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Want to boost your chance of start-up survival? Head to Tasmania

Thursday, 13 December 2012 | By Michelle Hammond

Start-ups in Tasmania have a better survival rate than elsewhere in Australia, with the healthcare and social assistance sectors topping the list of safe industries, according to a new report.

 

The McCrindle Research report, titled Small Business Nation, is based on data from the Australian Bureau of Statistics, from June 2007 to June 2011.

 

“The entrepreneurial dream is still alive but, as demonstrated by the survival rates of new businesses, without better support only a minority will achieve success,” the report said.

 

There is almost one actively trading business for every 10 Australians, according to the report. But from all the new businesses that started four years ago, 51.4% are no longer operating.

 

Start-ups are most likely to survive in healthcare and social assistance (61.7%); rental, hiring and real estate services (56.3%); and financial and insurance services (55.1%), the report said.

 

The start-ups least likely to survive are those in public administration and safety (37.6%), administrative support services (41.3%) and arts and recreational services (43.4%).

 

Social researcher Mark McCrindle says “everything that’s discretionary” hasn’t done so well, suggesting start-ups should steer clear of discretionary products and services.

 

“The statistics are sobering and therefore they highlight to would-be proprietors of business that some sophistication is needed,” McCrindle told StartupSmart.

 

“[This requires] setting up a diverse offering that may be resilient in tough times, and setting medium and long-term goals so you can get over that micro business hump.

 

“It’s about growing beyond one to four employees, doing over $50,000 in revenue, and the third factor is the business structure.

 

“If your business can have that sophistication and get over that hump… you’re more likely to [succeed].”

 

With regard to the business structure, McCrindle is referring to the legal entity.

 

For example, trusts are the most likely start-up legal entity to survive (61.8%) followed by public companies (57.1%), private companies (52.5%) and partnerships (51.3%).

 

Sole proprietors have a significantly lower chance of survival, at just 37.2%.

 

In terms of geography, the best chances for start-up survival are Tasmania (54.2%), South Australia (52%) and Victoria (49.6%).

 

The worst chances are in the Northern Territory (45.1%), NSW (47.3%) and the Australian Capital Territory (47.4%).

 

However, the Northern Territory saw the highest increase in the number of businesses, at 1.6%, while the ACT topped the list of both new and exiting businesses at 16% and 14.6% respectively.

 

McCrindle says there are several reasons why Tasmania and South Australia performed better than the other states.

 

“Tasmania is billed as a tough place to do business but in this [report] it’s doing well,” he says.

 

“A lot of those businesses may only have one or two clients, so essentially it’s a contractor arrangement, and Tasmania has done well in that regard.

 

“South Australia has a higher proportion of government money, per person, than some of the larger states.

 

“That government money has been more certain than the commercial dollar and the household dollar.

 

“NSW hasn’t done so well and that’s had an impact on business. Because of the competition, [NSW businesses] are up against more sophistication.”