Small Business Strategy

September 2011

Department of Economic Development, Tourism and the Arts

SUMMARY
This Small Business Strategy has been developed as part of the Economic Development Plan for Tasmania. The Tasmanian Government is committed to the strategic development and sustainable growth of small business in Tasmania as part of its broader strategy for development that is economically, environmentally and socially sustainable. The Tasmanian Government will: create a competitive business enabling environment in Tasmania d  eliver leading-edge business advice, market information and skills development to operators s  upport and encourage well-planned and well prepared start-up businesses f acilitate the growth and export capabilities of established small businesses  ssist small businesses that are ready to be players in the a digital economy m  aximise opportunities for small business to be involved in government contracts and projects improve the exchange of information and communication between government and small business w  ork closely with small business representative organisations, chambers of commerce, industry associations and stakeholder groups to build a strong small business network.

Disclaimer: The information contained within the Small Business Strategy is considered to be correct at the time of publication. Images used within this publication remain the property of the copyright holder. State of Tasmania September 2011 (reprint February 2012) ISBN 978-1-921527-17-3 Small Business Strategy (Print) and 978-1-921527-18-0 Small Business Strategy (Online) Images courtesy of f8 photography, Tourism Tasmania, Rob Burnett, Dan Fellow, Nick Osborne and Simon de Salis.

Small Business Strategy 2011

1.0 Overview
A small business employs less than 20 people, is independently owned and operated, and close control over operations and decisions is held by the owners.1 Generally, one or two people are required to make all of the critical management decisions finance, accounting, staffing, purchasing, processing, marketing and selling without the aid of specialists or specific knowledge. Small businesses are not simply small-scale versions of large companies. They have many features that are not found in large organisations and are managed differently. A dynamic small business sector is critical to achieving economic growth, creating new jobs and increasing exports in the Tasmanian economy. Small businesses play an important role in binding communities, especially in regional Tasmania. Small businesses are also a vehicle for human capital development and social inclusion. 2 There are sound reasons for government to actively support the small end of the business sector. Small businesses make up over 95 per cent of businesses in Tasmania and employ around 46 per cent of the Tasmanian workforce. They are essential to Tasmanias economy. They are frequently the drivers of new business models and rst adopters of innovative products and services. Every large business was once a small business. Innovative small businesses create and maintain signicant numbers of jobs3 and are a signicant component of the Tasmanian economy. Small businesses are important vehicles for income generation and wealth creation, and the self-employment they enable is an important contribution to employment more generally. Research suggests that in times of economic crisis, small businesses display resilience that serves to cushion the impact of economic downturn by maintaining employment at a time when large rms tend to shed staff.4 Many small businesses are exporters interstate or internationally, or supply larger firms that export products and services. The potential benets of government support for small businesses include: improved viability and reduced incidence of failure lower social and economic costs of failure greater small business confidence appropriate risk-taking, including a greater willingness to innovate faster growth increased profitability higher levels of export to interstate and international markets increased employment h  igher business sale values, resulting in wealth creation and intergenerational transfers.
1 2 3 4 ABS 2001 Small Business in Australia, Cat no 1321.0 Kuratko and Hodgetts, 2007 Bridge, 2011 Johnson et al, 1995

Governments across all jurisdictions in Australia recognise the strategic importance of the small business sector to the community and the economy. In support of the challenges faced by small business, the high social and economic costs of failure, and the potential benets of success, governments have for many years funded or part-funded the delivery of small business services, including: t  he provision of information, advice and support for business intenders and small business start-ups coordination of local networking events c  oordination of the delivery of business education and training programs t  he allocation of funding to support expansion or access to export markets the supply of business diagnostics and counselling the supply of coaching and mentoring programs.

Small business in Tasmania

Small businesses make a vital contribution to a successful Tasmanian economy and community. In addition to being a major contributor to the economy in terms of output, employment and number of businesses, the small business sector in Tasmania is selfreliant, innovative, responsive and entrepreneurial by nature. 5

Large
200+ staff 0.3%

Medium
20-199 staff 4.9%

Small
1-19 36.0%

Non-employing
58.8%

Figure 1: Size of all businesses operating in Tasmania

Source: ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0

5 Department of Economic Development, Tourism and the Arts, Small Business Focus Groups, 2010

Small Business Strategy 2011

There is estimated to be 38000 businesses in Tasmania of which around 36000 are small businesses (95 per cent).6 A decade ago there were around 23700 small businesses in Tasmania, indicating an increase of approximately 37 per cent over the past 10 years.7 Of the small businesses in Tasmania, around 22000 (58.8 per cent) are non-employing micro-businesses.6 Approximately 106000 people are employed by small businesses in Tasmania.8
Key statistics for small business in Tasmania 36 000 small businesses in Tasmania9 95 per cent of all businesses in Tasmania9 73 per cent of small businesses are located in Hobart, Launceston, Burnie and Devonport9 58.8 per cent are non-employing9 Almost 40 per cent of small businesses are operated from homes10 Almost one third of small business operators are aged over 50 years10 Over a third of small business operators are women10 Almost a quarter of all small business operators are born overseas10 One third work part-time10 92 per cent of small business owners operate one business (eight per cent have multiple small businesses)11

