What Percentage of Businesses Make it Through the First 3 Years?

[GuestMember]

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Why 3 years? Arbitrary really but my blog focuses on 3 years so I’ve taken an interest in that figure and it’s useful to hold something constant in these kinds of discussion.

It should be a simple question but it’s a hotly debated topic, influenced by all manner of variables.

[arrowwise]

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The definition of people in business is broad, varied and fragmented – likewise what constitutes making it in business? There are people working full time with a part time profit, and claim to have made it, while others work full time as a salary earner and run businesses on the side that are more profitable than their day job

[Robert Gerrish]

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Hi Paul

Finding up-to-date, accurate stats is not easy. Certainly there are a plethora of scaremongering reports, but these are usually from those trying to push business consulting or coaching services.

This 2012 report from The Department of Industry, Innovation, Science, Research and Tertiary Education is a pretty thorough one and it indicates that around 60% of non employing businesses had survived over 4 years and this is confirmed in this paper from the RBA.

There has also been some good start up research (that I can’t lay my hands on at the moment) that showed that while a high percentage of tech start ups fail to get traction, the process of cessation, was not felt, by the entrepreneur, to be any kind of failure and indeed was generally a positive learning.

Personally, I’ve been aware of a good number of solo business closures over the 10 years we’ve been online and rarely, if ever, have those been dramatic closures ending in any kind of financial ruin. Often it’s more that the business isn’t turning into what the individual expected.

So, to answer your question, and based on the reports cited above, I would say that one might reasonably assume that around 70% of businesses survive their first three years. And that’s not what the headlines often say is it?

Good luck with your research.

Robert

[bb1]

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I think these figures stack up
Of the 294,210 new business entries during the 2010-11 financial year:

• 76 per cent were still operating in June 2012
• 59 per cent were still operating in June 2013
• 50 per cent were still operating in June 2014.

[LucasArthur]

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Berty Beetle

I know this is not related to this post, albeit an awesome conversation that my past has certainly had me involved in, i just want to draw on your quote that you have in your signature.. Certainly, we have raised it before although this is it:

“Never be afraid to ask the difficult question, it can save you $’s”

LOVE THIS COMMENT!!!!!

Always have and always will.. it is just a straight forward comment that can simply be applied to all, and almost any, situation. Drop off the $$$’s at the end and it can be used extensively..

Just a ‘hats off to you mate’..

Cheers
{anonymous and extensively removed from reality}

Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888

[Alan Maddick]

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Remember when you see figures based on ATO or ABR data this is a pure number started vs number closed – if a business starts as a sole trader then turns into a partnership in year 2 and then on sound advice from their accountant converts into a company then the way most numbers are run this would count as 3 businesses started and 2 closed when in fact its just one business changing operating structure.

I my personal experience in my practice I would estimate that around 10% of businesses close within the first 3 years.

[GuestMember]

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Interesting thoughts so far, thanks everyone. It is certainly a tricky statistic. I have some radio interviews coming up. Obviously, I’d like to get the facts right but it seems like shifting sands! The last round of research landed me at 1 in 2 businesses are successful at year 3. It was a hedge between a lot of varied stats from respectable sources. The amount they vary about the mean is astounding. We really should know these things. It’s (sometimes) people’s lives, health, community services, marriages, etc, affected. Unfortunately, I lost all of my previous research so I’m getting back into it and I’m grateful for your thoughts.

Do you have the source of your figures Bert?

[bb1]

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Paul Peace, post: 223417, member: 54653 wrote:

Interesting thoughts so far, thanks everyone. It is certainly a tricky statistic. I have some radio interviews coming up. Obviously, I’d like to get the facts right but it seems like shifting sands! The last round of research landed me at 1 in 2 businesses are successful at year 3. It was a hedge between a lot of varied stats from respectable sources. The amount they vary about the mean is astounding. We really should know these things. It’s (sometimes) people’s lives, health, community services, marriages, etc, affected. Unfortunately, I lost all of my previous research so I’m getting back into it and I’m grateful for your thoughts.

Do you have the source of your figures Bert?
Hey Paul,
http://www.abs.gov.au/ausstats/[email protected]/mediareleasesbytitle/950EC94DB899312ECA2573B00017B8F4?OpenDocument

[GuestMember]

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Thanks Bert, that’s really helpful. I’ll be digesting their PDF for some time!

[GuestMember]

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The tentative conclusion so far seems to be that 50% of businesses survive the first 3 years. That’s not to say the other 50% fail, however. They may wind up for personal reasons, and we have to take into account adjustments for essentially the same business registering differently due to acquisitions, mergers and change of legal structure. Does that seem a reasonable summary? What does everyone think?

[Rowan@quaotic]

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As the others have said, the question and statistics are complicated. People are always talking about the high rate of small business closures as failures when there is so much more to it than that.
I have tried a few of small retail businesses before settling on the business I have now and only one of those businesses I would think of as a failure – the other two were where I decided that the business was a great idea but it just didn’t suit me so I moved on, well one had fantastic potential and worked well but was in the wrong spot, but I decided to close it rather than bear the cost of moving.

I think that some people need to try different things before they hit on the perfect business for them, a bit like trying different jobs or studies.

[Roman K]

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I don’t know the stats, but I heard many times from many coaches only around 10% make it overall. Not sure about first 3 years though. 90% of new businesses fail due to a number of factors, number one being doing what you don’t like.

For a business to be successful first checkbox ticked should be: “PASSION”.

Nothing else matters – so long as you love what you do and happy to invest in your mind until your last day on the planet, everything can be learnt and achieved regardless of your financial situation.

[alliedib]

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Roman K, post: 223459, member: 72542 wrote:

I don’t know the stats, but I heard many times from many coaches only around 10% make it overall. Not sure about first 3 years though. 90% of new businesses fail due to a number of factors, number one being doing what you don’t like.

Thats what I love about statistics – 84% of people are able to manipulate them to their benefit….

But in all honesty, what does ‘10% make it overall’ mean? If my business is sold / acquired – am I part of the 90?

[LucasArthur]

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alliedib, post: 223461, member: 37857 wrote:

Thats what I love about statistics – 84% of people are able to manipulate them to their benefit….

LOVE IT!!!!

A strong believer in statistics are able to be stacked to represent ANYONES argument, good or bad.. Taking a snap shot of time is awesome, but only a minute portion of the story (read that as truth)..

Lets engage the story “oh boy, ok everyone i am here to tell you that the world is awesome.. We all breathe fresh air (i) and are able to walk (ii) this fine earth for as long as we deem fit (iii) and at this point in time (iv) everyone would want to be human and alive (v).”

All based on statistics of sorts as follows:
(i) – if its purified with a humidifier from retailer XYZ as per study in 2014
(ii) – unless you are one of the ones unable to by some degree of disability as per statistical survey xyz by ABS 2014
(iii) – we meaning corporation abc of the USA
(iv) – only based upon information provided up til the time of writing
(v) – based on the altruistic beliefs of scientology

Ok, so i am being a little funny.. but have fun..

Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888

[GuestMember]

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I can’t make sense of this. Would it be okay to stay on topic?
What Percentage of Businesses Make it Through the First 3 Years?

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