Published: December 2025
The latest Australian Bureau of Statistics release on business counts has revealed something remarkable about the Australian economy: we're running faster just to stand still. In the 2024-25 financial year, 437,150 businesses started trading while 370,500 closed their doors. That's a combined total of 807,600 businesses either entering or exiting the market in just twelve months.
To put that in perspective, imagine every business in Australia being given a number. If you lined them all up, roughly three out of every ten would either be brand new or about to disappear within a year. This represents a churn rate of 30.3 per cent, and it's reshaping the Australian business landscape in ways that most people haven't fully grasped yet.
As of 30 June 2025, Australia had 2,729,648 actively trading businesses. That's a net increase of 66,650 businesses, or 2.5 per cent growth on the previous year. On the surface, this looks healthy. Dig deeper, though, and the story becomes far more complex.
Of those 2.7 million businesses, only 994,178 employed anyone at all. That's just 36.4 per cent. The remaining 1,735,470 businesses are sole operators with no staff. This isn't just a quirk of the data. It represents a fundamental shift in how Australians are choosing to structure their working lives, and the trend is accelerating.
The growth patterns tell an interesting story. Non-employing businesses grew by 4.9 per cent in 2024-25, significantly outpacing the overall market. Meanwhile, businesses with 1-4 employees actually declined by 0.7 per cent. Businesses with 5-19 employees showed zero growth, and those with 20-199 employees fell by 0.5 per cent. Only at the very top of the spectrum do we see expansion: companies with 200-plus employees grew at 2.6 per cent.
We're seeing a barbell economy emerge: lots of solo operators at one end and large companies at the other, with the middle getting squeezed.
Here's where the data becomes truly revealing. When we track businesses that started in the 2021-22 financial year and follow them forward, the survival patterns split dramatically based on whether they employ staff.
After one year, 72.3 per cent of non-employing businesses were still operating. That sounds reasonable until you compare it to employing businesses, where 82.4 per cent survived their first year. That's a ten percentage point gap just in year one.
By year three, the divergence becomes stark:
Put simply, if you start a business and hire employees, you're roughly 40 per cent more likely to still be operating three years later. This survival advantage compounds over time.
The question is why. The data suggests employing businesses survive better because they're forced to develop proper business infrastructure earlier. When you have staff depending on you, casual approaches to business operations don't work. You need systems, processes, and discipline. Solo operators can muddle through for longer, but many eventually hit a wall they can't overcome.
Perhaps the most significant finding in the latest data is the decline of small employing businesses. The 1-4 employee segment dropped by 0.7 per cent in 2024-25, representing a loss of 4,688 businesses in this category. Even more telling, 32,428 businesses that were employing people at the start of the year had become non-employing by year's end.
This represents businesses actively choosing to let staff go and return to solo operations, or businesses where the only employee left. Either way, it's a reversal of what we'd traditionally expect in a growing economy.
The cost equation has fundamentally changed. Let's say you want to hire someone at $65,000 per year. The base salary is just the starting point:
For a business turning over $500,000, that's 16-19 per cent of revenue going to one person. If that person isn't directly generating revenue, the equation becomes difficult to justify.
Add to this the complexity that's been layered onto employers in recent years. Single Touch Payroll Phase 2 requires detailed reporting on every pay run. Superannuation increased from 10 per cent to 11.5 per cent between 2021 and 2025. Modern Award complexity means many small employers aren't even sure if they're paying correctly. Fair Work compliance requirements continue to expand. The regulatory burden has grown while the financial capacity to manage it hasn't kept pace.
Many business owners are deciding the 1-4 employee range isn't worth the complexity. They'd rather stay solo and use contractors or technology, or jump straight to 5-plus employees with proper infrastructure in place.
The shift in business composition isn't uniform across all sectors. Some industries are booming while others contract.
