Owners are working longer and spare capacity is running thin, while the time saved through AI is being put back into running the business.
Australian small business owners are working longer without necessarily seeing an improvement in what they pay themselves, according to new research from the Council of Small Business Organisations Australia (COSBOA) and Square.
The findings were revealed in the fifth State of Small Business Report, which drew upon aggregated and anonymised data from hundreds of thousands of Australian Square sellers and a national survey of 608 small business owners.
Revenue for the typical Square seller rose 3.9%, almost exactly in line with inflation of 3.8%, meaning the typical business essentially held its ground in real terms. Around half of sellers grew and almost as many declined, while the typical business took no more payments and traded on no more days than the year before.
Where turnover did increase, profit followed for around two-thirds of those owners. However, only around one in four owners are paying themselves more than a year ago, while about the same proportion are paying themselves less. Around two in five are working more hours, and one in four worked longer for pay that was flat or lower.
The report also found that many small businesses have limited capacity to meet increased customer demand. Only 25.8% said they could absorb a 20% rise in demand with their current people and systems. The most common response, at 27.8%, was that they could manage it only by working longer themselves. A further 23.2% would need to increase employee hours or hire. Taken together, around one owner in three would either absorb the extra demand personally or turn the work away.
COSBOA CEO Skye Cappuccio said the findings show that stronger business performance does not necessarily mean the owner is better off.
“The topline figures show small businesses largely holding their ground, with revenue growth almost exactly in line with inflation. But underneath that, we can see owners themselves are often putting in more just to maintain momentum,” Ms Cappuccio said.
“Many are working longer hours without seeing an improvement in what they pay themselves. That is an important part of the small business picture that topline revenue figures alone don’t show.
“For many small businesses, the owner is also the spare capacity in the business. When demand increases, they are often the person who stays later, takes on the extra work or finds another way to make it happen.
“When the extra capacity a business needs has to come from the owner, there is a natural limit to how far that model can stretch.”
Technology returns time, and more of it with depth of use
Digital tools are now standard equipment for small businesses, with the report finding that deeper use can return more time. AI adoption is also rising, with owners reporting that the time it saves is being put back into running their businesses.
This year, Square data allowed a closer test of what adopting new tools returns, comparing first-time adopters with similar businesses that did not adopt. Sellers who took up Tap to Pay held their revenue steady while their matched counterparts went backwards, and first-time adopters of software integrations finished the year well ahead of their matches.
Around 45% of surveyed owners now use artificial intelligence tools in some form, up from 39% in 2025. AI users estimate the technology saves them one to two hours in a typical week and are more than twice as likely as non-users to be planning to expand. The report suggests that time is currently being reinvested into running the business: AI users are not yet showing greater capacity to absorb a 20% rise in demand without strain, and their own working hours have not fallen.
The report also found the depth of technology use matters. Around three in ten owners said their digital tools saved some time or improved efficiency, while around one in ten said they saved substantial time and enabled the business to grow. That figure roughly doubled among owners using five or more digital tools.
Marco Lamantia, Executive Director of Square Australia, said the findings point to the value small businesses are getting from digital tools.
“Businesses that took up new tools over the year held up better than similar businesses that didn’t. That matters in a year when the typical business was simply holding its ground,” Mr Lamantia said.
“Most small businesses now run on digital tools, so the question has moved on from whether to adopt them to how deeply they’re used.
“The owners getting the most from technology are the ones whose tools work together – one tool on its own can save some time, but a connected set starts to change how the business runs.”
Cost pressures weigh on plans for the year ahead
Looking to the year ahead, the report shows many owners remain cautious about expansion. Around 45% expect to keep their business at roughly its current size. Around one in seven expect to expand, while a similar share expect to reduce scale, sell, pause or close.
High operating costs or weak margins were effectively level with insufficient customer demand as the two biggest constraints on growth. Utilities were the cost most likely to be weighing more heavily than a year ago, followed by insurance premiums and supplier costs. Labour costs ranked fifth.
Ms Cappuccio said the findings should be closely considered by policymakers, industry and others shaping the environment small businesses operate in.
“Small businesses have adapted, but for a third of owners, extra demand would mean working longer themselves or turning work away,” Ms Cappuccio said.
“If conditions improve and demand strengthens, many owners will still have to meet that extra work by putting more hours into their own week.
“The ability of small businesses to respond to better conditions increasingly depends on the capacity of the people running them.”
