Understanding the Reasons Behind Small Business Failures in Australia

This essay examines the primary reasons for small business failures in Australia, emphasizing the critical role of small and medium-sized enterprises in maintaining economic stability. It highlights that entrepreneurial activities significantly contribute to job creation, productivity, and overall living standards. The essay identifies management mistakes, such as expanding at the wrong time or lacking market awareness, as major factors in business failures, often accounting for a significant percentage of such cases. Additionally, it discusses how inadequate financial planning and lack of appropriate funding channels contribute to these failures. The essay also points out that a comprehensive understanding of both internal factors, like the owner's skills, and external variables, such as financial conditions and customer behavior, is essential for addressing and preventing business decline. It references several studies that underscore the importance of these factors in determining the success or failure of small businesses.

Reasons behind small business failures in Australia:
The main aim of this essay is discussing the reasons behind small business failures in
Australia. The small and medium businesses of the Australia provides the evidence that the
knowledge about the success or the failure of the small businesses is essential for maintaining
the stability and the conditions of the economy of Australia. The aspect of the
entrepreneurship is associated with the creation of significant jobs, increase in the
productivity and enhancement of the standards of living and in general, the growth of
Australia.
Some of the researchers claims that the failure of business happens when the firm files
for any kind of protection from bankruptcy but others might be contending towards the
several forms of the death of the organisation that includes the acquisition or merger (Byrne
& Shepherd, 2015). From the theoretical point of view, the process of entrepreneurship can
be defined as a set of the activities using which the innovations could modify or update the
prevailing combinations of the factors of the production from any business.
The determining of the reasons of failure of the businesses could be helpful in the
identification of eventual phase of decline of any business. The extensive studies of the
performance of any small firm has been done from various approaches for the better
understanding of the reasons for the failure of any business and the success of any business.
According to several researchers, 87% failures of business are because of the mistakes of the
management (Jenkins, Wiklund & Brundin, 2014). Several leading mistakes of the
management that have resulted in the failure of business could be the expanding the business
in the wrong period or for wrong reasons, misunderstanding of the requirements of time by
the entrepreneur , lack of the awareness of market or any other reason could be the major
reason in the failure of business in the country. Several business fails due to the lack of the

proper and appropriate channels of financing. The major reason behind the failure of the
business due to the lack of funding is not the fact that capital is not sufficient for the
prospering of the business, but the effective planning for the finances of the business, that
leads to the failure of the business.
For addressing the issues that leads to the failure of the business or the success of any
business, any firm must be viewed from a wide perspective. Several causes could be directly
connected to the skills of the owner or the manager while several other might be connected to
the variable of the environment like the financials, behaviour of the customers or the
competition. The firms and the policy makers could collectively effect the environment but
these aspect consists of restricted ability of influencing the firms individually.

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