Why Do Businesses Fail In Australia

When it comes to starting and running a business, a few things are crucial for success. However, despite following all the right steps, some businesses still fail. So, what’s going wrong?

Well, sometimes it’s just bad luck, but oftentimes, businesses in Australia fail because of mistakes that could have been easily avoided. 

Are you interested in starting your own business but are afraid of failing? You’re not alone. Every year, thousands of businesses close their doors in Australia.

So what causes so many businesses to fail? And more importantly, what can you do to make sure your business doesn’t become one of them? 

An astounding number of businesses fold within the first few years of operation in Australia. In fact, almost half of all businesses don’t make it past the two-year mark. One of the reasons is that the company is no maintaining its accounting right, and can’t keep on track of all the financial dangers. So, picking the right tax agent at the start is a good idea to make your business prosper and successful in long term. 

So what’s the reason for this high failure rate? And how can you avoid becoming one of the statistics? In this blog post, we take a look at some of the key reasons businesses fail in Australia and offer some tips on keeping your business from meeting the same fate.

There is a Failure Rate of 97% Among Australian Businesses. We’ll Explain Why

When you travel to Australia, you are likely to see a large number of ‘lease signs’ posted on storefront windows and in major retail centres across the country.

As a consequence of this, you can find yourself perplexed as to the reason why the vast majority of enterprises in the country are not performing well. But this truth has struck Australian business people as the irony of life in their own fields.

The data presented has shocked everyone, demonstrating that up to 97 per cent of all firms in Australia are terminating their operations and closing their doors.

However, when we take into account the insights, the statistics become an even greater cause for concern.

According to the Australian Bureau of Statistics, more than sixty percent of small firms fail during the first three years of their starting journey.

This is a significant amount of failure. Ouch! This is unquestionably a significant disadvantage for people who are enthusiastic about starting businesses in the country.

Those who choose to overlook the obvious fact that there is an elephant in the room won’t be able to make the problem go away. The start-up lifestyle may seem glamorous, but it comes with a number of challenges.

However, what specific things are going wrong? What is the driving force behind this massive shift in the business world? Let’s have a look at it so that you may steer clear of some of the dangers and make sure that you don’t end up as one of the statistics.

Beginning a Business Solely for Financial Gain

Even while making money is your company’s primary focus, you shouldn’t let it be your primary motivation for being successful. In Australia, a large number of companies are unsuccessful because they are unable to articulate the “why” behind their operations.

They lack the motivation, enthusiasm, and vision necessary to innovate something inside their specialised field. They are motivated solely by the desire to acquire financial gain, and hence, they are unsuccessful in their endeavours. 

You have the potential to have an impact on the world if you are enthusiastic about the work that you do and are interested in the line of work that you are in.

Having an understanding of the “why” component can also aid in the process of setting objectives and ultimately achieving them.

Unplanned Businesses Often Make Up the Majority of Small Businesses

A business that does not have a plan for its future is destined to fail. A rock-solid firm can be built on the foundation of a business strategy that has been meticulously documented.

One needs to design a comprehensive plan for their company and then make sure that it is shared with all of their business associates as well as partners.

This will make it easier for everyone to understand the vision and purpose of the organisation, while also boosting the likelihood of success and profitability.

In general, the following components should be included in a good business plan:

  • Market Research
  • Workforce Demands
  • Forecasting
  • Business Description
  • Vision, goals and keys to achieving them
  • Competition Analysis and Monitoring
  • Financial Specifications: assets and liabilities, cash flow, income projections, etc.

When times are difficult, you’ll be glad you have a business strategy to fall back on. It will serve as your road map to achievement and guide you in making important decisions regarding your company. A solid business plan will shed light on every facet of the enterprise and make decisions much simpler. Therefore, do not discount the usefulness of this tool.

Making Attempts to Remain in the Wrong Line of Work

In most cases, we come to the conclusion that we are engaged in the improper line of business and put in the effort required to rectify the situation by maintaining our previous course of action.