- Health Care and Social Assistance led all industries with 6.6 per cent growth in 2024-25, reaching 213,177 businesses. This isn't surprising given Australia's ageing population and the expansion of the NDIS, which has created thousands of new provider businesses. However, these same providers face some of the most complex compliance requirements in the economy, from trust account management to worker screening to constantly changing price guides.
- Transport, Postal and Warehousing came in second at 5.1 per cent growth, hitting 249,289 businesses. The explosion in e-commerce and last-mile delivery has created opportunities, but also complexity. Many of these businesses juggle a mix of employees, contractors, and owner-drivers, each with different payroll and tax treatments.
- Financial and Insurance Services grew 3.7 per cent to 133,743 businesses. These tend to be more sophisticated operators who understand the value of professional services and are willing to pay for them. They also face significant compliance requirements through ASIC, including Financial Services Guides, Product Disclosure Statements, and Professional Indemnity insurance.
The fastest-growing sectors share common characteristics: they're all service-based, people-intensive, and face significant regulatory complexity. Meanwhile, traditional goods-producing sectors tell a different story.
- Agriculture, Forestry and Fishing declined 0.8 per cent to 170,890 businesses, reflecting succession challenges as older farmers retire without next-generation replacements, climate pressures, commodity price volatility, and the significant capital requirements creating barriers to entry. Retail Trade dropped 0.4 per cent to 156,169 businesses, continuing a longer-term decline as online competition erodes traditional retail, high rents squeeze margins, and consumer spending comes under pressure.
- Professional, Scientific and Technical Services, while growing at a more modest 2.5 per cent, remains the largest industry segment by business count at 367,085 businesses. This category includes consultants, lawyers, accountants, engineers, architects, and designers. It's a mature sector with steady growth rather than the explosive expansion seen in healthcare or transport.
- Construction, with 454,850 businesses, grew 2.2 per cent. This sector remains one of the largest employers of small businesses and trades people, though growth has moderated from post-pandemic highs when government stimulus drove building activity.
The business formation story of the past four years is one of extremes followed by adjustment:
2021-22: The Boom
Net increase of 137,470 businesses with 442,555 entries and just 305,085 exits. This was the post-lockdown rebound, fuelled by stimulus money, pent-up demand, and a wave of people who'd spent two years thinking about starting their own venture.
2022-23: The Crash
Net growth slumped to just 50,149, a 64 per cent decline from the previous year. Exit rates surged to 356,216 as pandemic-era businesses discovered they couldn't survive in a normalised environment. Interest rates began rising. Stimulus ended. Reality returned.
2023-24 to 2024-25: The Stabilisation
The market has since stabilised around 66,000 to 73,000 net new businesses per year. Entry numbers have recovered to around 437,000 annually, similar to the 2021-22 peak. However, exits have climbed steadily to 370,500.
This is a tougher environment. Businesses that would have survived in 2021 are now failing. Competition is fiercer. Customers are more price-sensitive. Regulatory compliance is stricter. Only businesses with strong fundamentals are making it through.
Solo operators are now the dominant business model in Australia, representing 63.6 per cent of all businesses and growing at 4.9 per cent annually. The data shows you're part of the fastest-growing segment, but also the most vulnerable. With a 43.3 per cent three-year survival rate, more than half of solo businesses fail relatively quickly.
Success in this space requires clear specialisation and expertise in a particular niche. You need low overhead structures that don't require expensive office space or equipment. Strong client relationships become essential when you don't have the buffer of multiple team members generating revenue. Smart use of technology and contractors allows you to scale without the burden of employment. And perhaps most importantly, you need realistic expectations about revenue and growth timelines.
For small employers with 1-4 staff, you're in the most challenging segment. The 0.7 per cent decline and 32,428 businesses reverting to non-employing status show this is tough territory. The businesses surviving here typically have strong enough margins to support the overhead, meaning they're generating at least $200,000 per employee in revenue. They invested in proper systems from day one rather than trying to retrofit them later. Each team member has clear roles with expectations tied to either revenue generation or essential support functions. And these businesses stay rigorously on top of increasingly complex compliance requirements.
