Understanding small business success and viability

The aim of this project was to understand how the ATO can help to increase the viability of early-stage small businesses, taking into account the post COVID-19 environment, implement interventions that support new small business owners’ success, with a particular focus to their interaction with the tax system, and reduce the economic and social impacts of business failure by assisting those businesses that were never going to be viable to exit early.

Why is this important?

As with biological systems, the germination and growth of new firms coming to existence proceeds through multiple life-cycle stages (Churchill and Lewis, 1983, Scott and Bruce 1987). A well-known problem with new businesses is their high dissolution rate. For example, only 50% of firms survive the first three years (van Praag, 2003). Thus, government authorities are required to understand not only how to stimulate business start-ups, but also how to minimize the number of business dissolutions (van Praag, 2003). It is crucial to focus on small business, as over 90% of businesses in Australia fall into this category (ATO, 2016).

What did we do?

In the first stage of the project QUT undertook three programs of research:

1. A desktop review of the relevant literature on entrepreneurship and determinants of success for small business.
2. A discovery of available data using the Business Longitudinal Analysis Data Environment (BLADE) providing insights into Australian businesses and how they are impacted over time.
3. Facilitation and analysis of eight focus group discussions with small business owners, and business agents and consultants, to investigate the experiences, activities and behaviours of small business owners.

The synthesis of outcomes of these three programs contributed to the following outcomes:

• Development of a map of the Australian small business ecosystem including stakeholders, relationships, drivers, risks, requirements and behaviours of new small businesses.
• Identification of potential interventions that the ATO could implement to shape business success and reduce the number of unviable businesses.

What did we find out?

Eight themes have emerged based on the findings of the three programs of research conducted during this project. Each of the following themes represent the synthesised findings of the research and are the basis for the recommendations and directions for future development of the ecosystem map.

1. Motivations for starting a business vary
2. Financial goals, capabilities and resources affect business activity
3. Personal traits vary and affect behaviour
4. Behavioural biases manifest in different ways
5. Attractiveness of information is determined by motivations and personal traits
6. Response to ambiguity and an active approach are key behaviours influencing adaptability and vision
7. Business failure can be conceptualised in different ways
8. Approach biases matters when it comes to support

For more information about this project, please email: best@qut.edu.au