However, this is not even close to being the best approach to taking in order to achieve success.

As humans, we just get things wrong occasionally. However, we have the ability to put things in the proper direction.

External Factors

This setback could have been caused by a number of different external sources as well.

As an illustration, meddling from the government or a decline in market conditions could divert your interest away from the firm that you are now running and towards another one.

The stock market crisis that occurred in 2018 is a good example of this. Ignore your pride and close up shop; it’s in your best interest. 

This is the best course of action. This will free you from the constraints of being in the incorrect industry and give you time to investigate other opportunities that may be of interest to you.

You are even able to devise novel approaches in order to present the globe with a distinctive offering. The capacity to make course corrections when necessary is critical to achieving success.

Internal Factors

A blessing in disguise can come in the form of having a mentor or someone you can trust who is able to provide you authentic insights from a different perspective and/or assist you in seeing what is actually taking place.

When you are in the thick of things, it might be difficult to perceive things as they truly are at times.

There are many wonderful groups that business owners or leaders may join to receive mentoring and to learn from their peers. My personal favourite of these groups is the Entrepreneur’s Organization, but there are also other local clubs such as BNI.


Beginning a new venture is not for those who are easily discouraged. Prepare yourself to take a sucker punch to the face…sometimes on a daily basis.

The only thing that will get you through this is how you react and the people you surround yourself with.

Start-Ups Start Without any Research

When starting a new company, conducting research is an essential component of the planning process and should not be skipped.

However, many business owners choose to disregard it and keep operating in the treacherous terrain of the corporate world. It does not matter if you are selling a product or delivering services; in either case, you need to conduct market research to guarantee that people want what you have to offer. In addition to this, you should be aware of your competitors and the weaknesses in their offerings.

If you do not have such expertise, you will be nothing more than another brick in the wall, and it is possible that nobody will choose your company because there will be so many others that are comparable to yours.

For instance, if you are thinking about opening a salon on the street, you need to be aware of the other salons in the area as well as the many services that you may provide to entice clients to come to your establishment.

Competitor Research

Conduct an in-depth analysis of your competition. ranging from services to pricing to customer service to targeted markets and more. Because of this, success will be easier to achieve.

By spending more time in the beginning, you can gain an advantage over other people. Don’t get lazy.

What additional value would the numerous salons that line the street provide to the neighbourhood? You need to design a strategy to over-deliver in order to outweigh your rivals, and this applies regardless of the circumstances.

It’s time to go back to the drawing board if you can’t come up with a creative approach to offer something that’s distinct from what everyone else is doing.

What are the primary demographic characteristics of the region in which you are interested in establishing your company? Put yourself in harm’s way.

Engage locals in a discussion by inviting them to take part in a focus group, and pay close attention to the feedback you receive.

Every step that you take in the right direction gets you closer to achieving your goal of progress. Consider it in this way: once you start ranking for keywords, your visibility will increase proportionately to the number of terms for which you rank.

Something really interesting takes place as you begin to really stack those keyword rankings. 

The compounding effect is what happens when all of your efforts, one at a time, start piling up, and things really start to start moving forwards with more momentum.

Research on keywords and consideration of search intent are necessary steps in arriving at this result. Don’t just go with the flow!

The Principal Causes Why Small Businesses Fail

More than 2.3 million sole proprietorships and partnerships call Australia home at the moment.

Nevertheless, it is projected that twenty percent of new small enterprises in Australia will fail in their first year, and up to sixty percent of businesses that are started from scratch would not survive beyond the first five years after they are established.

To assist in providing your new company with the best possible chance of long-term success, we have enlisted the assistance of BOQ’s business banking specialists to gain their perspectives on the primary factors that lead to the failure of small businesses and the best ways to avoid falling into that category yourself.

Lack Of Research 

The lack of a ready market for the product or service being offered is a major contributor to the failure of new businesses.