Tasmanias small businesses span a range of industries, including high representation in agriculture, forestry, shing, construction and services. These ve industry sectors account for almost 60percent of Tasmanias small businesses. Small business is also highly represented in the states tourism sector, with at least 90percent of the 2000 operators classied as small business.12 It is estimated they contribute around $1.06 billion or 4.98percent to gross state product. Direct jobs generated in Tasmania from tourism are approximately 6.15percent of Tasmanian employment (14150 jobs).13 Almost 40percent of small businesses in Tasmania are in exporting industries (mining, agriculture/forestry/fishing, transport/postal/warehousing and manufacturing).14 In general terms (all sized businesses), total employment in mining and transport/postal/warehousing has increased over the last 10 years, whilst agriculture/forestry/fishing and manufacturing has declined.
Tasmanian small businesses by industry

Tasmanian small businesses by industry

Mining Electricity, gas, water and waste services Public administration and safety Information media and telecommunications Education and training

Arts and recreation services Not classified

Administrative and support services Wholesale trade Other services Health care and social assistance Manufacturing Accommodation and food services Financial and insurance services Transport, postal and warehousing Professional, scientific and technical services

Figure 2: Tasmanian small business facts As illustrated in the graph below, 45percent of all Tasmanian businesses have an annual turnover of less than $100000, including 29percent with less than $50000. Around 18percent of businesses have a turnover between $200000 and $500000 per annum.

Annual turnover of Tasmanian businesses

Annual turnover of Tasmanian businesses $5m or more $2m to less than $5m $1m to less than $2m Annual turnover $500k to less than $1m $200k to less than $500k $100k to less than $200k $50k to less than $100k zero to less than $50k 0% 5% 10% 15% 20% 25% 30%

Retail trade
Rental, hiring and real estate services Construction Agriculture, forestry and fishing 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Percentage of businesses

Figure 4: Tasmanian small businesses by industry

Source: ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0
6 7 8 9 ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0 ABS 2001 Small Businesses in Australia, Cat no 1321.0  odelled from ABS 2009 Counts of Australian Businesses, Including Entries and Exits, M Cat no 8165.0 ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0

Percentage of businesses

10 ABS 2004 Characteristics of Small Business, Cat no 8127.3 11 A  ustralian Communication and Media Authority, Jan 2008, Telecommunications Today Report 2: Take-up and use by small and medium enterprises 12 TigerTOUR database, Tourism Tasmania, May 2011 13  Sustainable Tourism Cooperative Research Centre, 2007/08 Tourism Satellite Account 14 ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0

Figure 3: Annual turnover of Tasmanian businesses

Source: ABS 2009 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0

Small Business Strategy 2011

There are approximately 5000 new business entries in Tasmania each year. The survival rate of Tasmanian business is the highest of any other state or territory in Australia, with 76percent of businesses that were operating in June 2007 surviving to June 2009.15 This may be linked to the comparatively higher number of sole-trader, home-based and family-owned businesses operating in Tasmania, for which there is generally a higher survival rate. Home-based businesses and independent contractors represent an expanding part of small businesses in Tasmania. The economic and social impacts of the global nancial crisis are still being felt by businesses in Tasmania. It is, and will continue to be, a challenging operating environment for small business as a result of pressures in the global nancial system and the rapidly changing nature of competition and consumer spending. Small businesses, in particular, are very sensitive to changes in the economic environment.16 While changes in markets, competition, products and customer preferences are inevitable, it is those small businesses that can anticipate and adapt to such changes that will ourish. The global nancial crisis has also impacted on the governments own scal position and has required it to review its approach to supporting small business. The Department of Economic Development, Tourism and the Arts (DEDTA) has conducted extensive industry consultation to properly understand the needs and challenges of Tasmanian small businesses and what role government can play in addressing these. The states small business community has provided signicant input into this strategy, through a series of focus groups, an industry forum, and one-on-one meetings with small business representative groups, associations and chambers of commerce. DEDTA has also conducted a review of existing data on small business, as well as considered the small business policy and program initiatives across Australia and overseas. The opportunities and challenges for small business identied are summarised below.

that small businesses have identied productivity related benets of the internet, including communication via email, conducting online research, access to online reference materials and e-commerce initiatives (for example, accepting orders online).18 The digital economy can quickly present new market opportunities while those that fail to adapt to the changing competitive environment may not survive. Recent research by IBISWorld has suggested the past decade of doomsday predictions in relation to the rise of the internet and online trading have been unfounded as retailers have found ways to reinvent and innovate, enabling smart operators to remain in the marketplace.19 Research by Sensis into social media usage by both consumers and businesses in Australia indicates further online opportunities for business. The research indicates 62percent of Australian internet users are actively embracing social media, however only 14percent of small businesses have a social media presence. 20 Sustaining existing businesses: With around one third of small business operators aged over 50, Tasmanias ageing population is a looming issue in the labour market. A greater number of transfers of businesses to younger generations would have a positive effect on the Tasmanian economy. The European Union experience indicates that successful transfer of business preserves more jobs on average than those created by new start-ups. 21 Government support therefore needs to be given to succession planning, business valuation and exit strategies. The government also needs to encourage suitably trained young Tasmanians to stay and work in the state. This presents an opportunity for the training sector, but also requires businesses of all sizes to provide an attractive work environment in which to retain good staff. It also suggests that strategies should be pursued that encourage an enterprising culture in Tasmanias education system from an early age and position self-employment as a career option.

