New business numbers rise slightly, but exits soar for new companies and small firms: ABS

The number of Australian businesses has lifted over the past two financial years after slumping during the global financial crisis, but growth rates are muted and new business and small firms remain vulnerable, official figures show.

The latest Bureau of Statistics data on Australian business numbers, covering the four financial years to June 30, 2011, shows that while the number of businesses declined between 2007-2008 and 2008-09, they jumped by 3.6% in the 2010 financial year but edged up just 0.4% in the year to June 30, 2011.

The increase is attributed to a significant increase in entry rates, coupled with a slight decrease in exit rates.

The report, released yesterday, shows that exit rates for micro-businesses were significantly higher for non-employing businesses, at 16.9%. It does not specify whether the exit was caused by retirement, sale, merger or collapse.

According to the data there were 2.13 million actively trading businesses as at June 2011. Of these, 2.04 million are small businesses with fewer than 20 employees. Small businesses represent 96% of all Australian businesses, although this does not include businesses without an ABN or who are not paying GST.

The statistics bureau found that survival rates for new businesses were significantly lower than those that were already established.

Of the 2.07 million businesses operating in June 2007, the percentage that survived over the next few financial years declined to 60% by June last year.

Similarly, of the 316,850 new business entries during 2007-08, less than half (48.6%) were still operating by June 2011.

“This indicates that business survival is related to the age of the business, ie. the longer a business survives, the greater its chances of continued survival,” the ABS said.

Another key factor was size, with non-employing businesses – accounting for 61% of businesses operating in June 2011 – less likely to survive than larger companies.

“Survival rates are also heavily influenced by the size of the business. For example, non-employing businesses have a significantly lower survival rate compared to employing businesses,” the ABS said.

The figures show 43.3% of non-employing entries in 2007-08 were still operating in 2011, compared to 60.0% of employing entries.

Peter Strong, executive director of the Council of Small Businss of Australia, notes there is a “disturbing trend with fewer people starting businesses and it appears fewer small businesses employing people.”

“This points to changes needed to be made in the area of compliance and workplace relations,” he says.

Sector by sector, the report found that accommodation and food services experienced relatively high entry and exit rates through 2010-2011, and the number of mining businesses lifted by 4.2% over that period. Health care and social assistance business numbers also rose by 3.5% over the period.

Conversely, agriculture, forestry and fishing had the greatest percentage decrease with business counts dropping 2.7%.

Agriculture, forestry and fishing and the manufacturing industry have recorded a decrease every year since this series began in 2007, the ABS said.

Small Business Minister Mark Arbib says the growth in small businesses over the past two years “should inspire confidence within the sector and is a reflection of the strong position of Australia’s economy.”

“The community must not forget that small business owners are people who put all their effort into running their business. They deserve strong support.”