Do Small Businesses Have High Failure Rates: Evidence from Australian Retailers

Abstract

This study seeks to clarify a number of apparent misconceptions concerning small business failure, in the hope that prospective entrepreneurs may be more reliably informed about the risks involved. The results may also help to ensure that future policy decisions made by governments, financial institutions, and other groups with an interest in small business are more soundly based. Failure rates resulting from the use of a number of different definitions found in the literature are estimated using data collected on 5,196 small business start-ups in 51 managed shopping centers across the five mainland states of Australia and covering the period 1961-1990. Reported failure rates vary from a high of more than 9 per cent per annum to a low of less than 1 per cent per annum depending on the choice of failure definition.

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