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Breakthrough Research: A desk audit into the data and research on micro-business profiling in Australia

6 July 2010

Independent Contractors Australia has long been dedicated to locating good quality research on self-employed people.


During 2009 we coordinated a unique collaborative effort on a new research exercise. The research has been compiled by Monash University, supported by the Commonwealth Bank of Australia, and undertaken with the assistance of Roy Morgan Research, the Australian Bureau of Statistics and the Australian Taxation Office.

The uniqueness has been in pulling together three distinct and separate information 'rich' databases on self-employed people in Australia. What has been discovered is a major consistency in data and profiling of self-employed people. But, the findings shatter many preconceived ideas about self-employed people. This has been a surprise.

There are two major implications resulting from this:
  • Government regulation of, and programs for, small/micro business people most frequently operate on false assumptions.
  • Private sector and government communication and marketing efforts to small/micro business people frequently 'miss their target' due to poor understanding and those same false assumptions.
Below is a brief overview of the report's findings. Here's a summary. Here's the full report.

Report Overview

How many people?

19% of the total workforce.

28% of the private sector workforce.

2 million people.

Who are we talking about?

There are many different terms and names used. These include self-employed, micro-business, small business, SME's, freelancer, independent contractor and so on.

However they are all identified by one common factor. They earn their income through the commercial contract not the employment contract. These people are in business. They are the business. The business is them. About half also employ other people, but they still work for themselves.

Exploding myths

There are many traditional assumptions about self-employed people that form the basis of much government policy and marketing and communication to 'SME's by government and business. However, the research finds that many of the assumptions are not valid in the light of evidence. Here are the major 'exploding myths'.

Self-employed people are mostly:
  • Not young, but mature. Most become self-employed from around the age of 35.
  • Not working in the trades area (plumbers, carpenters etc), but are dominant in the professional/managerial areas.
  • In high skill occupations, not low skill.
  • Found across all industries, but construction is the largest.
  • Earning high incomes, not low incomes. Forty-one per cent are more likely to earn over $100,000 pa.
  • Not forced to be self-employed, but become self-employed as a lifestyle decision. The motivation of self-control is all-important.
  • Not poor business managers, but highly competent.
  • Active in hunting out information.
  • Not operating with traditional business cycles. Their business cycles are instead linked to their personal life-cycles.

Confirmed ideas

Some understandings have been confirmed. Self-employed people:
  • Work longer hours than employees.
  • Are more likely to be male.

Attitudes to Debt

Attitudes to debt showed a distinct pattern. Self-employed see debt differently to many people.
  • Debt/credit is an enabler to do things.
but
  • Debt becomes bad when it 'controls you'.
  • 'Bad' debt is mainly concentrated in new businesses.
These attitudes have significant implications for government policy on SME finance and the way banks may approach SME finance.

Consumers

Self-employed people tend to be
  • Big spenders by comparison with other consumers.
  • Optimistic and willing to spend. This is a reflection of being 'in control of one's life'.

Large organizations and self-employed

How large organizations (government or private sector) relate to, and communicate with, self-employed people is an area of major interest. Large organizations have to operate in 'silos' of responsibility and decision-making. Employees specialise.

But self-employed people
  • Operate with different decision-making processes.
they
  • must take in everything and be holistic in understanding business. In this respect self-employed people must develop and have high level business competency in every aspect of business
but
  • Problems happen when the systems used to run large organizations limit the control self-employed people are able to exercise over their business.

Other research

Here are some other reports/research on self-employed people. You'll find the full list in our top 'drop down' menu under 'research'.

ABS May 2011
IPro Index; Entity Solutions 2009
ATO research 2009
We're happier: Zurich University 2004


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