A recent study suggests Australia has the second highest rate of start‐up businesses in developed countries behind the United States. According to research compiled by the Australian Centre for Entrepreneurship (ACE) in partnership with the Global Entrepreneurship Monitor (GEM), one in ten of all Australians are involved in an early stage enterprise.
Last year, GEM interviewed more than 140,000 adults in more than 50 countries. By surveying the adult population, GEM identifies entrepreneurs at the earliest stages of business creation. ACE participated as the Australian GEM partner, surveying 2,000 Australian adults.
The research found 10.5% of the Australian adult population was actively engaged in starting and running a new business in 2011. This suggests we have 1.48 million early stage entrepreneurs with 40% of them being women. This means 8.4% of the Australian female adult population is involved in starting or running a business. These are staggering statistics and the research also suggests that 80% are starting because their founders identified opportunities while only a small number set up business because of job loss or out of other necessity. As such, Australia is outperforming the US at the moment where necessity driven entrepreneurship has soared because of fewer employment opportunities.
In terms of job creation, a third of Australia’s early stage entrepreneurs expect to create at least five new jobs in the next five years, while 11% expect to create 20 or more new jobs over the same time-frame. These jobs will primarily be consumer oriented (such as retail) or in business services as between them these industries account for 65% of new entrepreneurial activity.
According to the research, Australians are more confident about their ability to start and run a business than budding entrepreneurs in most other developed countries. Around 50% of Australian adults believe they can identify opportunities for business start‐ups while 12% of Australians not currently involved in entrepreneurial activity intend to start a new business within the next three years. While this paints a rosy picture, 31% of established and new businesses closed during 2011. This is fairly average for developed economies and shouldn’t necessarily be interpreted as failure because many businesses close due to successful business exits or their owners found better or alternate opportunities. Other studies conducted by ACE have identified that Australia has very few closures that could be considered ‘disastrous’.
Australia is also ranked the second easiest place in the world to start a business behind New Zealand according to a report by the World Bank. The study found it was possible to set up operation in Australia in two days and after just two procedures. It might be hard to believe but Australia ranked fourth with regard to ease of obtaining credit, behind Malaysia, South Africa and the United Kingdom. While Australia may rank highly when it comes to the ease of starting up, it was ranked 10th with regard to the ease of doing business. The report suggests the Australian governments have done a good job in making the country a relatively easy place to set up a business but the red tape associated with running a business is onerous.
While starting a business sounds simple there are a large number of issues to address including structures, asset protection, insurances, tax and GST registrations, claiming car expenses, software selection not to mention finance, branding, marketing and issues around employing staff. If you are thinking of starting a business call us today!
