partnership with Arizona State University he announced the Starbucks College Achievement Plan which will provide full tuition reimbursement for juniors and seniors to finish a bachelor’s degree. What has enabled this program is that the courses will be online. The great advantage of an online course is that the student can listen to the lectures or do the course work on his or her own time and it can be opened to any employee across the US.
This ability to be inclusive with online education is I think critical to the needs of small businesses in Australia who also need to work during the day and push their learning to the nights and weekends and who are spread out across the country often with limited ability to attend the face to face courses and seminars that government or private sector organisations put on in larger metropolitan or regional locations.
There are many courses, tools and information services available but we need to ensure that small business owners are aware of and see the value in accessing these courses and that these services are perfectly pitched to meet the needs of small businesses is our opportunity.
In addition to reducing red tape I believe we can enable SMEs to grow in size and in number by giving them more access….more connections and more education.
Kate Gibson is general manager small business banking at ANZ.