1.1 Opportunities
Tasmania has the opportunity to become an entrepreneurial economy, one based on the knowledge, flexibility and expertise of people. It involves the start-up and growth of new innovative rms rather than economies of scale and routine production. This shift is already visible with service-based sectors being the fastest growing in Tasmania and nationally. Two main factors have triggered the emergence of the entrepreneurial economy: globalisation and the digital economy (the use of information and communications technology for online activity).17 The digital economy: The digital economy presents a major change in the way consumers buy their goods and services and the nature and location of competitors for Tasmanian business. Competition is not restricted to businesses in the same suburb or region. Global competition and access to products and services online presents an opportunity for businesses to change their business model, pricing, and promotional strategies to take advantage of new and emerging markets. Research indicates

15 ABS 2010 Counts of Australian Businesses, Including Entries and Exits, Cat no 8165.0 16 Houghton, 1997 17 Bridge, 2011 18  Australian Communications and Media Authority, Jan 2008, Telecommunications Today Report 2: Take-up and use by small and medium enterprises 19 IBISWorld, March 2011 20  Sensis, May 2011, Social Media Report, What Australian people and businesses are doing with social media 21 Commission of the European Communities, 2008

Small Business Strategy 2011

Supply chain collaboration: Building strong links within supply chains with a focus on collaboration offers considerable opportunities for small business in Tasmania. As noted in a recent United States paper, neither small business nor large business operates in a vacuum. One important connection is the supply chain: small and big businesses selling each others intermediate inputs, that is, the goods and services used as inputs in the production process.22 Sectors with competitive advantage: There are signicant opportunities for small businesses to start and grow in those sectors identied in the Economic Development Plan where Tasmania has competitive advantage, such as renewable energy and agriculture. Other opportunities for small businesses in Tasmania include: p  roduction of niche, value-added goods with a connection to place c  ontinued growth in the services sector knowledge intensive industries s  peed to market flexibility and innovation in meeting customer demands Tasmanias liveability as a great place to live, work, and learn.

More training was the top suggestion for government to improve the success of small business. 29 In 2010 and 2011 the Tasmanian Government conducted its own focus group research, an industry forum and consultations to confirm the key barriers to small business growth. The following charts present the barriers to growth and issues raised in the research.

Barriers to growth Barriers to growth

Exporting Pricing Negotiation Customer service Succession/exit planning Tendering and costing Distribution/logistics Project management Staff management Networking Sales Financial management Balancing time and work

1.2 Challenges
The operating environment for small business has always been challenging. 23 Starting and managing your own business is not easy, but it provides an opportunity for many people to take control and be their own boss. Generally, the challenges faced by small business come about due to their size, the connections to markets and the deficiencies in vertical and horizontal linkages. 24 Reviews of the literature and research indicate barriers faced by Tasmanian small businesses are similar interstate and in developed countries overseas. A study conducted by the European Union of European small and medium businesses cited administrative burden, overregulation and bureaucracy as the main concerns preventing business growth. These concerns are followed by access to finance, taxation, lack of skills, access to public procurement and unfair competition as barriers to growth. 25 Issues identied as priority concerns for small business in the United States include regulatory burden, fair and efficient capital markets, pro-growth tax policies and poorly maintained infrastructure. 26 In past statements on small business, the South Australian and Victorian Governments acknowledge the challenges of the operating environment including government red tape, business taxes, skills shortage and deficiencies, and the need for better coordinated service delivery and increased export capacity. 27 28 From a consumers perspective, the Victoria University in Melbourne conducted a survey on community perceptions of small business. The research revealed that 78percent of Australians had a negative perception of what it would be like to be in small business.

Computer IT technology Business planning Marketing and promotion 0% 10% 20% 30% 40% 50% 60%

Percentage of businesses

Figure 5: Barriers to growth identified by Tasmanian small business

Source: Department of Economic Development, Tourism and the Arts, 2010, Small Business Focus Groups, Strategic Economic Solutions Pty Ltd

22  Slaughter, M., 2010, Mutual Benets, Shared Growth: Small and Large Companies Working Together. Business Roundtable 23 Houghton, 1997 24 Tolentino, 2000 25 European Union, 2008 26 United States Chamber of Commerce, 2011 27 Government of Victoria, 2006 28 Government of South Australia, 2008 29 Breen, 2010

Small Business Strategy 2011

Issues for small business

Business climate Cash flow and access to finance

4% 10 % 25 %

Business skills and practice

to smaller companies and may inhibit entrepreneurship.30 It is not an argument about the need for regulation as such; in many cases these regulations are necessary to protect the nancial, environmental and safety interests of the community. Rather, it is the processes, forms and requirements on small business to apply and comply with these regulations that are of concern. Red-tape is the time and money spent by businesses to understand and comply with government regulations that are above and beyond the daily costs of running a business.31 These include:  aperwork compliance the costs imposed on business p through form-filling and providing information n  on-paperwork compliance such as human capital investment (staff training and education), physical investment (changes to plant and equipment) or capital holding costs associated with regulation-induced delays in business project approvals g  overnment fees and charges, including permit and licence fees that are intended to recover the cost of administering regulations. In its 2008 consultations on the major problems that European small and medium businesses face, the European Union noted that administrative burden, overregulation and bureaucracy are by far the main general concerns and that focused measures to alleviate the administrative burden would be helpful.32 It is acknowledged that many of the regulations that impact on small business are controlled at the Australian Government and local government levels. The Tasmanian Government will need to work more closely with these other tiers of government to inuence decision-making and improve processes in areas such as industrial relations and planning. However, there are a range of options available to the Tasmanian Government to address this issue. These options include: reviews of the stock of regulations reduction of administrative burdens simplification and re-engineering of administrative procedures consistent enforcement of regulations better multi-level coordination rapid introduction of e-government services.33 These options form the basis of the actions proposed in section three of this strategy.

