The impact of NBN on small business

Xero Small Business Insights and AlphaBeta have teamed up to quantify the impact of the NBN, the biggest infrastructure project in Australia’s history, on the nation’s largest employer: small businesses.

Using anonymised, aggregated data from tens of thousands of small businesses on Xero, strategic economics consultancy AlphaBeta and Xero have compared business outcomes in two distinct regions: areas where NBN access was mature in 2016 and areas where the NBN had not yet arrived.

The analysis has found that in 2017, small businesses in mature NBN regions grew employment by one-third more than businesses in non-NBN regions and increased revenue by almost two thirds more.

Overall, the Digital Connectivity Report suggests small businesses and the economy are benefiting from increased access to high-speed broadband. Adding to this momentum are business apps that help automate traditionally manual tasks, from processing expenses to scheduling client appointments and rostering staff.

“Many people have been fearful the digital revolution will result in the loss of jobs,” said Trent Innes, Managing Director of Xero Australia. “Instead, what our data suggests, is that it actually does the opposite. It’s enabling small business growth, and those that are leveraging digital the most are seeing significant benefits.”

Economic impact of the NBN on small businesses

The rollout of the $49 billion NBN is about halfway complete and has provided greater access to high-speed broadband for small and medium businesses, which employ nearly 70 per cent of all workers. According to the Australian Bureau of Statistics, in 2009-2010, only about 10 per cent of small and medium businesses had a high-speed broadband connection. That figure is now closer to 30 per cent, based on the ABS’s last count in 2015-16.

Digital app connections driving business growth

The report also found app integrations are associated with better outcomes for small businesses. Xero analysed data from businesses using the hundreds of cloud-based apps that plug into its open API platform. Small businesses are able to seamlessly connect apps that simplify tasks such as employee rostering and invoicing.

“There’s a strong relationship between app use and better business performance,” said Dr Charlton. “The analysis found that businesses generating jobs are turning to apps to help manage their growth.”

Businesses that hire more people are more likely to adopt apps. While there are many factors that affect growth in revenue and employment, businesses in the sample that used at least one app in 2017-18, on average, increased employment in the previous year by 2.2 percentage points more than similar businesses that didn’t use apps.

“Increased access to infrastructure, lower prices, greater choice, and innovation and specialisation in the app market are helping small businesses access technologies and functionality previously beyond their reach,” said Andrew Charlton, Director of AlphaBeta.

Boosting economic growth through small business digital connectivity

Despite digital connectivity improving across the country, Innes said that there is still work to be done, with many small businesses still not taking advantage of the opportunities.

At the last count by the ABS, two-thirds of small businesses were not connected to high-speed broadband. Additionally, approximately 30 per cent of businesses still lodge their BAS statements on paper, while 14 per cent of small businesses don’t use IT for their bookkeeping and accounting. Even amongst businesses who subscribe to Xero, many are yet to connect apps to Xero.

“Digital connectivity is evolving rapidly from a ‘nice to have’ to a ‘must have’. With the mandatory government rollout of Single Touch Payroll (STP), mandatory two-factor authentication (2SA), and increased use of e-invoicing, it’s critical that businesses, technology providers, government and advisors come together,” Innes said.

“We need to help small businesses overcome barriers like lack of awareness, lack of time, and fear of change to make this digital transition. It will not only help them meet their compliance requirements but will help boost economic growth across Australia.”

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