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The small businesses most likely to fail

Samantha Menzies
The small businesses most likely to fail

Tens of thousands of Aussies are increasingly opting to exit the nine-to-five workforce and instead embark on a new business venture, but how safe is it?

While starting up a new business presents many challenges and involves a lot of risk, keeping it alive and kicking is an even harder feat.

Also read: 12 businesses you can start for under $100

According to the Australian Bureau of Statistics (ABS), the vast majority of Australian businesses (97 per cent) are small businesses, over a third of which are forced cease operating within the first three years of starting up, an alarmingly high rate for those looking to start a new venture.

The ABS statistics show that by industry, public administration and safety businesses are the most likely to fail.

Only 53.3 per cent of those operating in June 2010 were still actively operating four years later in June 2014.

Also read: Govt aims to help start-up businesses

Businesses in the public administration and safety industry are very shortly behind with only a 53.5 per cent survival rate, followed by accommodation and food service businesses with a meager 54.2 per cent survival rate.

Unsurprisingly, Australia’s property and healthcare industries are the safest options for small businesses with the highest survival rates over four years of 71.7 per cent and 74.6 per cent respectively.

Businesses most likely to fail by industry

Businesses by industry 4-year Survival rate (%)
Public Administration and Safety 53.3
Administrative and Support Services 53.5
Accommodation and Food Services 54.2
Arts and Recreation Services 56.3
Information Media and Telecommunications 56.4
Construction 57.3
Retail Trade 57.4
Transport, Postal and Warehousing 57.6
Education and Training 60.1
Professional, Scientific and Technical Services 60.8
Electricity, Gas, Water and Waste Services 61.6
Wholesale Trade 62.7
Manufacturing 64.7
Financial and Insurance Services 66.1
Mining 66.7
Agriculture, Forestry and Fishing 69.6
Rental, Hiring and Real Estate Services 71.7
Health Care and Social Assistance 74.6

Source: Australian Bureau of Statistics

Not only is the type of small business greatly affect a startup business’s chance of success, location is another major factor.

The Australian Capital Territory is the riskiest area to set up a new business, with only 58.9 per cent surviving the first four years.

Also read: 10 worst Aussie jobs for the future

Queensland and Northern Territory are close behind, with a survival rate of only 59.4 per cent and 59.9 per cent each respectively.

However, it’s Tasmania which takes the crown as the area where businesses have the highest success rate across the nation at 65 per cent.

Businesses most likely to fail by state

Businesses by state 4-year survival rate (%)
Australian Capital Territory 58.9
Queensland 59.4
Northern Territory 59.9
Western Australia 60.9
New South Wales 61.7
Victoria 62.9
South Australia 64.7
Tasmania 65.0

Source: Australian Bureau of Statistics