Young business owners surge, says CommBank research

High living costs prompt some new businesses but there are other key reasons why Millennials and Gen Y become entrepreneurs.

Young entrepreneurs are driving a fresh wave of business start-ups, as new Commonwealth Bank research suggests that almost two-thirds of small businesses are established by Millennials and Generation Z.

CBA’s analysis of its business transaction account openings found a 10.4 per cent jump in the past financial year despite rising inflation and interest rates hurting consumer sentiment.

Australia’s biggest bank says small business start-ups are not just about a need for extra income, with a desire for control, freedom, independence and work-life balances also playing key roles.

It says Millennials (aged between 27 and 42) accounted for 48.5 per cent of all new business transaction accounts, while Gen Z (ages 11-to-26) were 14.8 per cent.

CBA’s executive group manager small business banking, Rebecca Warren, said the research showed that young entrepreneurs were more likely motivated to start a business “because it’s theirs”.

“Ultimately they’re telling us they want more control, freedom and independence over their career … many are saying they don’t want to work for anyone else and they are looking for greater autonomy,” she said.

“Freedom comes with the flexibility to make your own schedule, not have to answer to anyone, work from anywhere – you can go on holidays and work.

“Life in a fast-paced digital world has had a unique impact on Gen Z and the way they approach business and innovation, which is why we are seeing they are starting online businesses.”

Business owner Louise Gilbert from The Intime Collective. Picture: Supplied

CBA also noticed an increases in business transaction account closures, but it was still seeing net growth.

Louise Gilbert, 39, began her leadership development business The Intime Collective four years ago “to give me a chance to do something meaningful”.

She said the early years had been challenging, but added that tougher business conditions in the coming months could help her business because “more stronger leadership is needed”.

“And my business will be one year older – I actually think we are going to grow,” Ms Gilbert said.

“One of the biggest challenges is we don’t have a big marketing budget because we are a small business – it’s hard to build brand awareness,” she said.

Ms Gilbert’s key message to other young business owners is simple: “it’s all about relationships”.

Small Business Australia director Bill Lang said half of small businesses were currently not making a profit, and many owners hoped for more stability in 2024.

Mr Lang said noticed more under-40s inquiring about starting a business.

“It’s much easier now to have a go given the various software and internet apps that can be rented on a monthly basis, whereas in the past there would be significant fixed costs to create website,” he said.

Mr Lang said many young business owners were not geographically restricted and “can have customers all around the world”.

“The businesses that they are starting serve people like them – they live a very digital existence and understand those customers well,” he said.

However, it could be a challenge to connect with older generations who were not as digitally-savvy, Mr Lang said.

He said failing to do rigorous research remained the biggest challenge. “We still see 90 per cent-plus of new businesses not achieve the owner’s goals within three years.”

And beware of “digital snake oil salespeople”, Mr Lang warned.

“They promise various digital notions, lotions and potions … most are useless and trick the ‘wanna-preneur’ into spending money needlessly.”

CBA’s Ms Warren said success often depended on the type of business and its location.

“Starting a small business is hard in any environment … and some businesses actually thrive during economic uncertainty,” she said.

“That great entrepreneurial spirit is alive and well – they’re resilient, they’re fighters and they will give it a red hot go no matter what the economic conditions are.”

Originally published as Young business owners surge, says CommBank research