Far from a fairytale: How Australian small businesses survive

A 1936 musical fairytale may seem an odd inspiration for a digital book-publishing platform, but for Jenny Atkinson, it was the spark for an idea that led to the creation of her small business Littlescribe.

When her daughter was home sick from school with a friend in 2015, an unrecognised answer to a word puzzle prompted her to ask Atkinson what an "o-bowie" was. "The only way I could explain what an oboe was, was to actually show her an orchestra," she said. A YouTube search returned a performance of Sergei Prokofiev's "Peter and the Wolf" and Atkinson was shocked at their immediate interest in the recording.

"They were moved by the music and they ended up dancing. I have it on video because I was so taken with their engagement. They wanted to know what it was about, I explained everything is a story, this one told by music. They decided they'd like to become authors and write their own story. So, five hours later, they had written five books."

"And they photocopied them, stuck them together and then laminated them. And they set up like a lemonade library stand, at the front of the house, waiting for all the kids to come back from school. It was really interesting because they were completely driven by purpose, were very proud of their own work and they wanted it to be read."

Telling a story

Using her daughter's enthusiasm for her work as inspiration, Atkinson started digging into the issues around children's literacy and saw the need for a platform to address flagging writing standards in the education system. The celebrated Russian story about a child who rights a wrong by challenging the status quo became a fitting analogue for a publishing platform that looks to rectify the writing decline in Australian education, by celebrating and cultivating the innate creativity of children.

"In Australia, we have seven years of writing decline. When you look deeper into this data, we have fewer kids that are good writers and more kids that are not able writers. Literacy is the bedrock of education and writing is the number one educational challenge."

The result was a digital publishing platform that allows children to create and illustrate their own books. They can create their own private book club and each book can be read and commented on by their trusted audience, family and friends. Children can write their book using pen and paper, upload it digitally via the Littlescribe app to be shared, as well as buy a print version of the book itself.

"Technology is part of the problem but it's also part of the solution. Littlescribe is about turning on the best of human tech. Handwriting, illustrations and purpose to your writing create deep muscle memory and layering knowledge like this makes it is easier for the child to recall and reapply knowledge when and as needed."

"This learning process is referred to as "hands on, heads on, hearts on". Our student toolkit uses the child's original book and turns on their brain. The student writes their own comprehension questions, is rewarded for finding their own spelling mistakes and given extension words to include in their next book. In other words we turn off auto correct, copy and paste and turn on the childs brain to understand their knowledge and therefore their learning needs. We recently received great data proving the impact of this approach: year 5 students using the Littlescribe process achieved a years worth of writing outcomes in just 8 weeks."

The company now works with schools, teachers, non-profit organisations and parents, with the aim of having every Australian child write a 12-page book. They're also looking to expand internationally, having already launched a pilot program in New Zealand.

The grim reality

Yet, by the standards of most small businesses, Littlescribe is a fairytale of its own. Despite accounting for over 97% of all Australian businesses (with the majority operating as sole traders), the realities of running a small business better resembles the myth of Sisyphus: a daily struggle against the metaphorical boulders of a lack of cash flow, financing and time management.

Whatever study or survey you see, the challenges for small business owners do not make for pretty reading. 58% of SME owners expected to miss sleep over the Christmas period and 63% would not have a chance to relax, according to the recent Small Business Report released by Westpac and Deloitte.

Finding the time

Three quarters of SME owners worked 50 to 80 hours a week, with less than 1% reporting they were regularly able to work a 40-hour week, according to the SME Growth Index by Scottish Pacific. The same study found the average work week for a small business owner was 66 hours.

Atkinson believes her average week would exceed 60 hours and concedes that the person it most affects is herself. "The biggest thing that it impacts is my life. So my kids, my family fine, but me, personally, about what I do for me, that comes last. What does that mean: probably not enough exercise and just having some down time. I'm lucky that I really love what I'm doing, so I don't tend to watch the clock. I'm not saying it's a good or a bad thing. It's just how it is."

She has also recently worked a number of 80 hour weeks, but finds an approach that works around intense periods of work followed by periods of scaling down is effective for her business. "We're going through a huge opportunity at the moment. And so you've just got to grab those opportunities. And you've got to be quite conscious of where your time is and best spent, and at the same time having some time out, so you are fresh. I think I've got a responsibility to make sure I don't burn out, so we work more in sprints, and then you have a little bit of a down time."

Finding the right work schedule can be crucial to ensuring you get the most out of your limited time. Sally Arnold, an author and speaker who also works as a high performance coach under her company Creating Encores, found a co-working space boosted her focus and productivity, as did outsourcing her online marketing overseas.

Despite often putting in long hours working from home, a change in environment helped her avoid distractions and separate her working life from her home life. "Having a co-working space really taught me that if I just did four or five hours of solid work it was better than working all day and all night."

