I have recently been noticing small to medium sized businesses taking some wonderful calculated risks in what is an otherwise subdued economy.
In the last two months I have seen or heard of people setting up or expanding new small and medium sized businesses. This includes overseas offices in Asia, new cafes, restaurants, personal services businesses, professional service businesses and online clothing stores.
These business owners are showing fantastic bravery, often at great and immediate personal cost in terms of finances, health and family.
For big businesses taking big risks has the potential to impact thousands (and sometimes tens of thousands) of working Australians and their families, and broader communities and stakeholders. However, it feels like a long time since I regularly saw the Australian business media full of stories about big expansion, new or innovative products, or partnerships with start-ups. As always there are exceptions such as the recent acquisition of Dovetail, an innovative start-up that provides online collaboration solutions, by accounting software provider MYOB.
Around 95 percent of the 2 million businesses actively trading in Australia in 2011 were small businesses, accounting for almost half of employment in the private non-financial sector and over a third of production. The OECD estimates that SMEs comprise the overwhelming majority of firms in almost all countries, and contribute to at least two thirds of total employment.
The reality is that SMEs will provide the necessary innovation and job creation potential that will drive new economic growth. The question is how do we go about encouraging them?
Clearly access to funding is vital, together with effective mentoring. Funding for start-ups and growing business can be a complex area; investors have different criteria and understanding the different demands is often a huge learning curve. Increasingly funding can be provided through both traditional financial institutions in addition to other routes such as angel investors, venture capitalists, dedicated funds and high net worth individuals. Recently ANZ announced a $2 billion lending pledge to small businesses to provide a boost for the economy and create new jobs, signalling that they recognise the value of SMEs in the business environment.
One of the potential barriers to building more opportunities for SMEs is the need for more proactive communication. It may be that the ideas and the entrepreneurs exist, but they are struggling to get their voices heard. Not only do new media stories provide important portals for promoting new concepts, they document successes and failures providing important lessons for all.
But what about the role of big business in supporting smaller companies? Are there ways we could get big business to provide financial investment into developing new innovations?
I am keen to open a debate in this area and welcome your views.
One of the starting points is to ask ourselves whether we want big business to be more entrepreneurial? If not, then we need to consider how to better support SMEs to grow into big companies. For example, should we encourage internships from big companies to little companies? If we do, then perhaps we should attract people with SME experience into big companies and not just those CVs which include MBAs and other brand names or big corporate entities.
Established companies providing an opportunity for new ideas and products is an exciting area of discussion and I wonder if it is possible to translate the bravery of small business owners into this sector. Or have leaders in our big companies and government corporations lost the art of calculated risk and positive action?