One of the first things you should do if you’re starting a business is to study the market, the trends in your sector, your competitors, your potential customers, and the factors that will influence them to buy from you.

Lack of a Business Plan

A solid business plan can assist you in gaining clarity regarding the path that your company will take, in determining the strategies and a course of action that will allow you to realise your business objectives, and in securing the financial backing that will allow your company to start up or expand.

It is essential to have a written business plan before beginning the process of starting a new firm and working for your professional objectives.

On the other hand, if you don’t have a strategy for your company, you leave yourself up to mismanagement, which is one of the most frequent causes of failure for small businesses.

Having a business plan can also assist you in maintaining your concentration and keeping on track with your goals.

Lack of Required Business Funding

One of the most typical pitfalls that small business owners get into is the situation in which they run out of cash or are unaware of the various costs associated with launching and maintaining their company. 

The fact of the matter is that not all owners of small businesses possess the financial resources necessary to handle the expenses connected with launching a brand new enterprise.

When it comes time to draft your business plan, you should keep in mind the importance of having a thorough understanding of both the fixed and variable costs associated with beginning your business.

You will gain a better understanding of the types of financial assistance that are available to you by speaking with a small business banking specialist.

This is true whether you need to apply for a business loan, equipment finance, or information about government support for owners of small businesses.

A word of advice: keep in mind that “cash is king.” Because a shortage of cash flow can cause even prosperous firms to collapse, it is imperative that you bargain in all facets of your company’s operations.

You shouldn’t keep your company waiting for too long to get paid by your clients for the goods and services they’ve purchased, and you should always try to arrange payment terms with your vendors that are in line with the cash requirements and requirements of your company.

Financial Mismanagement  

It is possible to create a formula for disaster for your small business if you do not understand how to manage your cash flow or how to remain on top of all of your financial duties.

This is in addition to the fact that you do not have the necessary business finance to start your business.

Cash management needs to be one of the top priorities for owners of small businesses because if your cash flow is not stable, you will quickly find yourself in a difficult financial situation.

That is a threat to your company’s profitability that you must eliminate at all costs.

Poor Marketing 

When it comes to promoting their new company, a surprising number of start-ups have the misconception that all they need to do is “create it,” and customers will flock to it.

However, in order for a small business to be successful, it is necessary to have a consistent flow of sales and clients, which necessitates the development of a marketing strategy.

A strong marketing plan will have the correct mix when it comes to recruiting new consumers (acquisition) and building a foundation of loyal existing customers, and this balance will vary depending on the nature of your business and who you have identified as your target demographic (retention).

Finding a happy medium between “conventional” offline marketing activities (such as advertising, direct mail, letterbox drops, local area marketing, posters and flyers, and business-to-business marketing) and online marketing activities (such as social media marketing, email marketing, and content marketing) is essential for success in both arenas (including having a website for your business and using social media for business pages to target your audience).

The good news is that there are a number of ways to market your small business without breaking the bank. On the other hand, it is essential that you monitor and measure the outcomes in order to prevent wasting valuable dollars.

Ineffective management may be disastrous for every facet of a firm, but notably for the money. Unfortunately, a large number of business owners start out with the misconception that they can manage every part of their companies on their own.

This is especially common given the perception that outsourcing is a costly luxury.

This is a significant issue that is one of the key contributors to the high percentage of business failure in Australia.

However, in order for any business, and particularly a small firm, to be successful, it is essential to have a stable financial basis.

If you are not well-versed in financial matters, bookkeeping, or accounting, you should outsource these responsibilities immediately.

It does not necessarily mean that you need to hire an in-house bookkeeper just yet, but you should absolutely bring in a professional to make sure that everything is operating efficiently.

This gives you the ability to have a solid understanding of your financial situation, which in turn enables you to make decisions that are in the best interest of your company.

It is a wise decision to make this investment because it will boost both the overall health of your company and the profit margin.