Ebb and flow

Alongside a lack of time, the biggest challenge to business owners remains the problems around cash flow. 79% of businesses cited lack of cash flow as their biggest issue, according to the SME Growth Index from Scottish Pacific, and an earlier report found 90% of businesses reported that a lack of cash flow had prevented them from generating more revenue. 40% of business owners will also likely receive late payments from debtors, according to the index, and businesses spend an average of 8 hours a week chasing invoices to ease cash flow issues, adding further stress to what is already a delicate situation.

Alexander Langshaw, who became a barrister earlier this year and now operates as a sole trader, has found the administrative aspects of invoicing to have had the biggest impact on his cash flow.

"Managing cash flow is a daily issue. I am usually only able to bill for my work at the end of the month and then have a 30 day invoice period, which means payment for work may not be due for 60 days after it has been done. In practice that is usually much longer as many of my invoices, particularly the bigger ones, are paid much more sporadically. An added difficulty is that most outstanding invoices are due from solicitors with whom I have ongoing matters or want to foster a relationship with to ensure future work, which limits my ability to press for timely payment to a degree."

"It is also difficult to find the motivation for administrative tasks because I am very busy and charge by the hour, so the temptation is always to do more billable work rather than do administrative tasks."

Atkinson believes cash flow issues are simply the price of doing business, and that many owners are faced with difficult questions about how much to put into their business as it develops. "There were pressure points. There constantly is in any business. Whether you're a startup, or you've been involved for a long time. And the real question is, how much do you keep investing in the business? So you're always checking in and going, 'am I going to invest knowing that I'm not going to get cash flow return in the immediate term?'"

With 4 in 10 businesses needing finance to help with short-term cash flow or liquidity, according to data from the Australian Bureau of Statistics, it's clear that not enough is being done to help small businesses operate effectively.

Funding the dream

Despite initially considering a business loan, Langshaw was hesitant to load up on debt before securing work. "I was aware going in that it would be some months before payment would come in so saved some money to cover set up costs and a couple of months' worth of outgoings."

"Since that money dried up, I generally use a credit card to smooth over the 'lumpy' nature of my payments. I am also lucky in that my wife was working full time so we could rely on her regular salary to cover rent and basic living expenses. The credit card covered everything else and was the second thing paid when an invoice was paid."

The realities of running a startup make traditional financing a challenge, if you're fortunate enough to be approved in the first place, according to Atkinson. "Going to the banks, and the process for that, and what they're looking for is something that doesn't have risk. And when you're a startup, you're a risk."

"You think you're risking enough, and the bank's going to ask you to risk more. I'm risking my time. I'm risking lack of cash flow. I'm risking a whole series of things. Do I want to then go and risk and put more on the table? And the answer is frankly, no. There's a line. Banks are clearly not looking to share risk, they want to remove it. They want more than what I was prepared to put on the table."

When considering funding, Atkinson eschewed the banks altogether, instead using a combination of sweat equity, personal funding, grants and private investors to finance Littlescribe. "I've been quite fortunate that I have spent quite a bit of time around government funding and application. And so once you start to understand that space, frankly, it's a better use of your time."

Yet Atkinson believes there's still a big disconnect between what is demanded by the government and lenders to access funding, and the value of that time to small businesses. In applying for grants, she found some parts of the process a poor use of her time.

"In one scenario, the maximum that they would value my time is $16 an hour. Beyond being insulting, it's not worth me filling in that part of the application. I just allocated a third party cost; it was quicker and simpler and clearly demonstrates the lack of consideration of a founder's time and value."

For business just starting out, it can be next to impossible to get the backing you need. "Getting support in that early phase is pretty much nonexistent. You've just got to back yourself and access the support mechanisms within your own personal network. You have to do everything, from the coffee to the CEO. So the challenge is the diversity of skill set, and you've only got so many resources in your team. And so it's then deciding who's, actually, got the best skill set for that particular need at the moment. As you grow, then you'll get that additional skill set into the team. So you've got to have a team that is flexible and diverse. And you've got to be very clear about who's the best fit."

Looking to the future

With a federal election on the horizon, small business is already shaping up as a key policy battleground in 2019. The Morrison government recently announced the Australian Business Securitisation Fund (ABSF) to assist small businesses in getting funding from alternative lenders, and both major parties support the fast-tracking of small business tax cuts by five years.

But for the time being, small business owners must be like the eponymous Peter of the fairytale and remain resourceful and driven in the face of institutionalised adversity. For Atkinson, that means believing in your business. "Ironically their need is to be aligned with innovation and creativity so we find ourselves solving their needs and ours, growth and cash flow at the same time. We invest in developing innovative partnerships and models that are easier for large traditional organisations to adopt."

"We're just choosing to back ourselves."

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