New business survival

New businesses often do not survive beyond their first few years of existence. This is regularly conveyed to us at seminars and conferences. However, individuals starting new businesses often disregard or down-play the significance of the evidence.

Let us examine the evidence and see what can be done to increase your odds of survival.

Survival Rates for All Industries

Data from the Australian Bureau of Statistics (ABS) for all industries in Australia shows that there are a very large number of new businesses that do not survive their first three years. Across all industries, more than half the 342,753 businesses formed in 2009/10 did not survive beyond year three. The following diagram shows the survival rates of these businesses for each financial year ending 2011 to 2013.

PiBI Website - Chart - Business Survival Rate (all industries)

Therefore, of the 342,753 businesses formed in 2009/10, only 162,778 survived to June 2013 (i.e., less than half).

Survival Rates by Legal Entity

ABS data for Australian businesses (excluding trusts and the public sector) shows that of whose established in 2009/10, sole proprietors were less likely to survive beyond three years compared to company and partnership legal entities (see the following diagram).

PiBI Website - Chart - Business Survival Rate (legal entity)

These figures suggest that businesses operated by single owners are more vulnerable to failure than those with two or more partners, notwithstanding that some companies will be owned and operated by single owners.

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References

  • Australian Bureaus of Statistics (2014) Counts of Australian Businesses, including Entries and Exits, June 2009 to June 2013, Catalogue Number 8165.0

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