First year in business – you’ve got this
After his obituary was published in error in 1888, American novelist Mark Twain famously responded: “Reports of my death are greatly exaggerated.”
The good news for business owners is that reports of your impending financial doom have been similarly overstated.
You will probably have read all sorts of figures about business failures – or heard them from worried friends and relatives. But it’s not nearly as bad as you may have heard.
The Australia Bureau of Statistics indicates that, of the 25,249 businesses that opened their doors in WA in 2013, a heartening 79 per cent made it through their first year.
A solid 64 per cent survived the second, and 54 per cent the third. And the good news is those figures have risen about 4 per cent across the board in the past few years.
So, just over half of all new businesses can expect to survive their crucial first three years. You may find those odds daunting, but before you reach for the Pepto-Bismol, crunching the numbers slightly differently can give you a better insight into where the pressure points are.
By far, the most failures occur in the first year of operation (20 per cent). If you survive year one, you have a much higher chance – 69 per cent to be exact – of making it past the three-year mark, by which time your business should be turning a profit.
Those are not bad odds. And it’s easy to boost them further by attention to common pitfalls:
- a hazy or non-existent business plan
- a lack of capital or cashflow
- poor staff management or training
- poor promotion or location.
Business success is about giving yourself the best possible chance. We’ll show you on this website where the pot-holes are and walk you through strategies to maximise growth.
And focusing on grow is the key, with ABS statistics indicating the more employees a business has, the more likely it is to survive in the long term.
Of the businesses that opened in WA in 2013, nearly 62 per cent of those with one to four employees were still trading in June 2016, while 70 per cent of those with five to 19 staff were still operating.
That compares to 50 per cent for sole traders, who comprise the majority of Australian small businesses and, unfortunately, have the highest failure rate.