Is Fear of Small Business Justified?

There are lots of statistics thrown around about how many small businesses fail and how often. I have heard that four out of five small businesses fail in the first five years. Just for giggles, I thought I might check out the actual numbers with the Australian Bureau of Statistics (ABS), and yes, the numbers are frightening.

In Australia, as of 30.6.2021, there were 2,402,254 actively trading businesses. In the four financial years from 2017-2018 to 2020-2021, there were 1,128,355 business exits. An average of 282,089 per annum. This means that approximately 12% of businesses exit each year, and over the fabled five-year period, approximately 59% of businesses exit or three out of five. Wow! Business failure is real, and something we should be very aware of… or is it?

Digging a little deeper gives us a very different picture.

It turns out that in 2021, of the actual 277,674 businesses that exited that year, 272,282 turned over less than $2 million in revenues, and 83% of these turned over less than $200,000 in revenues. It is clear from this data that all business exits are not equal, and the facts are that if your business turns over more than $200,000, you have an 82% chance of survival year to year, and if your revenues exceed $2,000,000 per annum, you have a 98% chance of survival year on year.

There is any number of meanings we could attach to this data, but the one I think is most useful is the one that says we can afford to be brave as an SME. The fear-mongering that has permeated our psyche through myths and legends of small business failure does not stack up when we look at the facts.

This gives me great comfort in building transformational strategy and coaching entrepreneurs as they bravely transition through the entrepreneurial ceiling of overwhelm and chaos to breakthrough. Movies and literature are littered with tales of brave heroes stepping through a mystical portal into an unknown new world full of trepidation and uncertainty. Like Nemo in the movie the Matrix, Alice down the rabbit hole, or my personal favourite, Enid Blyton’s children’s characters entering the Enchanted Forrest and climbing the Faraway Tree, magical experiences can lay on the other side of our fears.