Where are the young small business owners? New data paints stark portrait of age gap in Australian SMEs

Australian small business owners are generally older, less innovative, and lacking in technological savvy compared to their counterparts across the Asia-Pacific region, according to an eye-opening report from CPA Australia.

The accounting body’s 14th annual Small Business Survey, which collated data from 4,280 business in eleven markets, found 46.8% of Australian small business owners are over the age of 50 — more than double the average rate across all survey respondents.

By comparison, just 12.2% of small businesses surveyed in China were operated by those aged 50 or over, with the figure dropping to just 4.3% in Vietnam.

Source: Asia-Pacific Small Business Survey 2022-23 / CPA Australia

Australia placed ninth out of eleven in terms of markets with the most small business owners under 40.

The relative age of Australia’s small business leaders has exposed a missing cohort of young entrepreneurs, marking what CPA Australia senior manager business and investment policy Gavan Ord has labelled “Generation MIA”.

Speaking to SmartCompany, Ord identified four main factors which may be dissuading younger Australians from starting their own business.

Younger people may have more difficulty accessing startup capital than their older counterparts, Ord said, especially entrepreneurs who don’t own a home they can use as collateral for foundational business loans.

The risk-reward ratio for establishing a small business may be skewed compared to other nations across the Asia-Pacific, Ord added.

“A lot of small businesses are putting in extreme amounts of time, and they’re not necessarily getting the reward they would get if they were just employed by somebody else,” he said.

Australian culture may have a more negative perception of business failure than neighbouring markets, Ord suggested.

The inverse may also be true: starting and operating a small business may simply be a more desirable pathway elsewhere than in Australia.

Internationally, “the small business owner doesn’t have to cover everything [themselves], and they can spend more time working on the business rather than in the business, to use a cliche,” Ord said.

“It’s a pathway to success more so in Asia than here,” he added.

The age disparity between Australian small business owners and those in other markets is more than a statistical oddity, but could represent real and pressing threats to the local economy, CPA Australia suggests.

The organisation is now calling on the federal government to launch an official inquiry into the barriers keeping young Australians from picking up the tools in their own small business.

Fears over the growing age gap largely pertain to productivity, a hot topic among business leaders and policymakers over the last week.

The age of small business owners and decision-makers is inversely related to their growth in 2022, the data suggests.

Ord said the limited growth of small businesses helmed by those in their sixties and over could be indicative of entrepreneurs gearing up for retirement.

However, business owners over 60 are significantly less likely to invest in forward-thinking technologies and processes than their younger counterparts, which may not only blunt their local competitiveness but, at scale, constrain the nation’s productivity.

“The issue in Australia is because we have a proportionately higher number of business owners in the 50 above and 60 above category [than other markets],” Ord said.

“That means the impacts in Australia are much higher.”

Issues arise when forward-thinking businesses do attempt to integrate new technology, too.

“Australian small businesses were the least likely to state that their investment in technology last year increased their profitability,” the report said.

“In other words, even when Australian small businesses do invest in technology, they underperform their regional counterparts in selecting technology that improves profitability.

“Australia’s lower technology adoption rates and an older demographic profile is likely contributing to that result.”

Australian businesses were also the least likely of any market surveyed to forecast innovation within their business over the next 12 months.

Source: Asia-Pacific Small Business Survey 2022-23 / CPA Australia

Beyond a government inquiry, CPA Australia says government funding to boost existing business-to-advisor connections is needed to make up the capability gap.

Small businesses should be empowered to “work with those they already were talking to: their accountant, the bookkeeper, the IT consultant,” Ord said.

“I think that’s the quickest and cheapest way to achieve positive outcomes.”