Small local market

10 %
Labour and industrial relations

17 %
Costs

17 % 17 %
Government regulations

Figure 6: Issues impacting growth raised by Tasmanian small business

Source: Department of Economic Development, Tourism and the Arts, 2010, Small Business Focus Groups, Strategic Economic Solutions Pty Ltd

Although a range of issues was raised, particular challenges were consistently identied by businesses across each region and sector and can be summarised into six broad themes: 1. costs of doing business 2. compliance with government regulations 3. a fair and competitive business environment 4. management and business skills of small business operators 5. access to skilled, quality staff 6. access to nance and capital. These are discussed in more detail below. Costs of doing business The costs of doing business are noted as a challenge to business growth in Tasmania. They include matters such as state taxation, and increasing costs of utilities such as electricity, gas and water, cost of freight and logistics. The review of state taxation is an important rst step towards improving the competitiveness of the business operating environment in Tasmania. A system that broadens the tax base and reduces the burden on growing businesses was called for. Rising input costs were also raised by small business and in particular, the need for increasing retail contestability of electricity, initially to users of 50 MWh per annum. The government has renewed its commitment to extend retail contestability to these users in 2011-12. These costs affect all businesses, regardless of size, and as such, are discussed in more detail in Goal One of the Economic Development Plan. Complying with government regulation Red-tape was identified as a common barrier to small business growth in the research and consultation undertaken with small businesses to develop this strategy. It is particularly burdensome

30 Organisation for Economic Co-operation and Development (OECD), 2011 31 Government of South Australia, 2008 32 European Union, 2008 33 OECD, 2011

Small Business Strategy 2011

Fair and competitive business environment Fair competition is regulated by Federal legislation, including the Australian Consumer Law, and is monitored by the Australian Competition and Consumer Commission. However, there is much that the Tasmanian Government can do to promote a fair, competitive business environment. In particular, there are opportunities to improve arrangements for solving businessto-business disputes, particularly in the area of retail tenancy. Tasmania does not currently have a formal alternative dispute resolution process outside the legal system. The public sector in Tasmania is often the driver of large projects and upgrades to essential services and infrastructure. As a result, it is responsible for many contract and sub-contract opportunities for business. Small business access to government tenders and the notion of buy local first was raised by a number of stakeholders. Issues raised included the economic benefits and flow-on effects of supporting local operators to supply government goods and services and work on major projects. There is a perception that the current arrangements are not transparent, that some government tenders limit the capacity of smaller operators to apply, and that price is the only factor considered in decisions. There also appears to be a general lack of awareness of existing services and understanding by small business in Tasmania of how to go about tendering for government business.

Management and business skills of small business operators The governments research and consultation with small business identied a genuine concern by small business operators that they do not possess the necessary business management skills to help their business grow. Many are highly skilled in the trade or profession delivered as the core product or service by their business, but feel they do not have the management skills important in operating a business. Broader research indicates that the potential for business growth in small businesses tends to outstrip management capacity. Insufcient managerial capacity has the effect of limiting and contracting growth and is a major factor in business failure.34 Recent gures released by the Australian Securities and Investments Commission indicate that lack of business management experience, skills and ability is one of the top three causes of business failure.35 Linked to this constraint is the fact that small businesses are often cash-strapped, particularly at the start-up phase. This makes them more vulnerable to nancial failure. Business failure leads to signicant social and economic costs, with family relationships and family wealth often the rst to suffer.

34 Reynolds, et al, 1994 35 A  ustralian Securities and Investments Commission, 2010. Australian Insolvency Statistics, 2009/2010

Small Business Strategy 2011

Small businesses are also often time-poor. Owner-operators know that they will benefit from spending more time working on the business rather than in the business, but operational and nancial pressures make this very difficult, resulting in their spending many unpaid or underpaid hours just to keep their businesses afloat. These constraints limit the ability of small businesses to realise their full potential for income generation and wealth creation, and are particularly acute in start-up and fast growth small businesses. Advice and services such as bookkeeping, the preparation of tax returns, business coaching, and legal advice are provided by the private sector. The associated costs often represent too great a challenge for cash-strapped small business owner-operators, and they may skimp on exactly the advice and support required to underpin their viability and sustained growth. Private sector providers, for their part, have little incentive to provide training for prospective business owners. Although a great deal of small business information and advice is now available online, it is not easy for Australian small businesses to sift through what is relevant and reliable from the mountains of online information. Furthermore, small businesses often require assistance with interpreting information and applying it to their own circumstances a need that often requires personal contact of some kind or specific sector knowledge, particularly at the start-up stage. Industry associations and chambers of commerce often play a vital role in supporting small businesses operating in particular sectors or regions. Access to skilled, quality staff An issue raised by small business is the ability to recruit and retain well-trained staff. The reasons behind this appear to include the literacy and numeracy levels of apprentices and lack of job-ready people, particularly in specic sectors and some of the more regional areas of Tasmania. The vocational education and training system is also seen as complex and the delivery of accredited training and qualifications is regarded as inflexible in meeting the immediate needs of small businesses. Access to nance and capital Businesses need access to nance for investment and managing cash ow. A sound nancial sector is critical to a robust economy. Rising interest rates and higher bank margins for small business are making access to finance a constraint for business. This challenge is even greater for entrepreneurs who have great ideas, but have yet to prove their success in the market. It is also acknowledged some small businesses are not ready for funding, and in some cases, may not have a sufcient business case to warrant investment by a third-party. One way in which government can assist is in building the capacity of small business operators to understand suitable nance options and prepare their business for investment. It can also support nontraditional avenues of finance for entrepreneurs at the start-up or innovation/renewal phases, such as Angel Investors Tasmania and micro-finance programs.

