Australian businesses show a good pass rate

According to the Australian Bureau of Statistics, there were more than 2.1 million actively trading businesses in Australia in June 2014. This is a slight increase on the number of actively trading businesses in 2012.

Our entry-and-exit levels have stabilised post-GFC, with our business entry rate (new businesses starting up) at 13% and our business exit rate (businesses closing down) at 12%. Accommodation and food services had the highest entry rate.

Australia shows a fairly stable “pass” rate for new businesses. 61.7% of the businesses actively trading in 2014 had stayed in business since before 2010, and half of the new businesses which started up in 2010 were still trading in 2014.

The more employees a business had, the more likely it was to survive – but the vast majority (97%) of Australian businesses are still small businesses. Healthcare and social services businesses were the most likely to survive.

As for a state-by-state comparison, businesses operating in Tasmania were the most likely to survive from 2010 to 2014. Businesses in the ACT were the least likely to survive, despite the ACT having the highest entry rate in the country.

How our entrepreneurs stack up to countries around the world

Over 100 countries are regularly assessed for their ‘entrepreneurship’ by the Global Entrepreneurship Monitor (GEM). They have been monitoring global standings of businesses and entrepreneurs around the world since 1999.

GEM data shows that as of 2014, entrepreneurship is alive and well in Australia. Our rate of business ownership is among the highest of developed countries, on a par with the USA and Canada. But we’re still not quite as business savvy as Qatar, Trinidad, and Tobago. Australia’s government also does a comparatively good job of providing financial support to new businesses.

GEM surveys show nearly half of the Australian population thinks they have a great idea for a start-up venture and the necessary skills to get it off the ground. This is well above the average for developed economies – probably because of our high education rates and the low level of government red tape for starting a business.

The Henry Tax Review found that on the one hand, our tax rate for businesses is higher than comparable OECD countries in Asia and Europe such as Singapore (17%) and the Netherlands (25%). On the other hand, our rate is still lower than the 40% rate of the USA and France’s 33% rate.

Similar to Australia’s 50% pass rate for businesses over 4 years is the UK, where half of all businesses fail within 5 years, and the USA, where Gallup says more businesses are dying than are being “born”.

Aussies feel confident in business

Perhaps because business in Australia is doing so well, our fear of failure when considering a start-up in Australia is in the average range at 39%, far below global comparisons. The countries with the highest fear of failure were Greece (61%), Poland (51%), and Belgium and Italy (both 49%).

According to the ABS, the vast majority of business owners (1.9 million businesses) indicated that they expected to still be in business in 12 months’ time.

What helps our businesses stay alive

Research done by the O2 program in the UK identifies training and financial support as the two key factors that help a start-up business survive.

Start-ups that are approved for incubator and accelerator training programs and make it through the program have survival rates as high as 92%. They are far more successful when raising investment capital, and they show higher EOFY profits.

The value provided by these incubator programs, O2 says, is largely due to providing specialist advice, one-on-one mentoring, and networking opportunities. Therefore, it would be highly profitable for a country to improve its entrepreneurship by providing new businesses with government-funded incubator programs or other training, as well as financial support.

2014 data from the Australian Bureau of Statistics shows that 12% of businesses receive financial assistance from the Australian government, most commonly in the form of rebates, grants, and subsidies.

Apart from outside assistance, businesses can benefit from a good set-up with their financial institution. From its early days on, a business that is to survive needs financial products that work for its profit, not against it.

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