New research released today by Commonwealth Bank has found the number of millennial and Gen Z small business owners is on the rise, with many Australians motivated to turn their business ideas into a reality because of a need for extra income, as well as a desire for work-life balance, and more control, freedom and independence over their careers.
The number of new CBA business transaction accounts surged by 10.4 per cent in the past year (FY23 compared to FY22), with millennials (born between 1981-1996) and Gen Z (born between 1997-2012) driving the majority of the growth.
Millennials accounted for half (48.5 per cent) of all new business transaction accounts while Gen Z opened a further 14.8 per cent of new accounts in the 2023 financial year.
The first financial quarter of 2024 revealed a surge in entrepreneurialism, with the number of new business transaction account openings up 26 per cent, compared to Q1FY23 in 2023.
Rebecca Warren, Executive Group Manager Small Business Banking, said while it had been a challenging year for small business owners, the significant growth in the number of people starting their own small business revealed a strong Aussie entrepreneurial spirit.
Ms Warren said more women were taking advantage of opportunities to start or run their own business or side business, with women opening up 43.2 per cent of new business transaction accounts in the 2023 financial year.
The rising number of small business entrepreneurs is supported by new research released by CBA today which shows that 46 per cent of entrepreneurs have started a small business in the past three years. The study, conducted in partnership with YouGov1, looked at the primary drivers for starting a new business, the top challenges budding entrepreneurs face and types of businesses they are setting up.
“An increasing number of younger Australians and women are choosing to start a small business or side hustle to supplement their primary income or as an avenue to pursue new ideas to fill market gaps or build experience and skills in industry segments of interest such as photography or graphic design,” Ms Warren said. “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.
“Aussies are demonstrating great entrepreneurial flair, determination and drive, using fresh approaches to attract customers or target niche areas.”
Cost of living bites
The new research showed that a primary motivator for starting a new business or side hustle was to create something that is “theirs”.
“New business owners are looking for extra income (51 per cent), but they’re also looking for new opportunities that give them more control, freedom and independence over their career (23 percent),” Ms Warren said.
“Women are more likely than men to have started their small business or side hustle because they needed some extra income (56 per cent compared to 48 per cent), while men are more likely to have done so because they saw a gap in the market (17 per cent compared to 8 per cent).
Younger entrepreneurs are more likely than their older counterparts to say they were motivated to start their small business or side hustle because they wanted to create something that is “theirs” (26 per cent compared to 18 per cent) and they wanted more control, freedom or independence over their career (25 per cent compared to 19 per cent).
“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,” Ms Warren said.
“Living in a fast paced, digital world has had a unique impact on Generation Z and the way they approach business and innovation. It’s no surprise that their most common type of small business or side hustle is an online one.”
Other key findings from the report include:
Customer retention a top challenge for entrepreneurs
The majority of entrepreneurs (85 per cent) said they faced challenges running their small business or side hustle. The top challenges for entrepreneurs were finding and retaining customers (37 per cent) and not having enough time to run or manage the business how they would like (32 per cent), which was unsurprising given that entrepreneurs personally spend 19 hours a week on average working on their small business or side hustle.
Dealing with competitors (26 per cent) and managing cash flow (24 per cent) were other common challenges.
Ms Warren said outstanding digital banking experiences were helping many entrepreneurs to manage these challenges.
The research showed digital experience is the most important factor when it comes to small business banking, along with having all the products and services they need at competitive rates.
“Small business owners are often short on time and resources and are looking for superior digital banking and payments experiences and our priority is continually improving and innovating to support our small business customers,” she said.
Professional services trump creative services
The research revealed strong trends in online retail, the most common type of small business or side hustle (16 per cent), followed by professional services such as accounting or legal (13 per cent), and creative services including graphic design and photography (12 per cent).
The data showed men are more likely than women to have a small business or side hustle in professional services (16 per cent compared to 9 per cent) or handyperson services (9 per cent compared to 3 per cent).
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