According to McCrindle’s analysis, a start-up’s best chance of survival is in the healthcare and social assistance sector (where 61.7% of firms survived), the rentals side of the real estate sector and financial and insurance services (55.1%).
Least likely to survive, according to McCrindle, are those firms in public administration and safety (where just 37.6% of firms survived), administrative support services (41.3%) and the always unstable arts and recreational services sector (43.4%).
Forget the mining boom. According to McCrindle’s data, the best chances for start-up survival are the Apple Isle of Tasmania (where 54.2% of firms survive), South Australia (52%) and Victoria (49.6%).
On the flip side, small firms found the going hardest in the Northern Territory (where 45.1% of firms survived), New South Wales (47.3%) and Australian Capital Territory (47.7%).
It’s very, very tough on your own, according to the research, with sole traders experiencing a significantly lower survival rate (at just 37.2%) than other structures. Trusts are the most likely start-up legal entity to survive (61.8% survival rate), followed by public companies (57.1%), private companies (52.5%) and partnerships (51.3%).
“It’s not necessarily that bigger is better [but] there is an increasing need for sophistication in business,” McCrindle says.
Given the low survival rates of sole traders, it’s not surprising that non-employing businesses have the lowest survival rates at 43.4%. The analysis shows that businesses with 20-199 employees have the best chance of survival (67.8%), followed by businesses with five to 19 employees (64.5%), and one to four employees (58.7%). Survival rates were slightly lower for businesses with 200 or more employees.
“The survivability of those between five and 19 employees and 20-plus employees hasn’t changed markedly. You’ve just got to get out of that micro business stage,” McCrindle says.
Forget getting to $1 million in sales – getting past the $50,000 mark will boost your chances of survival. Start-ups with a turnover of more than $2 million have a 66.9% survival rate, followed by those with between $200,000 and $2 million (57.5%) and between $50,000 and $200,000 (48.2%). Those with less than $50,000 in annual sales had a survival rate of 43%.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
