Are young people steering away from owning their own businesses?

According to the survey, 36 per cent of small-business owners across the country were aged over 50 — the highest percentage in the Asia-Pacific. When it comes to business owners under 40, Australia placed ninth out of eleven.

CPA Australia business and investment policy senior manager Gavan Ord said that the survey results portray a concerning future for the Australian economy.

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“Where have all the young business owners gone? They’re ‘Generation MIA’ when it comes to small businesses,” he said.

“Australia has been ranked among the worst in Asia-Pacific for attracting young people into small business ownership since we started our survey in 2009. We need the federal government to launch a public inquiry to find out what is stopping young people from launching businesses.

“The survey results show that young business owners and founders are a necessary ingredient for Australia’s economic future, our digital capabilities and future innovations. We need Australians of all ages running and owning small businesses. Diversity brings huge benefits to the economy. The absence of young people has long-term implications.”

Jonathon Naef co-founded Balance Family Law at the age of 23 in the ACT — and was surprised at these findings given the rise of legal tech in recent years.  

“I was shocked that Australia is amongst the worst in the Asia-Pacific when it comes to younger business owners. I naively thought that with the rise in the reliance on technology and need for innovation, and the adoption of social media as a marketing tool for businesses, that there would be an abundance of young business owners. That is with other industries, at least,” he told Lawyers Weekly.

“Locally, however, the research aligns with my observations. Also, when we commenced the business, our principal was approached and cautioned about my perceived inexperience. With suggestions that I should ‘not feature as prominently’ on our website and other marketing material. I think this is because there is still a perception that you need to ‘do your time’ being employed by other solicitors before daring to venture out on your own.

“While I am aware of many young law firm owners through broader circles beyond the ACT, I would not be surprised if younger lawyers are underrepresented as law firm owners as well.”

Similarly, KF Lawyers principal Katrina Favre said that especially in the legal profession, young business owners would be put under particular stress.

“I think the research has some truth to it, especially in the legal industry, which requires a lot of energy and discipline,” she said.

“The cost of living in Australia for young adults is crippling, and the legal industry is highly competitive. There are obvious risks with running any business on your own. In the legal industry, there is the additional risk that you may not have clients engage you or retain you for the long term.”

Innovation among small businesses reportedly low

The report also includes statistics around innovation in small businesses: 30 per cent of those surveyed did not use social media for business purposes at all (compared to the survey average of 15.4 per cent), despite 32 per cent finding that investment in technology improved profitability.

Meanwhile, only 18.8 per cent of Australian small businesses sought advice from technology consultants last year. Businesses that did invest in technology were focused on updating their website and computer hardware rather than tapping into new and innovative options such as artificial intelligence.

“Australia’s small businesses are unlikely to innovate. Only 14 per cent are intending to introduce a unique product or service to the market in 2023. This is the worst result in Asia-Pacific,” Mr Ord quipped.

“A lack of innovation is a drag on economic growth and productivity that we will feel for years to come. Encouraging new talent to launch small businesses can boost long-term innovation. The government needs to ensure running a small business is an attractive option for young people who can bring their digital skills to the sector.”

Furthermore, only a quarter of small businesses said they considered cyber attacks to be a possibility in 2023, compared to an Asia-Pacific average of almost half.

Challenges for young business owners

According to Mr Naef, there are a number of reasons why young lawyers would be hesitant to start their own firm: the perception that they don’t have enough experience, going it alone and financial pressures being the key issues.

“Adequate experience is often measured by the number of years you have been in practice. While it is important to have at least a few years’ experience before venturing out on your own, it is important to remember that how long you have been around isn’t everything. Younger lawyers can add considerable value to the profession, through innovative thinking, adoption of technology to assist in practice, and more flexible working arrangements (which may translate to flexible offerings to clients),” he said.

“Secondly, yes, if you start your own firm and you’re a solo practitioner, you may not have people within the business for these things, but there are many online communities that can assist, and consultants and other firms and businesses you can engage to assist in the running and development of your business. Or, you don’t have to do it alone at all — you could partner up with like-minded young colleagues and start a firm together.”

Additionally, with the cost of living rising, many younger lawyers may have put their dreams of starting their own firm on hold, as the cost of building a business can be a substantial investment.

These factors are also combined with the added responsibility firm owners face, according to Ms Favre.

“Young lawyers might be hesitant to start their own law firm because they may lack confidence that clients would trust them with such sensitive life situations. For example, a family law client who is going through a complex property settlement process after 30 years of a marriage may not be confident in a young lawyer who has not had as much life experience as them,” she said.

“Another reason why young lawyers may be reluctant to commence their own law firm is because it is a very large responsibility. Most young adults are seeking to establish themselves in their own home and/or start a family. These are large responsibilities in and of themselves.” 

When co-founding his firm, Mr Naef was also faced with the perceptions of others — those who thought he was “too young” for the role, as well as feelings of impostor syndrome.

“On the flip side, impostor syndrome can also keep you very alert and aware of areas where you might lack confidence and experience, and push you to be thorough and reflective in your practice. There is, and will always be, room for improvement and growth. I can always be better than I was before,” he said.

“Other than this, I think as a young co-founder of a law firm, I probably face the same challenges as any other founders and co-founders out there. What I think I add, however, and the value I potentially bring, is in fact due to being a young, and to some ‘inexperienced’ lawyer. It has allowed me to bring a different perspective to discussions around the running of our business, about where, when and how to innovate, and the type of firm we want to be.”

The survey also notes that there are some positive signs for future growth within Australia, as small businesses had their best year in five years in 2022, with 47.6 per cent growing. This year, more than 55 per cent of businesses are expected to grow, despite growing economic challenges, according to Mr Ord.

“It’s understandable that some young Australians are questioning whether business ownership is worth the stress and commitment. The pandemic, rising cost of living, high property prices and global uncertainty are adding to their doubts,” he added.

“We want young people to seize the opportunity to control their own destiny. This is a huge chance to inspire and encourage young people into the business community as Australia continues to recover. We want the government and current business owners to explore how to attract young minds into this critical sector.”

And despite also facing challenges in her journey as a firm owner, Ms Favre emphasised that starting KF Lawyers has been rewarding, to say the least.

“Some of the challenges I have encountered include enjoying a work/life balance. I find myself working almost seven days a week to stay on top of deadlines and assist clients in urgent situations. This means I have to sacrifice a social life, which most young adults enjoy. Having said this, I work with many amazing colleagues and barristers and still enjoy a social life,” she said.

“More young people need to consider opening their own businesses. Starting a business at a young age is rewarding, and it is something that runs in my family. As a young business owner, you have the energy, stamina and ambition to always improve yourself on an individual and professional level. These are just some of the benefits of taking this big step in your career.”