The 5-19 employee range showed zero growth in 2024-25, suggesting it's a transitional phase rather than a stable end state. Businesses either scale through this range relatively quickly or get stuck and struggle. Success appears to require professional management systems that don't depend on the owner's personal involvement in every decision. You need clear organisational structure with documented processes and procedures. Investment in training and development becomes necessary as you can't personally teach everyone everything. And revenue must be sufficient to support overhead without the owner being personally involved in every client relationship.
The larger you get, the more stable you become. The 200-plus employee segment growing at 2.6 per cent suggests economies of scale and established market positions provide significant protection. These businesses typically have multiple revenue streams so no single client or product line is critical. Management layers below the owner mean the business can function without the founder's daily involvement. Established brand and market presence provide pricing power and customer loyalty. Better access to capital and resources allows them to weather downturns. And they have resilience against individual client losses or market changes that would devastate smaller operators.
Business growth isn't distributed evenly across Australia. The major states dominate in absolute terms, but the growth rates tell an interesting story about where opportunity is strongest.
New South Wales added 20,040 businesses in 2024-25, the largest absolute increase of any state, taking the total to 891,123 businesses. However, this represents just 2.3 per cent growth, suggesting a maturing market with high competition and costs. Victoria added 16,486 to reach 735,805, growing at an even more modest rate. Queensland saw 14,769 new businesses for a total of 511,835, with a healthier 3.1 per cent growth rate.
The standout performer was Western Australia at 4.3 per cent growth, adding 10,877 businesses to reach 260,730 total. This significantly outpaced the national average of 2.5 per cent. Western Australia's stronger performance likely reflects its resources sector strength, which has remained robust even as other parts of the economy have softened. Population growth from interstate migration as people seek more affordable housing and lifestyle also plays a role. The state's smaller base means there's more room for growth compared to the saturated Sydney and Melbourne markets.
South Australia, Tasmania, Northern Territory, and the Australian Capital Territory all recorded positive growth but remain smaller markets. Every state and territory showed net business increases, which is noteworthy. Even in a tougher environment, business formation continues nationwide.
The way Australians are choosing to structure their businesses is also shifting. Companies grew 4.7 per cent in 2024-25, adding 54,666 to reach 1,207,814 total. This is growing faster than any other legal structure, reflecting both tax planning advantages and the desire for clearer ownership and succession arrangements. More business owners are incorporating from the start rather than beginning as sole traders and converting later.
Sole proprietors grew 2.4 per cent, adding 19,186 to reach 822,873 total. This remains the simplest structure to establish with minimal setup costs and compliance requirements, making it popular for service providers, contractors, and those testing business ideas. However, the lack of separation between business and personal liability becomes a concern as businesses grow.
Partnerships declined 4.3 per cent, losing 9,226 businesses to finish at 204,703. This structure was once the default for professional services firms, medical practices, and law firms, but the shift to corporate structures reflects concerns about unlimited liability, complexity in exit and succession planning, and changing tax treatments. Many long-established partnerships are converting to companies as founding partners retire and new structures are needed.
The decline in partnerships is particularly interesting because it represents a structural change in how professionals organise themselves. The traditional two-person partnership that was once common in law, accounting, and medical practice is being replaced by either sole practitioners using contractor arrangements or larger corporate structures with clearer governance.
How businesses are classified by institutional sector also tells a story about the evolution of Australian business. The household sector, which includes most sole proprietors and partnerships, accounts for 49.3 per cent of all businesses at 1,346,835 total. This grew just 1.4 per cent in 2024-25, the slowest of any institutional sector.
Non-financial corporations, which includes companies operating in regular commercial sectors, represent 46.6 per cent at 1,272,505 businesses. This sector grew 3.4 per cent, significantly faster than household businesses. The shift suggests a gradual professionalisation of Australian business, with more operators choosing formal corporate structures over traditional small business models.
