Christmas disaster looming
Expect a bloodbath of business failures by Christmas unless the government steps in, drops its fixation with a surplus and produces a small business stimulus package immediately.
The tax loss carry-back proposal doing the rounds today is a good start but this is a big issue.
I am not an alarmist. I run a small business and share with other small business owners around the country a sense of pride in standing on my own two feet.
During the past few months I have been increasingly worried about the small business sector and our story yesterday in SmartCompany really got alarm bells ringing for me.
Forty per cent of small businesses (under $1 million revenue) are reporting losses in 2010 and 2011.
Forty per cent! That means almost half of our small businesses are not making a profit.
What does that really mean? It means they are eking out a living at break even or having to shovel money into the business to keep it going.
What is worse is that the figure has risen dramatically from an average of 25% reporting losses in the 2006-2008 period.
If the government needed proof that an avalanche of small businesses is a gasp away from dying there it is.
And they had better listen up because the Christmas break is the killer for struggling businesses because they face a lot of holiday leave, a fall in revenue and a BAS in February.
Some of the 40 per cent loss makers have been trading a while and may have the resources to withstand a few years of loss. They will be restructuring, cutting back and bunkering down.
Many will have tried to access money from banks or private investors and failed.
Others may have found that the traditional source of money from friends and family has dried up because the baby boomers have taken a hit on their superannuation and are unsure of their futures.
That group will struggle on, not employing, not training and dealing with huge amounts of stress.
But another sector of the 40% loss makers have struggled for two years and are getting ready to shut up shop.
They have tried everything – negotiating with landlords to get cheaper rent, trying to transition their businesses to the internet, putting staff on part time or reducing hours.
Nothing worked and Christmas is now bearing down like a freight train in a long, dark tunnel.
That is the group that will wind up before Christmas because they will not be able to bear further losses and the patience of their families has worn out.
Start-ups are another group of 40 per cent loss makers.
Starting your own business is hard at the best of times but the past two years – particularly FY 11 – has been harder than they possibly imagined.
Those new businesses feed the pool of emerging companies and many of them will not be able to survive until the magical year three, when the business is established enough to withstand some stress.
Traditionally no one gives a toss about small business owners. So what would make Labor sit up, take notice and deliver a small business emergency stimulus package?
It isn't votes because the sector traditionally votes for the Coalition and the Greens, and the Labor Party knows it.
But maybe small business owners have another ace up their sleeve. Maybe sheer weight of numbers might do the trick.
Think about it. If there are a million small businesses and 40% are really struggling, that is a lot of people who are doing it really hard.
They are downsizing, not spending, not employing and not innovating.
Worse, they are not creating jobs and skilling up the workforce of tomorrow.
And worse still, they are not consuming at a personal level.
The Coalition is working hard to talk the economy down because it knows that low economic and consumer confidence is the trick to get them into power.
Imagine if you could get Labor politicians to see small business owners as consumers, creators of jobs and innovators.
Then imagine if they could go even further than the tax loss carry-back idea and quickly craft up a stimulus package that would include payroll tax relief to assist those employing companies to keep their businesses open over Christmas and to keep their staff employed.
Imagine if the government could put together an amnesty on some crucial payments like the February BAS until companies can get back on their feet.
Imagine if the government could set up some sort of training package to assist struggling businesses take on new staff and skill them up.
What a fillip before Christmas. What a message to send the economy – that we are through the worst and this is some targeted assistance to get these hard-working small business owners over the Christmas hump to next year, when things will be better.
And think of the relief for those 40% of small business owners, their staff, suppliers and families around the country, who otherwise are facing a very bleak Christmas.