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Today’s small business trends speak of economic positives

In case you missed it, here is some great news for anyone feeling discouraged about Australia’s small business sector: the head count is in and it is on the rise. In further (unsurprising) news, the sector continues to carry the local economy.

The latest report by the Australian Bureau of Statistics reveals an increase of 0.4% in the number of actively trading businesses last financial year (the vast majority are small businesses). This is an additional 8,868 businesses on 2011 – something I am very pleased about.

The entry rate of businesses (13.5%) was higher than the exit rate (13.1%). It is a small difference, but an important one.

While it is great news that more Australian’s are choosing to run their own business, the increase of just 0.4% is well down on the prior year when the number of new businesses increase by 3.6%. I believe this is due to a lack of confidence in the local economy.

Small businesses account for 96% of Australia’s 2,141,280 actively trading businesses as of June last year. This comprises 1,306,093 sole traders (61%), followed by 514,859 businesses with 1–4 employees (24% – micro business) and 231,591 businesses with 5–19 employees (11% – small business).

The remaining 88,737 (4%) are medium-sized businesses, ie. those with 20–200 employees.

The report also found that in terms of business survival rates, of the 2,071,360 businesses operating in June 2008, 61.8% were still operating in June 2012.

The fall in active new businesses over those four years was as follows: 84.6% were still operating in June 2009, 75.1% were still operating in June 2010 and 67.9% were still operating in June 2011.

As expected you can see the longer a business survives, the more likely it is to continue to survive in future years.

Little is spoken about the needs of lives of small and medium businesses – but they form a critical component of our economy and should be treated as such.

They are major employers, they provide flexible work environments and they often take on apprentices, helping build skills in our workforce.

On the whole they are cherished by the staff who rely on their monetary support, professional guidance and friendship.

The enthusiasm, drive and passion of these business owners have a much larger financial and emotional, direct and ripple, effect on our economy than many realise.

Looking at even the most base of financial facts, small businesses contribute 34% to gross domestic product. The money that is spent with a small business is often the marginal dollar in a consumer’s wallet.

The increase in savings that we have therefore seen over the past 4 years has hit small business revenue much harder than the economy overall.

As loyal employers, most small business owners have absorbed as much of this as they can in their own wallet.

As a nation we must continue to encourage and empower potential entrepreneurs to take the chance to start a business.

At MYOB we apply great focus to supporting, recognising and celebrating the journey of smaller businesses and start-ups, and I urge the government and larger businesses to strengthen their focus as we look to strengthen ours.

The government is on the right track with some new initiatives announced in the Budget, such as the intended investment of $3.2 million over 15 years for the “promotion and marketing” of Australian start-up success stories.

Many start-ups are on their way to becoming tomorrow’s leaders. Our support means a lot to their future and Australia’s future.

Here are some further interesting facts from the Australian Bureau of Statistics ‘Counts of Australian Businesses, including Entries and Exits: 2011-2012 financial year’ study:

  • The largest number of Australian businesses was in the Construction industry (16.2%), followed by Professional, Scientific and Technical Services (11.7%) and Rental, Hiring and Real Estate Services (10.5 %).
  • ‘Agriculture, Forestry and Fishing’ and ‘Rental, Hiring and Real Estate Services’ industries had the lowest entry rates, of 6.5% and 8.8% respectively.
  • ‘Accommodation and Food Services’ and ‘Administrative and Support Services’ industries had the highest entry rates, of 16.7% and 16.4% respectively.
  • The ‘Public Administration and Safety’ and ‘Administrative and Support Services’ industries had the highest exit rates, of 17.5% and 16.8% respectively.
  • ‘Health Care and Social Assistance’ and ‘Agriculture, Forestry and Fishing’ industries had the lowest exit rates, of 8.1% and 9.4% respectively.
  • The state with the highest number of businesses operating in 2011–12 was New South Wales (710,733). Victoria followed (551,220), then Queensland (428,515), Western Australia (221,918), South Australia (148,138), Tasmania (38,658), the Australian Capital Territory (26,016) and the Northern Territory (14,669).


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Tim Reed

Tim Reed

Tim Reed became Chief Executive Officer of Australasia’s largest business management software provider in 2008, after gaining deep operational insights over five years in management roles including Managing Director, MYOB Australia and Group Product Executive.

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