Financial corporations, at just 4.0 per cent of businesses with 108,771 total, was actually the fastest-growing institutional sector at 5.6 per cent. This includes banks, insurers, investment firms, financial advisers, and brokers. The strong growth reflects both the financialisation of the economy and the ongoing expansion of the financial advice and mortgage broking sectors.
The data from 2021 to 2025 tells us we're in a period of significant structural change in how Australian businesses operate. Several trends seem locked in for the foreseeable future.
The rise of solo operations appears permanent. With 63.6 per cent of businesses having no employees and this segment growing at 4.9 per cent, the solo operator is the new normal for Australian business. Technology, platforms, and the gig economy make this more viable than ever. Online tools allow one person to do work that previously required a team. Platforms connect specialists with clients without the need for traditional business infrastructure. The question is whether this creates a sustainable business ecosystem or a precarious one where most operators struggle financially.
The challenging middle ground of 1-19 employees is increasingly difficult territory. Costs are high, complexity is significant, and margins are tight. The data suggests businesses need to either stay lean or scale quickly through this range. Lingering here appears to be a recipe for struggle. This has implications for employment, as these small and medium businesses have traditionally been significant job creators in the Australian economy.
The resilience of scale is clear in the data. Larger businesses with 20-plus employees, and especially those with 200-plus, show greater resilience and growth. Once you reach critical mass, survival rates improve and growth becomes easier. The challenge is getting there without being crushed by the weight of complexity and cost in the transition phase.
Service economy dominance is accelerating. All the fastest-growing sectors are service-based: healthcare, transport, financial services, professional services. Traditional goods-producing sectors like agriculture, manufacturing, and retail are stable or declining. This has implications for productivity, as service sectors typically have lower productivity growth than goods production. It affects wages, as many service jobs are lower-paid than manufacturing. And it raises questions about economic complexity and resilience when so much activity is concentrated in services.
Geographic concentration continues, with Sydney and Melbourne dominating in absolute terms but growing more slowly. Growth is strongest in Perth and Brisbane, which may reflect affordability driving both business formation and population migration to second-tier cities. This could reshape the economic geography of Australia if sustained over time.
The churn continues at historically high levels. With 30.3 per cent of businesses entering or exiting annually, high turnover is the new normal. This creates opportunities for new entrants but also suggests many businesses are marginal. The ecosystem is dynamic but also fragile, with success far from guaranteed even for well-prepared operators.
It's worth noting what's missing from these statistics. The ABS counts actively trading businesses, but it doesn't measure profitability, revenue, owner income, or satisfaction. A business that survives isn't necessarily successful. Some long-running businesses barely break even. Some exits are actually successful outcomes when owners sell or retire having achieved their goals.
The data gives us the skeleton of Australian business, but not the full story of how these businesses actually perform or what they contribute. Similarly, the survival rates don't distinguish between businesses that close due to failure versus those that close because the owner achieved their goal, got a better opportunity, or retired. A 43 per cent survival rate for solo businesses might include many people who tried something, learned it wasn't for them, and moved on without financial disaster.
The numbers are revealing, but they're not the whole picture. They tell us about quantity but not quality. They show us entries and exits but not the human stories behind each decision. They reveal patterns but not always the causes.
Australia's business landscape is reshaping before our eyes. The old model of steady progression from solo operator to small employer to growing business is breaking down. Instead, we're seeing more people choose to stay solo indefinitely, enabled by technology and platforms. Those who do hire face a much higher bar to make it work economically.
The 807,600 businesses that entered or exited in 2024-25 represent enormous economic activity and personal ambition. Behind each number is someone who took a risk, someone who closed a chapter, someone who's still fighting to make it work. Some will succeed spectacularly. Many will struggle. Most will land somewhere in between, building modest but sustainable operations that provide income and purpose.
The data tells us this much: success in Australian business increasingly requires choosing your model clearly and committing to it fully. You can build a sustainable solo operation leveraging technology and specialist contractors. You can build a scaled business with multiple employees and professional systems. But the in-between is getting harder, as the decline in small employers shows.