Access to markets The focus of government in the past has been on supporting businesses with export potential to access and reach overseas markets. More recently, this support has been extended to assist small firms to access interstate markets often a critical first step to international expansion. The difficulties for small business in accessing off-island markets were rated as an important constraint in the research. There was a call for government to continue its support for businesses exporting Tasmanian products and services, given their important role in job creation and privatesector investment. Communication with small business The governments research and consultation with small business indicated the current communication with business by government is not cutting through. The diversity of small businesses in terms of sector, size and location makes communication with and from government challenging. There is also a sense that greater coordination across government agencies on issues that impact small business is needed to improve decision-making. Government needs to consider more formal mechanisms to listen to the needs of business, improve access to information and ensure greater collaboration across government. There is a role for government in the provision of information and data to business. Numerous studies and reports call for more coordinated access for business to information on markets, industries and regional economies.36 McKinsey and Company argue that governments have an important role to play in providing easy, low-cost access to information.37 A study of regional small business conducted for the Council of Small Business Organisations of Australia and the Australian Government, concluded that respondents want better information about the local and regional economy to help position their business and raise competitiveness.38 This outcome was confirmed in the recent small business focus groups undertaken in Tasmania and supported by the Tasmanian Chamber of Commerce and Industry. The Council of Small Business Organisations of Australia report concludes that there is an urgent need for a central agency to play the role of information broker for business.

36  B angs and Halliday, 1997, The Australian Business Start-up Guide, Woodslane Press 37 McKinsey and Company, 1994, Lead Local Compete Global, Sydney 38 Houghton, 1997

Small Business Strategy 2011

2.0 Small business policy approach

Governments role is a balance between getting out of the way and providing strategic interventions to regulate operations, and support the growth of many small businesses. The diversity of Tasmanias small businesses in terms of size and sectors in which they operate make developing a straight forward policy framework difficult. Support for small business has been developed within the following policy principles:  overnment should focus its support where it can have the g most impact, principally by improving the Tasmanian business operating environment where it has some control and inuence s  upport from government for small business is about broad reach and impact it covers all sectors and regions in Tasmania t  he business life cycle framework (concept, start-up, growth, maturity, innovation and renewal through to exit) should be used to guide government intervention initiatives should be directly linked to the problem of barrier to business growth as identied in the research

initiatives should be focused, transparent, flexible and simple initiatives must be well communicated to reach all small businesses across Tasmania and to involve a whole-ofgovernment approach g  reater use should be made of existing channels and networks for government to listen to, and support, small business, such as industry associations and chambers of commerce a  ny initiatives proposed by government must be sustainable and efficient and must avoid duplicating existing activities delivered by the market w  herever possible, government should deliver its services through the online medium and encourage businesses to make the transition to a digital economy the impact of government initiatives must be measurable. Evaluation of the research, challenges and opportunities has revealed gaps and shortfalls that may limit the growth of some small businesses. The policy principles guide what the role of government is in addressing these gaps and the ways in which government can make a difference to support the growth of small businesses.

Small Business Strategy 2011

3.0  Action plan for government and industry

There are two key and interconnected areas that address the barriers to small business growth under which initiatives will be developed and implemented by the government over the next five years. One is to improve the business environment. The other is to skill business for growth. The governments initial efforts will be focused on improving the business environment in which small business operates. The policy and regulatory environment determines, to a large degree, the success and sustainability of other support programs for small business.39 The government needs to get the operating environment right first. The improvement of the regulatory framework within which small businesses function is often one of the most important aspects of creating an overall business enabling environment for small business development.40 However, creating this environment may not be sufcient to accelerate the development of small businesses. As such, specic support policies and programs to skill small business for growth will be put in place to address the barriers and constraints faced by small businesses in Tasmania. It will:  rovide all government licences, permits, regulations and p related forms in one place r  educe the time, and therefore money, it takes for business to apply and comply with government regulations provide ready access to licence information and payment options streamline and improve government-to-business service delivery p  rovide 24 hours a day, seven days a week access to online information enable small business to tell government once. It is proposed that the service will also be supported by experienced service centre operators that can provide a direct answer from government. Business Tasmania Online will link to the Australian Business Licence Information Service and Australian Business Account, currently under development by states and territories and the Australian Government. Business Tasmania Online will also provide a mechanism for government to audit and monitor administrative and regulatory burdens on an ongoing basis. Reducing the compliance burden The government will aim to reduce the administrative burden placed on business in applying and complying with government regulation. Commencing in 2011-12, it will involve a systematic review of the paperwork, processes, time and costs of complying with existing regulations across state government on a sector by sector basis. This will include undertaking a baseline study of the costs to business in complying, identifying areas to improve regulatory processes and recommending actions to government to improve efciency, cut duplication and lower the cost of compliance. Critical to the success of this program will be the DEDTA project team working closely with relevant government agencies and the industry representative bodies and associations to identify areas of greatest concern to small business operators and work to reduce or simplify these. Importantly, the information gathered from this project will inform which licences, permits and related forms can be automated and made available on Business Tasmania Online.

