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1 in 5 Aussie Businesses Don’t Make a Profit – Make Sure You’re Not One of Them

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1 in 5 Aussie Businesses Don’t Make a Profit – Make Sure You’re Not One of Them

The Australian Bureau of Statistics is an incredibly useful source of all manner of data, such as ABS Dataset number 8155.0 – Australian Industry, 2015-16. This ABS data reveals the disturbing statistic that more than 1 in 5 Australian businesses don’t make a profit!

Dataset.

This ABS Dataset covers all Australian businesses divided into 18 different industry sectors such as Agriculture, Manufacturing, Retail Trade, Professional Services, etc. A wide range of data is provided including employment numbers, salary costs, income, expenses, capital expenditure, profit and more. It’s a great source of information on business performance, value and trends across different industry sectors that could prove very useful for your own business research.

Company profit figures.

The biggest piece of information that stood out to me from the whole dataset was that 21.0% of all Australian businesses either broke even or made a loss in 2015-16. Given that there are approximately 2.2 million businesses operating in Australia, this means that more than 450,000 Australian businesses didn’t make a profit in FY16!

On a more positive note, the figures have been improving – the data shows that over the past four years the percentage of businesses that have not made a profit is:

  • 6% in FY13
  • 7% in FY14
  • 3% in FY15
  • 0% in FY16.

Aim for sustainable profit.

These figures highlight the importance for businesses to really focus on achieving and maintaining sustainable profits – this should be a primary goal for any business. Consistent losses will surely lead to business failure, contraction or stagnation.

It is well known that good, consistent cash flow is the lifeblood of any business. That crucial cash flow can only consistently be maintained with sustainable profits. I recognise that money is not necessarily the primary motivator for all business owners – there are a number of other factors such as freedom, flexibility, control, doing what you love and many more reasons for people to get into business than making big profits. However, the fact remains that without profits, pretty soon you won’t have a business.

Benchmark your business.

Benchmarking is a very powerful tool to help work out where you are in your business and how it stacks up against other companies within your industry. It’s also useful to compare your performance to other businesses outside your industry sector to see if there is value in pursuing other opportunities beyond what you are currently doing. Benchmarking figures such as revenue, costs, profit, staff, capital and more can be very useful to see where you’re at right now and if there are areas where you could improve.

The Summary of the ABS Dataset can be found at http://www.abs.gov.au/ausstats/abs@.nsf/mf/8155.0. Use the ‘Download’ tab to access more detailed data if you really want to get into some comprehensive analysis.

Key industry figures.

When reviewing statistical figures, I find it very useful to look at the outliers in the data – those that are noticeably beyond the normal, or averages of the dataset. These figures quickly show what areas are performing above or below average and can provide a useful launchpad for further investigation. Looking at trends is also an important method you can utilise because it shows where key measures are increasing or decreasing.

Some interesting highlights from the ABS Dataset include:

  • In FY16 the average profit margin across all businesses was 10.9%.
  • The bottom three industry sectors with the lowest profit margins in FY16 were Wholesale Trade at 3.4%, Mining at 3.7% and Retail Trade at 4.3%.
  • The top three industry sectors with the highest profit margins in FY16 were Rental, Hiring and Real Estate Services at 50.1%, Health Care and Social Assistance (Private) at 27.2% and Professional, Scientific and Technical Services at 22.2%.
  • The Mining industry showed the biggest drop in profitability over the past four years, going from a 26.5% profit margin in FY13 down to just 3.7% in FY16.
  • The worst-performing industry with the highest percentage of businesses that did not make a profit in FY16 was the Mining sector, at 60.5%.
  • The best-performing industry sector with the lowest percentage of businesses that did not make a profit in FY16 was the Transport, Postal and Warehousing sector, at 12.1%.

Remember the profit.

This important industry data is a stark reminder of the importance of focusing on profit. Don’t be one of the nearly half a million Aussie businesses that are not making a profit, or you will soon find yourself without a business!

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