Millennials and Gen Z are dominating the small business landscape in Australia, accounting for 63.3 percent of new business accounts opened at Commonwealth Bank (CBA) in 2023.
New business accounts at CBA grew by 10.4 percent from 2022, with millennials (born 1981-1996) opening 48.5 percent and Gen Z (born 1997-2012) opening another 14.8 percent. Women accounted for 43.2 percent of all opened accounts.
Around 51 percent said they started a new business for additional income, while 23 percent are exploring new opportunities to gain more control and career independence.
“Many young people have decided they don’t want to work for anyone else and are looking for greater autonomy to pursue their career dreams and are keen to excel quickly. Starting their own business allows them to take control of their financial future and build a career on their own terms,” she Warren said.
Meanwhile, she noted some key differences in reasoning between men and women.
She said women were more likely than men to start a small business because they needed extra income (56 percent compared to 48 percent).
“While men are more likely to have done so because they saw a gap in the market (17 percent compared to 8 percent),” she said.
She explained men filled market gaps in creative industries like photography and graphic design.
“In fact, the creative services were the third most common type of small business/side hustle that entrepreneurs have created in the last three years,” she said, adding many created theirs online.
She said it was no surprise that an online business was the most common type of startup small business among men and women.
“Living in a fast-paced, digital world has had a unique impact on Generation Z and the way they approach business and innovation,” she said.
She said the digital world opened new avenues for owners to market their businesses.
“Aussies are demonstrating great entrepreneurial flair, determination, and drive, using fresh approaches to attract customers or target niche areas,” she said.
She added that the notable increase in people starting small businesses reflects Australia’s strong entrepreneurial spirit.
The CBA study, conducted in partnership with YouGov, surveyed 1,016 Australians aged 18 and over who started their small business in the past three years. It looked at the primary drivers for creating a new business and the top challenges budding entrepreneurs face.
Entrepreneurial Hurdles: Evolving Customer Spending Habits
Still, it was a challenging year for small business owners, with most (85 percent) facing hurdles.A top challenge was finding and retaining customers (37 percent).
Needing more time to run a business (32 percent), dealing with competitors (26 percent), and managing cash flow (24 percent) were other common challenges.
Low customer retention comes as consumer discretionary spending lowered in 2023, as many Australians feel more pressure from inflation and rising living costs.
Meanwhile, 25- to 29-year-olds have been the hardest hit with a 5.1 percent decline in total spending—the only age group to decrease discretionary and essential spending.
“We’ve also seen younger people redirecting discretionary spending from things like clothes and homewares to spend on cinemas and ticketed events such as concerts and sport,” he said.
“Given the most recent rate rise, it will be interesting to continue to monitor these trends, as we expect to see a dampening of the post-COVID experience spending preference.”
He was referring to the RBA hiking its cash rate to 4.35 percent on Nov. 7, a 12-year high. The increase was the central bank’s 13th rate rise since May 2022.
Older Australians Display Greater Financial Comfort
Compared to younger Australians looking to save money, older Australians are increasing their discretionary spending.Those over 55 increased spending on travel (up 17 percent) and eating out (up 11 percent).
Meanwhile, annual spending by those aged over 35 has increased by 7.7 percent, almost double the 3.4 percent increase in spending by those under 35.
Mr. Tubman said older Australians are more likely to own their homes outright and they might even have savings buffers.
“The higher interest rates at the moment might mean that [people with savings] actually have more disposable income,” he said.