Improve the business operating environment

The government is committed to improving the business operating environment by reducing red-tape, simplifying access to information and providing a fairer go for small business.

Action 1: The Business Tasmania Initiative

The Business Tasmania Initiative aims to reduce the time businesses spend complying with regulation and make it easier for business to find what they are looking for from governments at local, state and federal level. It includes two interrelated projects: Business Tasmania Online, a new online portal designed to a.  make it easier for businesses to interact with all levels of government and to nd the information they need, complete transactions and obtain services Reducing the compliance burden, a review of the administrative b.  burden for business in complying with existing regulations across state government on a sector by sector basis. Business Tasmania Online Based on the successful Victorian Government model and linking to new Australian Government online initiatives, the Tasmanian Government will look to introduce Business Tasmania Online. DEDTA will coordinate the preparation of a business case on the initiative for consideration by the government in 2011-12. Building on the experience of the Service Tasmania initiative, Business Tasmania will facilitate a whole-of-government approach to business services.

39 Tolentino, 2000 40 OECD, 2011

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Small Business Strategy 2011

Action 2: Improve small business access to government tenders

The Department of Treasury and Finance has responsibility for Government Procurement Policy. A review of the current tendering guidelines for government agencies indicates there are measures in place to maximise opportunities for Tasmanian businesses to bid for government contracts. Over the past two years, more than 80percent of the governments procurement of goods and services (where at least one Tasmanian business competed) have resulted in one or more contracts being awarded to Tasmanian businesses, indicating progress has already commenced in this area. Additionally, the government funds the Industry Capability Network to support all businesses to access government contracts and support agencies in identifying local suppliers. However, advice from industry suggests that many small businesses are not aware of the requirements, processes and guidelines for tendering. The government is committed to improving communication with Tasmanian business at all levels on tendering requirements. DEDTA will work with the Industry Capability Network on improving communications, training and information events regarding tendering by small business. This will include making online materials available, delivering training sessions for small businesses that want to become suppliers to government, and a Meet the Buyers event where business operators can meet and speak one-on-one with procurement decision-makers from government agencies.

The Industry Capability Network will also enhance its existing online services through the introduction of the Regional Industry Link, an online tool to assist small business suppliers list their capabilities and match with available projects or tenders in their local area. This tool will be accessible through Business Tasmania Online. The Department of Treasury and Finance will continue coordinating the Procurement Advisory Group, which involves government consulting with external stakeholders on a regular basis to discuss tendering and procurement matters. The Department of Treasury and Finance will also continue to maintain, and where appropriate supplement, its existing agency procurement resources for government agency staff to ensure they are up-to-date and aware of all options for tendering, including supporting local suppliers wherever possible.

Action 3: Alternative dispute resolution

The Tasmanian Government will work with the Australian Government in developing options for a nationally consistent approach to providing small business with ways to solve businessto-business disputes, outside the court system. Solving disputes, such as retail tenancy, through the existing court system can be time consuming and costly for small business. A system of alternative dispute resolution is likely to improve the operating environment and support small business in resolving complaints about unfair market practices.

Small Business Strategy 2011

11

Skilling small business for growth The government has a role to play in providing access to quality information, facilitation, training and mentoring to business operators. Support is also needed to better train staff to meet the needs of growing small businesses. The government will also look to facilitate business access to finance, markets and information to help them thrive.

the business life cycle accessible 24 hours a day, seven days a week  nline training modules covering key business management o skills such as planning and research, financial management and marketing  ractical step-by-step business guides and templates on topics p such as succession planning and doing business online o  nline forums for small business operators to share learnings and ideas  earch tools to assist businesses find services, for example find s an advisor tool improved direct electronic communications with business, industry associations and small business service providers links to market intelligence data to help businesses undertake research and make informed decisions.

Action 4: Business development services

The government will deliver a range of capacity building, training, facilitation and mentoring services that vary in their reach and level of intervention. It will deliver an improved, coordinated approach to Business Development Services based on the following model.

Level of intervention

Advisory mentoring

Training and skills development DEDTA will introduce the Business Ready Program, a series of annual advanced workshops delivered by experts across the state for established small business operators that address key barriers to growth or capitalise on opportunities for business. Each workshop will involve group delivery and follow-up mentoring to direct new learning to individual circumstances. DEDTA will consult with small businesses to determine the focus of each annual series through the Small Business Forums (see Action 8), as well as ensure they are lling gaps not delivered through the Skills Tasmania initiatives and align with priority sector requirements identied under Goal Two of the Economic Development Plan. Based on feedback from small business during the strategy consultation, the following have been identied as priority areas over the next two years: people ready energy ready market ready investment ready succession ready digital ready. The government commits to improving the digital skills and capacity of small business operators to enable them to compete in global markets through the Digital Ready initiative. DEDTA will deliver a new version of the established Tourism e-kit suitable for all types of business. It provides self-directed and paced learning modules on how to develop online business. For those that require one-on-one assistance to support this e-learning, the government commits to extending the scope of the successful Digital Coach program piloted by Tourism Tasmania. This program has supported 500 individual operators to enhance their online skills and capacity. The initial focus will be

