Business Failure Rate Jumped But Small Businesses And Startups Shouldn't Panic

Are small businesses and startups in trouble?Image: iStock

While there have been reports about the small business sector performing well this year, credit reporting company Dun & Bradsheet sees it differently. According to its latest survey, business failures rose by 11% year-on-year in the third quarter of 2016. The company also saw a decline in the number of startups. But small businesses and startups shouldn't be too concerned by the figures. Here's why.

The second quarter of 2016 saw 72,000 new businesses created nationwide. But there has been a noticeable slowdown in the third quarter. Around 62,073 new businesses opened up and the business failure rate was up 42% compared to the previous quarter, according to Dun & Bradsheet. The company also noticed that there aren't as many startups as there used to be.

But small business and startup pundits are not fazed by the figures from Dun & Bradsheet.

Council of Small Business of Australia CEO Peter Strong told The Sydney Morning Herald that there are a number of factors to consider when you look at business failure rates, which doesn't break down the number by different industries:

"It's the use of the word 'failure' that worries me – is it failed businesses or simply businesses which are closing down and finishing up?... The failures may be in the construction sector, which is cyclical, which I could understand, but I'm seeing nothing about the decline in retail figures to support this kind of downturn."

Sydney See Fund partner Garry Visontay had this to say about the health of the startup scene:

"I see train wrecks most days of the week but I don't think we're in a different world than we were six to nine months ago. If we're talking about the number of new tech start-ups, the sector is relatively buoyant and healthy."

It should be noted that startups often fail fast and fail often. Founders may wrap up one startup only to launch another one in rapid succession. You can read more about this in our previous article What Makes A Start-Up Successful And When To Pull The Plug.

What do you think about the Dun & Bradsheet findings about the small business and startup scene? Let us know in the comments.

[The Sydney Morning Herald]


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