Which Australian state is most entrepreneurial? And is that a good thing?

Entrepreneurialism – it seems – is not about the wild frontier nor about libertarian values. The most entrepreneurial state in Australia is its most densely populated and most left-leaning (arguably).

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The data comes from the ABS series Business Entries and Exits. They show not only that Victoria has (slightly) more businesses per capita than anywhere else, but also that it is extending that lead.

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Is that surprising? Victoria is not only a wealthy state, which allows residents the opportunity to strike out on their own, it is also a beacon for immigrants, who often open small businesses. Also it has experienced a lot of structural change as manufacturing businesses close, forcing people to create new opportunities for themselves. 

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The beginning of a Bin Hire empire for Ben?

(Another point of note is how the ACT is a laggard for total number of businesses, but mid-pack when it comes to opening new businesses. I’m imagining a lot of senior public servants applying for an ABN as they prepare to lose their jobs and become consultants under the Abbott government.)

But historically, the ACT is the worst place to start a business. More than half of them disappear within a few years. In fact, Tasmania and SA, with their seeming reluctance to start businesses, are rewarded by having the highest four-year survival rates.

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The failure rate of small business is not a mainstream topic of conversation. But I can’t help imagining all the life savings that get flushed away, and all the relationships that fail when small businesses disappear.

 

It’s the hidden underbelly of capitalism, in a way. We focus on the big businesses that put people out of work, but in those cases, workers have none of their own capital involved and governments guarantee their benefits. When your local milk bar goes down or a removals company runs out of money, nobody notices but the proprietors. They’re not just looking for a new job. They are dealing with the death of their dream. But nobody comes to interview them about their plight.

Governments go ga-ga over small business, calling it the backbone of the economy, etc, etc. But they are risky. The data show you are much safer working for or investing in a business with more than 20 employees.

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But if you believe in yourself, the carrot is there. Last year, 27 businesses went from having no 1-4 employees to having over 200 in the space of one short year. It’s a bit like buying a Tattslotto ticket – it is unlikely, but just possible that you will have a very exciting result.

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

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