Failure to Keep Up with Either the Needs of Customers or the Requirements of the Competition


To create a customer base that is devoted to your brand, you must first determine who your target customers are and how you can connect with them.

However, it is of the utmost significance that you have the systems in place to monitor the requirements of your customers. 

For instance, let’s say that you don’t grasp what it is that your customers demand from you, despite doing customer satisfaction surveys, watching and responding to comments made on your social media business sites, and just having conversations with your customers. In such a scenario, you run the danger of seeing those devoted consumers go to one of your rivals.

In the same vein as the previous point, you need to pay attention to what your rivals are doing. If they are able to satisfy the requirements of your clientele in a more satisfactory manner, you will lose business to them.

No Online Presence

In the past, you might have been able to get away without having a website or without maintaining a continuous stream of updates on your social media accounts, but these strategies are no longer effective.

If you want to be successful in today’s world, you absolutely need to have a website and some kind of presence online.

This does not even take into account online commerce or other forms of online sales (although this is often a good idea).

If you don’t have a website, a lot of potential customers won’t be able to find your company (as online searches are a very popular way to choose a store to visit).

Additionally, if you do not have a presence on social media, it will be difficult for potential clients to contact you. Therefore, make sure you don’t underrate the significance and the worth of this stage!

In conclusion, owners of small businesses need to devote some of their time to strategic planning and customer engagement in order to ensure that their companies are successfully managed and easily accessible to clients.

Insights Into the Unknown World of Australian Small Businesses

What kind of knowledge do you have regarding the demographics of the small business community in Australia? The research titled “Small Business Counts: Small business in the Australian economy” was published in July 2019 by the Australian Small Business and Family Enterprise Ombudsman. Below you will find some interesting data that we extracted from the report.

  • In Australia, about 98 percent of all firms are considered to be small businesses.
  • They have 2.2 million individuals working for them.
  • They are responsible for 35 percent of the gross domestic profit in Australia.
  • They are responsible for the employment of 44% of Australia’s workforce.
  • Women make up 35% of all proprietors of small businesses.
  • Micro and small firms have a greater potential for innovation and the introduction of new products and services to the market compared to large businesses.
  • When compared to major firms, the proportion of employees who are employed by small businesses in the agricultural, forestry, and fishing industries is significantly higher, standing at 85 percent.
  • When compared to major firms, the ratio of small businesses in the fields of electricity, gas, water, and garbage is significantly lower.

How Many Australian Small Businesses Make It Big?

It’s possible that different people have told you different things about the percentage of small enterprises in Australia that fail. Some online sources claim that as much as 97% of small businesses in Australia are unsuccessful.

Others hold the view that this is not the case at all, asserting instead that the success rate far outweighs the failure rate. If you are considering going into business for yourself, how can you ensure that the information you obtain is accurate?

In order to provide you with a clearer picture of the overall picture, we have gleaned the above data regarding the success rates of small enterprises in Australia from official government sources.

According to the research that was released in July 2019 by the Australian Small Business and Family Enterprise Ombudsman, the survival rate of an organisation increases proportionally with its size. For instance, small enterprises that employ zero to nineteen people have a success rate of 59.7 percent. However, companies that employ 20-199 people have a 75.8% success rate, which is significantly higher than the average.

This is consistent with a previous analysis that was compiled by the Australian Bureau of Statistics. According to that report, the survival percentage for small enterprises that employed zero workers between the years 2010 and 2014 was 56%. Nevertheless, this percentage rose to 68% for companies that employed between one and four workers.

Even in this day and age, the chances of success for smaller companies in Australia are still significantly lower than those of larger organisations.

However, these numbers are not so frightening that they should completely dissuade enterprising spirits who are hoping to pursue their goals. 

After all, being the boss of your own humble establishment may be an extremely gratifying experience. Keeping all of this in mind, let’s take a look at some of the reasons why small businesses fail and some ways that you can avoid making the same mistakes that other owners make.

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