There's never any shortage of headlines suggesting new businesses have a limited chance of success, but drilling down into the figures suggests this might not actually be the case.
What the national statistics say
Official data from the Australian Bureau of Statistics (ABS) shows that as of June 2014, there were 2.1 million actively trading businesses throughout the country. This marked a 1 per cent rise from the previous year.
Even though the number of active companies increased, there was a fall in the business exit rate over the 2013-14 financial year. The ABS noted that it fell from 14 per cent a year earlier to 12.7 per cent.
To be among these successful businesses doesn't require luck, but rather some extensive planning and strong cash flow. Everything from unpaid invoices to increasing costs can all take their toll on a company, which is why you have to be realistic about your prospects.
Be prepared for difficulties in the first year
The first 12 months of trading are generally the most difficult for start-ups, explains Mark Whelan, ANZ's CEO in Australia, and managing director of global commercial banking.
He explained that this is a time when business owners will be forced to assess their options and whether they're committed to making their ventures a success. They'll also invest time in establishing their customer base and figuring out whether there is a demand for certain goods and services.
Although this is far from the only hurdle, the first year will be a difficult one that separates some business owners from the rest of the crowd.
Assessing data reliability
The Department of Industry, Innovation, Science, Research and Tertiary Education acknowledges that official statistics might not paint the most accurate picture of the business landscape.
It's often the case that businesses are sold, or reassigned a new code because they have taken on a new legal status. These don't constitute failures, but will show among the data as being companies that have ceased trading.
The first 12 months of trading are generally the most difficult for start-ups
Mr Whelan further emphasised this point, saying that for some business owners, another opportunity might come along that is more appealing. Starting a family or joining a different firm are both legitimate and understandable reasons, but these will reflect negatively in ABS data.
Being realistic about the future
Business success and failure is dependent on a number of factors, with cash flow among the most integral. Seasonal trends will affect the data - for example, Dun & Bradstreet recently revealed that the number of failed businesses in Australia jumped 17.7 per cent during the third quarter of 2015.
The country has faced its fair share of economic and political turmoil this year, which will be reflected in these figures. However, with a sound business plan and drive in place, there's every chance of success.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].