Survival Rates of SMEs

This Document is Archived

SMEs in New Zealand: Structure and Dynamics - 2003

[ Last Updated 4 November 2005 ]

SMEs have a lower survival rate than larger firms

Survival rates are generally perceived to be lower for smaller enterprises. Figures 15 and 16 show that this is true for enterprises born in 1995. Of all small businesses started in 1995, 55.0 percent were still active in 1997, 46.2 percent in 1998. By 2002, only 27.4 percent of these businesses were still active

Figure 15: Survival Rates of 1995 Enterprise Births by FTE Category

Graphic of Figure 15: Survival Rates of 1995 Enterprise Births by FTE Category

	FTE Size Category
	0-5	6-9	10-19	20-49	50-99	100+
1997	54.97	70.15	71.74	78.79	75.00	90.00
1998	46.23	58.71	63.04	66.67	66.67	80.00
1999	39.66	49.75	54.35	60.61	66.67	80.00
2000	34.94	43.78	50.00	57.58	58.33	80.00
2001	30.84	38.81	45.65	51.52	50.00	80.00
2002	27.42	35.82	41.30	51.52	50.00	70.00

The total number of enterprise births in 1995 by enterprise size were: 0-5: 48,970; 6-9: 2,010; 10-19: 920; 20-49: 330; 50-99: 60; 100+: 50.

Survival rates for enterprises established in 1995 for each industry sector¹⁰ are illustrated in figure 16.

Figure 16: Survival Rates for 1995 Enterprise Births by ANZSIC

Note : Survival numbers can increase, due to use of random rounding to maintain confidentiality.

Graphic of Figure 16: Survival Rates for 1995 Enterprise Births by ANZSIC

ANZSIC Classification	Year
ANZSIC Classification	1997	1998	1999	2000	2001	2002
A	52.54	44.57	40.58	37.68	35.87	33.33
B	53.33	46.67	40.00	33.33	40.00	40.00
C	58.51	50.60	43.88	39.57	35.25	30.94
D	66.67	66.67	66.67	66.67	50.00	50.00
E	59.77	50.19	42.91	38.06	33.59	29.37
F	52.65	43.92	38.10	33.07	29.37	25.93
G	55.41	45.32	38.15	32.08	27.70	24.06
H	53.28	41.80	34.02	29.51	25.82	22.54
I	55.82	45.78	39.76	34.94	30.92	27.71
J	51.11	41.11	32.22	27.78	23.33	20.00
K	71.43	67.46	60.32	54.76	50.79	48.41
L	52.45	44.55	37.36	33.10	28.91	26.30
M	66.67	83.33	66.67	66.67	66.67	66.67
N	64.52	58.06	50.00	46.77	41.94	40.32
O	71.18	64.12	59.41	53.53	46.47	42.35
P	50.67	40.67	37.33	34.00	30.00	27.33
Q	58.60	48.92	40.86	35.48	30.65	26.88

1996 and 1997 enterprises show a similar survival pattern to 1995 enterprises

Figures 17 to 20 show survival rates by FTE category and ANZSIC classification for enterprises born in 1996 and 1997. As is the case for 1995 enterprises, SMEs are less likely to survive the first two to three years of operation than their larger counterparts.

Figure 17: Survival Rates of 1996 Enterprise Births by FTE Category

Graphic of Figure 17: Survival Rates of 1996 Enterprise Births by FTE Category

	FTE Size Category
	0-5	6-9	10-19	20-49	50-99	100+
1997	68.47	85.44	86.11	83.33	91.67	85.71
1998	57.10	72.78	72.22	75.00	75.00	85.71
1999	48.55	62.03	63.89	62.50	58.33	71.43
2000	42.44	55.06	56.94	54.17	58.33	71.43
2001	36.50	47.47	51.39	50.00	58.33	71.43
2002	32.50	42.41	45.83	45.83	58.33	57.14

The total number of enterprise births in 1996 by enterprise size were: 0-5: 39,420; 6-9: 1,580; 10-19: 720; 20-49: 240; 50-99: 60; 100+: 35.

Figure 18: Survival Rates for 1996 Enterprise Births by ANZSIC

Note : Survival numbers can increase, due to use of random rounding to maintain confidentiality.