Training and skills development

Online information

Number of enterprises

Figure 7: Proposed model for business development services As the core service, the government will provide free access to comprehensive information to assist all small businesses via the Business Tasmania Online website, supported by a free call telephone line. More intensive training and skills development will be available through the Business Ready Program, targeting businesses at the growth and innovation/renewal stages of the business life cycle. Improved business advisory services sit at the top of the triangle, delivering quality advice and mentoring support to businesses at early and growth stages of the business lifecycle. The government will include a mix of free and user-pays approaches to the business development services it delivers. Online information In addition to improved licensing and regulatory information, Business Tasmania Online will include the following information to assist small business operators build skills and understanding: interactive small business toolkit including checklists, diagnostic tools, nancial calculators and podcasts covering all stages of

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in supporting operators in the retail, tourism and arts sectors in Tasmania, considering opportunities to move traditional bricks and mortar business models to bricks and clicks. The Economic Development Plan has identied 17 sectors with growth potential, an export focus and competitive advantage. The government is committed to investing and building the role of small business within supply chains in key sectors. Funding for specic initiatives that can assist in building the capacity, technical ability or skills of groups of small businesses within a sector will be supported under the Business Ready Program. Business advisory services and mentoring The Enterprise Centres Tasmania network currently delivers free guidance and assistance to start-ups and existing small businesses. The government has contracts in place with six organisations to deliver services in eight locations across Tasmania until June 2013. As part of the new Business Development Services program, a comprehensive review will be undertaken on the scope of the services, role and delivery model of existing Enterprise Centres Tasmania. This will include consideration of alternative and best practice enterprise facilitation and business advisory models. The review will include discussions with the Australian Government, which also funds some Enterprise Centres in Tasmania, with a view to greater collaboration in the delivery of Business Advisory Services. Mentoring provides a valuable mechanism to address gaps in skills, knowledge and experience of small business operators. DEDTA will also review its existing funding and support for mentoring

activities, including consideration of other mentoring programs and approaches used in other jurisdictions. DEDTA will also look at partnering with industry associations on developing targeted sector-specific mentoring support for small business operators.

Action 5: Skills plan for small business

Skills Tasmania is undertaking research of the small business sector to identify the barriers to small business engagement in vocational and other accredited training for their staff. This is considered an important first step in developing a Small and Micro Business Skills Plan for Tasmania, in which Skills Tasmania, supported by DEDTA, will work with key stakeholders to develop strategies to support increased workforce development activity. This plan may include support for on-the-job training programs, improved partnerships and better support to increase small business participation in training. The government is already investing in Tasmanias education system, in particular improving the literacy and numeracy of young Tasmanians. The results from this investment will be seen over the longer-term. Skills Tasmania is also supporting those young people who have already emerged from the education system and require additional support through remedial training to improve their skills to meet the needs of employers. The government can also support the level of skilled migration to the state, growing the population base to improve business access to skilled staff. The issues around education and skilled migration are addressed in Goal One of the Economic Development Plan.

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Action 6: Export Active Program

The Export Active Program aims to provide small business with market information, build capacity and facilitate entry to new markets. It includes amongst other activities the following initiatives: Export Skills Workshops providing essential information on taking a product or service to market. Content will be developed and targeted to support key sectors such as food and agriculture, information communications and technology, and manufacturing. Springboard into Market Program assists small businesses to develop and increase their off-island capabilities through reimbursement of up to 50per cent of eligible expenses used for interstate market promotion activities. Export Market Assistance Program helps small and medium enterprises to develop their business overseas and make their first export sales. Trade exhibitions and promotions participation in major targeted exhibitions by a coordinated group of businesses under the Tasmanian brand. Further details on initiatives are in Goal Two of the Economic Development Plan.

Action 7: Facilitate business access to nance

Support will be available to non-government and private sector organisations that assist Tasmanian small business to access finance. For example, Angel Investors Tasmania and Pitch Club provide an opportunity for individuals to meet on a regular basis to pitch their idea, share contacts and information that can lead to accessing finance. Creating these networks of start-ups and experienced business people and investors is a strategic way to link experience with need. DEDTA will build relationships with private-sector providers to facilitate access to finance for business. For example, promoting the National Australia Bank Micro-Enterprise loan to small business start-ups. An assessment of overseas models for increasing the availability of nance for small business such as the United States Small Business Administrations guarantee schemes will also be undertaken. As part of the Business Ready program, an Investment Ready workshop will be offered across Tasmania. The aim of this workshop is to provide small businesses with expert advice and tools with which to approach investors or nancial institutions for funding, including what they may need to consider in return for a capital injection into their business.

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Action 8: Small business connect

Small business forums The Tasmanian Government is committed to running a public Small Business Forum twice a year to provide an opportunity for an ongoing, open dialogue between government, small business and representative organisations. These forums will be chaired by the Parliamentary Secretary for Small Business and enable business to communicate current views and issues of concern as well as provide government with the opportunity to share information on current activities and report on progress of initiatives. Tasmanian Small Business Advisory Network Many Tasmanian Government agencies have interactions with small business, but not always in a coordinated manner. The Tasmanian Government will introduce a cross-agency advisory network, with representatives from each relevant state government department. Representatives from relevant Australian Government agencies such as the Australian Taxation Office or Fair Work Australia will also be invited to join the network. The network will meet quarterly to consider policy and program measures that impact on small business such as the introduction of new regulations.

