According to estimates, Australia currently has around 2.3 million small businesses. Sadly, one in three newly established small businesses in Australia fail in the first year, followed by two out of four by the end of the second year, and three out of four by the end of the fifth.

A recent study by the University of Technology, Sydney shows that the following factors are frequently cited as the cause of business failure: poor financial management, bad management, bad record-keeping, issues with sales and marketing, issues with staffing, failure to seek outside counsel, general economic conditions, and personal factors.

An in-depth analysis of these findings is instructive. Accounting for 32% of all failures, financial mismanagement is the single leading reason for business failure. Financial mismanagement refers to a number of problems, such as a lack of business experience, cash flow problems, starting with insufficient capital, excessive private draws, excessive credit utilisation, a lack of budgeting, and inadequate tax preparation.

Incompetent management, largely the result of insufficient experience, is the reason why 15% of businesss fail. 12% of unsuccessful businesss had insufficient or wrong records. Some don’t even have any case files or books.

11% of businesss fail due to inefficient sales and marketing issues. Poor promotion, an inability to deal with seasonal conditions, and inadequate competitor knowledge are a few of the serious issues that fall into this group.

According to another estimate, 9 % of businesses fail due to staffing issues, including poor management. Surprisingly, only 3 % of companies ignore external counsel when facing a crisis. Looking at the bigger perspective, 14% of failures refer to general economic conditions. Additionally, 6 % of businesss fail due to personal problems like divorce, illness, and changes in circumstances.

However, a flourishing economy depends on a thriving small business sector. More employment prospects are also a sign of a healthy small business sector, and Australian small businesses are the country’s economic lifeblood.

If you also have a great idea for a small business and have always wanted to be your own boss, then continue reading this article to learn about the mistakes to avoid for running a successful small business.

A company that employs fewer than 20 people is considered a small business. They make up nearly 98% of all businesses. 

Australia’s small Business sector has been the fastest-growing sector, that aged between 45 and 59, 61% of small business owners. 

Australia’s gross domestic product is composed of 35% of small businesses (GDP). 

44% of the workforce in Australia is employed by small businesses. 

The main industries employing people are farming, forestry, and fishing. 

The second-highest number of workers are employed by small rental, hiring, and real estate businesses. 

There are more apprentices and trainees than in any other industry, with construction ranking third in terms of employment.

There is no demand in the market for their good or service, which is one of the most frequent causes of new businesses failing. Researching everything from the current market, and current and future trends in your industry, to who your competitors are, who your target audience is, and what will motivate them to do business with you is, therefore, one of the most crucial first steps you need to take when you are setting up a business.


Read Full Article: Why Australian Small Businesses Are Failing in Early Stages