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