There’s more than 1 million “unrecognised” small businesses in Australia, report reveals

A growing number of Australians are turning their hobbies into small businesses but these ventures are often not captured by official statistics because their operators don’t have an Australian Business Number (ABN).

That’s the key finding from a recent whitepaper released by Australia Post, which seeks to shine a light on “unrecognised small businesses” — a largely concealed, yet influential, sector of the Australian business landscape that is estimated to account for 41% of the country’s small businesses.

Released at the Council of Small Business’ National Small Business Summit in August, the ‘Under the Radar’ whitepaper is based on a survey of 2000 Australian small businesses, 1500, or 59%, of which have an ABN.

The research draws on Australian Bureau of Statistics figures that put the number of actively trading small business in Australia at approximately 2.1 million. When multiple ownership and the number of discretionary trusts are taken into account, Australia Post estimates the number of actively trading small businesses with an ABN to be 1.6 million.

However, 41% of the businesses surveyed by Australia Post don’t have an ABN. This led the mail carrier to estimate the total number of these businesses could be as high as 1.1 million.

If this group of “unrecognised” small business is added to the estimate for actively trading ABN-registered small businesses, the total number of small businesses in Australia would be closer to 2.7 million.

Australia Post defines “unrecognised small businesses” or USBs as businesses that don’t yet generate enough revenue to require an ABN. They are often sole traders who are younger than an average business owner, with the vast majority being hobbyists and product focused businesses.

Compared to businesses with an ABN, more USB owners are between the age of 18-29 (29%), with 59% of them being under the age of 50, according to the research.

The average turnover for these businesses is one-third of a typical small business, with Australia Post finding the median turnover for USBs is under $25,000. This compares to businesses with an ABN whose median turnover falls in the $50,000 to $75,000 range.

For the operators of USBs, the business is often considered more of a side project; 43% of USB operators surveyed are currently employed by another company. When asked if their business started as a hobby, USB operators scored a collective 7.6 out of 10, compared to 5 out of 10 for business owners with ABNs.

The people behind these USBs tend to not consider themselves business owners either and scored lower compared to businesses with ABNs on questions around business experience, acumen, and training.

“Without the conventional characteristics of traditional businesses and with very small turnovers, USBs have gone largely unnoticed in Australia. Nevertheless, they may represent a sizeable proportion of the economy,” the whitepaper reads.

“As more Australians become confident selling online and the casualisation of the workforce increases, it is likely that many more people will turn to side businesses to supplement their income, or monetise their hobbies.”

“It seems likely that USBs will become an increasingly important slice of the Australian economy, and one that will not go under the radar much longer.”