The 20-plus-year banking veteran also probes whether the aspiring entrepreneur understands the time commitment required and has not been seduced by visions of a beautiful work-life balance with no boss and no commute to the office.
“Owning a small business is not for the faint of heart,” says Rebecca Warren, head of small business banking at Commonwealth Bank.Credit: Commonwealth Bank
The reality is very different. “A small business owner has a lot less time than he or she has at his or her disposal,” Warren said.
“It’s hard work and it takes a lot of courage to do it.”
Warren said his ultimate concern was whether the owner understands the nuances and seasonality of the industry he or she is entering and has enough capital to survive the first 18 to 24 months, which is the really vulnerable time for any small business.
Despite the risks, there is no shortage of Australians who want to start a business or decide to close one.
By mid-2023, according to the latest available figures, Australia had almost 2.6 million actively operating businesses. Around 15 per cent had been operating for less than a year and almost the same number had closed, representing a net gain of 50,000 businesses in 12 months.
Lack of time can be costly
One modern burden that small business owners are particularly vulnerable to is cyber scams.
“A lot of the scams are targeting small businesses, and it’s heartbreaking for them,” Warren said.
“Many small businesses basically don’t protect their perimeter.”
Charging
Hacked email systems allow criminals to observe what is happening and act at just the right time so that nothing seems out of place.
They commonly send fake invoices that look real just before the genuine one is due, with a seemingly harmless request to change bank details.
“A small business owner who is short on time will take the email, save it as the new payee, take out the money,” Warren said, and only know he’s been hacked when he’s being chased for an unpaid invoice.
Commonwealth Bank has spent $750 million on cybersecurity in the past 12 months. Like its competitors, its customers now see the account name after entering branch and bank account details to make a payment, providing a check against fraud.
WA Small Business Tracking, The Best
While Commonwealth Bank serves one in four Australian small businesses in WA, it holds a third of the market. Its strong position is due to its ownership of Perth-based Bankwest, which now focuses exclusively on retail and whose business customers are in the process of being transferred to the parent company.
Warren said small businesses in WA were performing better than the national average.
Lending data from the Commonwealth’s 240,000 small business customers in WA shows some surprising investment shifts over the past 12 months, with electric vehicle purchases tripling and light commercial vehicle lending quadrupling.
Warren said asset financing was a leading indicator of a healthy corporate sector.
He said the 2.2 per cent rise in consumer spending was the highest in the country. However, with inflation higher, even Western Australia is showing a decline in the real value of spending.
“It’s always difficult to run a small business, but in relative terms, you could say it’s the best state to be in.”
Warren said sectors such as hospitality, which rely on discretionary spending, were the hardest hit.
It is no surprise that a recent Commonwealth Bank national survey showed that a third of small business owners are concerned about rising input costs. The main reason given for buying electric vehicles was cost reduction, not emissions reduction.