Beverley Head
February 12, 2018

Kate Carnell on small business

The Establishment

Kate Carnell on small business

Kate Carnell: A small business is not just a little big business

Government’s tendency to think of small business as little big business is just plain wrong, according to Kate Carnell. And when it comes to innovation the problem is particularly acute, because technology remains a mystery to many.

Ms Carnell will blow out two candles on the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) cake next month.

An appointment by the Governor General, the Ombudsman is at arm’s length from the government of the day, with the requirement to advocate for small and family businesses.

It’s an important element of the nation’s economy, and while startups classify as small businesses, not all small businesses classify as startups. They are pharmacists, manufacturers, restaurant owners, and tradespeople.

According to Ms Carnell; “Small businesses are good at what they do, technology can be for many of them just a mystery."

Beyond what they need to actually run their businesses – and they will be good at that – they don't tend to have much in house capacity outside their core business.”

Small and family owned businesses make up 98 per cent of all organisations in Australia and are responsible for half of all employment and GDP.

According to Ms Carnell; “One of the things that always surprises me about government is that it has a tendency to think about business as one thing, and that small business is just little big businesses.

“The fact is that is not the case. Big businesses have in-house lawyers and technologists and people to run the computers and they have a lot of inhouse capacity.”

When it comes to SME innovation she says “the great dilemma for small business is thinking outside the square – what could technology do for my business, how could I use technology for my business?

“The problem we have from an economic perspective is that there is a chunk of research in this space that shows small businesses that are fully digitalised or focussed on the digital space are more likely to be growing. We know this helps growth.”

Failure to properly address technology issues does not just limit growth, it can drive a small business to the wall.

According to ASBFEO, 60 per cent of small businesses which endure a cyber breach go out of business within six months – and that’s before the penalties associated with data breach notification laws kick in later this month.

In January, ASBFEO released a cyber security guide aimed at small business, and Ms Carnell has sounded several warnings since the beginning of the year for small businesses to take seriously the mandatory data breach notification laws which come into effect on February 22.

She is also keeping a close eye on Amazon’s impact on the businesses she serves and met with the company’s local management last year to remind them of the fact.

“It's true that the digital economy can really, really help small businesses grow if they stay ahead of the curve. The main game in town is Amazon. Is it a good thing or a bad thing?

“Amazon is just a thing.” But it’s a thing that needs to be handled with care by small business warns Ms Carnell.

“Amazon didn't get to be as big as it is by being a compassionate player in the marketplace. As a little business dealing with Amazon you really have to understand contracts, what you are getting into, or the outcome might not be all that crash hot for you.”

ASBFEO held face to face meetings with Amazon’s local legal team, CEO and CFO.

It was, she says; “To remind them that Australia has the unfair contract term legislation which means that contracts they have with small businesses (in Australia) could not have a range of the clauses that they have in the contracts in the US.”

Amazon can’t for example terminate a contract in Australia for any reason at any time, similarly it can’t just change terms and conditions willy nilly.

“We had a good meeting with them and made it clear we were going to keep a close eye on this.”

Ms Carnell is on balance very optimistic about how technology could be used to grow small and family businesses – but warns that a fundamental is missing from the innovation equation for this sector – access to capital.

“The great dilemma is access to capital.” While there are funds available to start ups, and supporting infrastructure for those organisations in the form of hubs and incubators, it is difficult to access funds to grow and invest in a small business, to buy plant or equipment, she says.

Meanwhile legislation to allow crowdfunding for private enterprise remains mired.

Right now; “Unless you have significant equity in bricks and mortar, for example, your home or something else, banks are increasingly unwilling to lend.

“You can't grow a business if you don't have capital on the whole,” she said.

“Remember that small business are not little big businesses.”

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