The businesses that will thrive are those that understand which path they're on and build the right capabilities around it. Solo operators need to specialise deeply, keep overhead low, and use technology to compete with larger players. Small employers need margins high enough to support proper systems and staff. Growing businesses need to transition quickly through the difficult 5-19 employee phase. Large businesses need to maintain the systems and culture that made them successful in the first place.
The churn will continue. The market will keep evolving. And the businesses that survive will be those that adapt to these new realities rather than clinging to how things used to work. Understanding the data is the first step. Acting on what it reveals is what separates survivors from statistics.
What is the business survival rate in Australia?
Based on the latest ABS data, 75 per cent of new businesses survive their first year, falling to 48 per cent by year three. However, this varies significantly: employing businesses have a 61 per cent three-year survival rate, while non-employing businesses have only a 43.3 per cent three-year survival rate. The survival advantage of employing businesses increases over time.
How many businesses fail in Australia each year?
In 2024-25, 370,500 businesses exited the market. This represents a 13.9 per cent exit rate. Combined with 437,150 entries, this creates a total churn of 807,600 businesses, or 30.3 per cent of all operating businesses. Exit rates have climbed from 305,085 in 2021-22 to current levels, reflecting a more challenging operating environment.
Why are small employing businesses declining in Australia?
Businesses with 1-4 employees declined by 0.7 per cent in 2024-25, with 32,428 businesses moving from employing to non-employing status. This reflects the high cost of employing staff including wages, 11.5 per cent superannuation, payroll tax, WorkCover, recruitment costs, and compliance burden with Fair Work, Single Touch Payroll, and Modern Awards. The total cost of a $65,000 employee can exceed $90,000 in the first year.
Which industries are growing fastest in Australia?
Health Care and Social Assistance leads at 6.6 per cent growth (213,177 businesses), followed by Transport, Postal and Warehousing at 5.1 per cent (249,289 businesses), and Financial and Insurance Services at 3.7 per cent (133,743 businesses). All the fastest-growing industries are service-based rather than goods-producing.
What percentage of Australian businesses have no employees?
As of June 2025, 63.6 per cent of all Australian businesses (1,735,470 out of 2,729,648) have no employees. This segment is growing at 4.9 per cent annually, significantly faster than employing businesses. Non-employing businesses are now the dominant business model in Australia.
How has business formation changed since COVID?
Post-pandemic, net business formation peaked at 137,470 in 2021-22, crashed to 50,149 in 2022-23, then stabilised around 66,000-73,000 per year in 2023-25. Entry rates remain high at around 437,000 annually, but exits have climbed from 305,000 to 370,500, reflecting tougher operating conditions with higher interest rates and reduced consumer spending.
Why do employing businesses survive longer than solo operators?
Employing businesses have a 61 per cent three-year survival rate compared to 43.3 per cent for non-employing businesses. The data suggests this is because employing businesses are forced to implement proper systems, processes, and business discipline earlier. When you have staff depending on you, casual approaches don't work. Solo operators can muddle through longer but often hit walls they can't overcome.
Which Australian states have the strongest business growth?
Western Australia has the highest growth rate at 4.3 per cent, adding 10,877 businesses in 2024-25. In absolute numbers, New South Wales leads with 20,040 new businesses, followed by Victoria with 16,486. Queensland showed strong performance with 3.1 per cent growth. All states and territories recorded positive growth.
What does the 30.3 per cent churn rate mean?
The churn rate of 30.3 per cent means that nearly one in three businesses either entered or exited the market in 2024-25. This represents 807,600 businesses out of approximately 2.66 million at the start of the year. High churn indicates a dynamic but also fragile business ecosystem with significant turnover.
Are partnerships declining in Australia?
Yes, partnerships declined 4.3 per cent in 2024-25, losing 9,226 businesses to finish at 204,703 total. This reflects concerns about unlimited liability, complexity in exit and succession planning, and the shift of professional services firms to corporate structures for tax and ownership advantages. Companies grew 4.7 per cent in the same period.
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