What’s the definition of a small business in Australia?

MACHUS Solutions’ CEO, Mac Radomyski, has over 30 years’ experience working with small business clients, ranging from sole traders to multi-site operations, in almost every industry.

What makes a small business?

Formally, Mac has always used the ATO’s definition as his measure of whether a company is a small business. That is, a small business is one which has less than 15 employees and turns over up to $2.0M annually.

However, informally, Mac believes a small business can be classified by the way in which it is managed. Small business owners, for example, generally micromanage activities. Much of the management is based on the owner’s memory, instincts and experience, rather than via formal procedures such as cash flow management, prescribed policies, management structures, human resources, IT and recruitment. Business risks are also often ignored or underestimated.

In addition, small businesses tend to focus on survival and generating and meeting orders rather than on long term planning. When compared to larger organisations, fixed costs tend to be lower so small businesses can be more flexible and tolerant to sales fluctuations.

A universal definition of a small business?

Mac believes there most definitely should be a universal definition of a small business. Firstly, a standard definition would mean they are treated uniformly under State and Federal employment, taxation and other relevant legislation. Secondly, and as outlined above, small businesses have different priorities and requirements to those of larger businesses so a universal definition would better assist in addressing these.