Small business research: statistics and proling The gap in the availability of data on small business in Tasmania, and more generally in Australia, makes it more challenging to determine policy and program responses and measure the impact of any such activities. DEDTA will collect reliable and current statistical data on small business in Tasmania through various methods which may include an annual survey of Tasmanian small businesses. DEDTA will also continue to lead work with the Australian Bureau of Statistics and through the National Small Business Advisory Group to improve collection of reliable small business data at a state, regional and local level. A Small Business Fact Sheet will be produced, regularly updated and made available on the Business Tasmania Online website. Support innovative networks Innovation is embedded in the every-day activities of small businesses and entrepreneurs. Supporting our entrepreneurs through the sponsorship of grass roots organisations like Start-Up Tasmania enables government to recognise and support the benet of growing entrepreneurial capacity, with the community owning the benets. Government can also support activities that showcase innovative practices and provide opportunities for collaboration, knowledge transfer and skills building, such as the 5 Days of Innovation Festival or Women in Global Business initiative.

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APPENDIX References
Australian Bureau of Statistics, 2001, Small Business in Australia, Cat no 1321.0. http://www.abs.gov.au/ Australian Bureau of Statistics, 2004, Characteristics of Small Business, Cat no 8127.3. http://www.abs.gov.au/ Australian Bureau of Statistics, 2010, Count of Australian Businesses, Including Entries and Exits, Cat no 8165.0. http://www.abs.gov.au/ Australian Bureau of Statistics, 2011, Labour Force, Australia, Detailed, Quarterly, Feb 2011, Cat no 6291.0.55.003. http://www. abs.gov.au/ Australian Communications and Media Authority, Jan 2008, Telecommunications Today Report 2: Take-up and use by small and medium enterprises. Australian Securities and Investments Commission. 2010. Australian Insolvency Statistics. Table 3.1.3.2 Nominated causes of failure by region (1 July 2009 30 June 2010). www.asic.gov.au Bangs, D. and Halliday, M., 1997, The Australian Business Start-up Guide, A one-year plan for entrepreneurs. Woodsland Press. Breen, J, 2010, Community Perceptions of Small Business, Victoria University. Bridge, S, 2011. Self-Employment and Entrepreneurship: From Agriculture to Fordist to Entrepreneurial. Ulster University. Department of Economic Development, Tasmania, 2006, Issues Paper: Growth and Productivity Issues for Tasmanias Small Businesses. Department of Economic Development, Tourism and the Arts, 2010, Small Business Focus Groups, Strategic Economic Solutions Pty Ltd. Department of Economic Development, Tourism and the Arts, 2010, Small Business Industry Forum Summary, 3pconsulting. Department of Economic Development, Tourism and the Arts, May 2011. TigerTOUR database, Tourism Tasmania. European Commission, Enterprise and Industry Policies, 2008 Small Business Act for Europe, Think Small First principle http:// ec.europa.eu/enterprise/policies/sme/files/docs/sba/sba_ consultation_report_final_en.pdf Government of South Australia, 2008, The South Australian Small Business Statement A dynamic and sustainable future for small business. Government of South Australia, 2008. Reducing Red Tape for Business in SA 2006-2008. Government of Victoria, 2006, Time to Thrive: Supporting the changing face of Victorian small businesses. Houghton, K., 1997, Jobs In Our Region: Building on the Small Business Base. Council of Small Business Organisations of Australia and the Department of Transport and Regional Development. IBISWorld, March 2011, Defying the odds: Industry triumph over online adversity. Johnson, D., Kenyon, P. And Ha, V., 1995, Employment Growth by Firm Size Category, Labour Economics and Productivity, vol. 7 no. 1, pp. 49 72. Kuratko, D.L and Hodgetts, R.M. 2007, Entrepreneurship, Mason Oh: Thompson. McKinsey and Company, 1994, Lead Local Compete Global, Sydney. Organisation for Economic Co-operation and Development (OECD). 2011. Cutting Red Tape. http://www.oecd.org/document /43/0,3746,en_2649_34141_38227179_1_1_1_1,00.html Reynolds, W., Savage, W. and Williams, A., 1994, Your Own Business (2nd Edition).Thomas Nelson Australia. Sensis, May 2011, Social Media Report, What Australian people and businesses are doing with social media. http://about.sensis.com.au/ News/Sensis-Social-Media-Report/ Slaughter, M., 2010, Mutual Benets, Shared Growth: Small and Large Companies Working Together. Business Roundtable. http:// businessroundtable.org/ Sustainable Tourism Cooperative Research Centre for Economics and Policy, The economic contribution of tourism to Australian states and territories 2007/08. http://www.crctourism.com.au/ Tolentino, A., 2000, Guidelines for the analysis of policies and programmes for small and medium enterprise development. International Labour Organisation. United States Chamber of Commerce, 2011. http://www. uschambersmallbusinessnation.com/take-action/key-issues

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Contact Department of Economic Development, Tourism and the Arts Business Point 1800 440 026 22 Elizabeth Street, Hobart TAS 7000 Email: info@development.tas.gov.au Web: www.development.tas.gov.au