The top five best and worst businesses to start in Australia right now – and anyone can do it

An insolvency expert has revealed the top five best and worst businesses Australians can start during a cost-of-living crisis.

Insolvencies are now at the highest level in more than a decade thanks to aggressive interest rate rises with more pain expected.

The Reserve Bank last month left interest rates on hold at a 12-year high of 4.35 per cent, but with inflation still on the high side, there are fears of more rate rises and slightly higher unemployment.

The cost-of-living crisis comes as everyday Australians become increasingly dissatisfied with their wages failing to keep up with rising prices.

The latest Hays Salary Guide found 73 per cent of people surveyed were unhappy with their pay and didn’t believe their salaries reflected their performance.

Hays chief executive for the Asia Pacific, Matthew Dickason, said the cost-of-living crisis had encouraged many Australians to quit their jobs in search of higher pay.

Some Aussies will no doubt consider starting their own business considering that wages are barely outpacing inflation, now back at four per cent.

Matthew Caddy, a partner with specialist restructuring firm McGrathNicol with more than 25 years’ experience handling corporate insolvencies, told Daily Mail Australia businesses could survive if they offered good value for money or a product people couldn’t go without.

GOOD BUSINESSES

1. Grocery stores

While supermarkets thrive regardless of the economy, smaller good-value grocery stores could also withstand the cost-of-living crisis, including Asian specialty outlets.

‘Generally in times like this, you’ll see that the supermarkets perform well in terms of their sales because more people are buying food to cook at home rather than going out,’ Mr Caddy said.

‘Any low-cost option does well in this environment.’ 

2. Tutoring

Demand for education remains constant even when consumers have less money left over because parents continue to prioritise after-school lessons for difficult subjects like maths.

‘There’s high demand for tutoring – education has always been a priority for people and there’s probably an increasing prevalence for tutoring services and post-Covid, that’s getting done through online platforms,’ Mr Caddy said.

3. Garbage collection

Waste services companies, which collect rubbish for councils or provide skip bins on construction sites, are needed regardless of how the economy is doing.

‘They’re not going to experience a spike in insolvencies as the economy tightens because waste services still need to be dealt with,’ Mr Caddy said.

4. In-home aged care

Baby boomers wanting to live their twilight years at home rather than in a nursing home are going to want more in-home help.

‘With our ageing population, there’s obviously going to be higher demand and sustainably higher demand for an extended period – people in that sector have the opportunity to do well,’ he said.

5. Farmers

Fruit and vegetable growers and meat producers thrive, regardless of economic activity, because people need to eat.

Farmers are therefore less likely to encounter difficulties in securing a bank loan even during times of drought or floods.

‘The conditions have been pretty good and it’s also a sector that is probably looked upon more favourably from a lending position,’ Mr Caddy said. 

BAD BUSINESSES 

1. Apartment builders 

Apartment builders in particular are struggling with Australians preferring to living in houses, as developers battle eroding margins.

‘More of the construction insolvencies relate to higher-density construction projects rather than land and building developments,’ Mr Caddy said. 

‘In those projects, there’s very skinny margins and when there’s reduced demand, then everyone’s competing for what’s available and that drives margins down further.’

Construction was by far Australia’s worst-affected sector with 2,832 companies going into administration in the year to June 16 – a 33.7 per cent surge – based on Australian Securities and Investments Commission data.

Fixed-price contracts and higher building material costs are crippling builders, despite Australia having a housing shortage following record-high immigration. 

2. Restaurants

Higher interest rates mean fewer Australians with a mortgage are eating out at restaurants or getting takeaway food.

‘Hospitality’s heavily linked to discretionary spending and clearly in terms of consumer demand, as the dollars in people’s pockets is generally lower due to the cost of living pressures,’ Mr Caddy said. 

The accommodation and food services sector saw 1,576 failures – up 49 per cent.

3. Women’s fashion retailers

Women’s fashion retailers struggle when they are left with unsold stock during the end of a season.

‘If you’re retailing fashion, you need to be able to move between the seasons,’ he said.

4. Mortgage brokers

The banking royal commission had led to new rules, and led to many mortgage brokers leaving the industry.

‘The regulation makes it a higher cost – if you’re a smaller business, you don’t necessarily have the ability to adapt and meet the requirements,’ Mr Caddy said.

5. Specialist manufacturers

Higher labour costs in Australia, compared with Asia, are hurting niche tech manufacturers making components for things like fishing rods and bicycles.

‘There’s carbon fibre manufacturing that occurs in Australia where the labour is at a huge cost where parts of Asia are now focusing on that – the labour costs are so much lower,’ he said.