Graphic of Figure 18: Survival Rates for 1996 Enterprise Births by ANZSIC

ANZSIC Classification	Year
ANZSIC Classification	1997	1998	1999	2000	2001	2002
A	64.41	54.95	49.55	45.05	41.89	38.29
B	60.00	50.00	40.00	40.00	36.00	30.00
C	70.75	58.49	48.74	43.08	38.05	34.28
D	80.00	100.00	60.00	60.00	60.00	60.00
E	74.52	61.93	53.15	46.56	40.12	35.14
F	64.54	52.72	44.09	38.02	33.23	29.39
G	71.18	57.06	47.45	40.39	33.73	28.24
H	70.71	55.56	44.44	36.87	31.31	27.78
I	71.36	59.71	50.49	42.72	36.89	32.52
J	73.33	58.89	47.78	38.89	31.11	26.67
K	79.41	76.47	65.69	61.76	54.90	50.98
L	64.75	54.98	46.67	41.10	34.98	31.60
M	100.00	100.00	100.00	100.00	66.67	66.67
N	72.92	64.58	58.33	52.08	50.00	45.83
O	79.58	69.01	64.08	57.04	50.00	46.48
P	65.35	55.91	49.61	46.46	40.94	38.58
Q	73.43	60.14	50.35	42.66	34.97	31.47

Figure 19: Survival Rates of 1997 Enterprise Births by FTE Category

Graphic of Figure 19: Survival Rates of 1997 Enterprise Births by FTE Category

	FTE Size Category
	0-5	6-9	10-19	20-49	50-99	100+
1997	100.00	100.00	100.00	100.00	100.00	100.00
1998	87.69	97.02	93.59	96.77	100.00	100.00
1999	69.19	79.17	78.21	80.65	90.00	100.00
2000	61.84	70.83	70.51	77.42	90.00	100.00
2001	52.95	61.90	61.54	70.97	80.00	87.50
2002	46.58	54.17	55.13	61.29	80.00	75.00

The total number of enterprise births in 1997 by enterprise size were: 0-5: 31,840; 6-9: 1,680; 10-19: 780; 20-49: 310; 50-99: 50; 100+: 40.

Figure 20: Survival Rates for 1997 Enterprise Births by ANZSIC

Note : Survival numbers can increase, due to use of random rounding to maintain confidentiality.

Graphic of Figure 20: Survival Rates for 1997 Enterprise Births by ANZSIC

ANZSIC Classification	Year
ANZSIC Classification	1997	1998	1999	2000	2001	2002
A	100.00	90.56	74.48	77.97	73.78	69.23
B	100.00	87.50	62.50	62.50	62.50	45.00
C	100.00	88.62	71.54	65.04	56.50	49.59
D	100.00	100.00	100.00	90.00	75.00	60.00
E	100.00	93.39	73.75	65.13	55.91	48.50
F	100.00	80.16	64.68	55.56	47.62	41.27
G	100.00	82.25	63.74	53.05	43.89	37.98
H	100.00	83.24	64.32	50.81	42.16	35.14
I	100.00	91.84	73.47	63.95	53.06	46.94
J	100.00	100.00	74.63	59.70	47.76	37.31
K	100.00	100.00	92.11	90.79	81.58	75.00
L	100.00	86.17	65.97	60.22	50.67	44.68
M	100.00	75.00	75.00	50.00	50.00	50.00
N	100.00	100.00	83.78	75.68	70.27	62.16
O	100.00	100.00	91.07	83.04	73.21	65.18
P	100.00	85.39	69.66	64.04	55.06	48.31
Q	100.00	91.94	72.58	61.29	53.23	43.55

The 1995 and 1996 industries with the highest survival rates into 2002 were government administration and defence and electricity, gas and water supply. These industries have a proportion of SMEs significantly below the average. Survival rates into 2002 for 1997 businesses in these industries were much lower however, the highest rate of survival being instead for businesses in the finance and insurance industry.

In general, survival rates likely overstate the number of firm deaths

The lowest survival rates were in the sectors of accommodation, cafes and restaurants, and communication services. Both of these sectors have an average sized proportion of SMEs.

However, evidence suggests that these survival statistics present a situation significantly harsher than reality. The statistics are calculated on the basis that if a firm ceases to exist under exactly the same legal status or structure then it is assumed to have collapsed, presumably due to financial difficulties. These "deaths" can signify other events, such as:

Geographic transfers (location is changed but activity, means of production and market are not)
Changes of ownership (there is a new owner but no change in activity or location)
Temporary closures (such as for seasonal activities)
Closure due to health or personal reasons.

¹⁰See footnote 9 for industry classifications.

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Printed: 26/11/2009