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Entrepreneurship2.3 Business Growth

2.3.1 High-growth firms measured by turnover

Evidence suggests that business growth is associated with certain types of innovation.[53] However, exceptional growth is not some innate business characteristic, but rather a phase that some businesses go through during their life cycle. Between 2008 and 2012, Australia's proportion of high-growth firms (HGFs) as measured by turnover was consistently above the median for all countries for which data are available. This was despite the decline of Australia's HGF proportion since 2008. However, by 2013 the all-country median had lifted dramatically to reach 10.5 per cent, while Australia's HGF proportion continued its decline to 9.3 per cent in 2012–13. The most recent available estimate of Australia's proportion of HGFs is 9.6 per cent for 2016–17, whilst the all-country median has now reached 19.6 per cent for 2017. Further investigation may be warranted into the underlying drivers of these trends.[54][55]

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2.3.2 High-growth firms measured by employment

Australian HGFs make a disproportionate economic contribution compared to other businesses. Between 2004–05 and 2011–12, businesses with high-growth in employment represented only 9 per cent of all businesses with five or more employees but they contributed around 46 per cent of net positive employment growth. This means that the effect of job gains outweighed job losses. Further, 23.5 per cent of net positive employment growth came from large HGFs (as measured by employment), which represented only 0.4 per cent of businesses. HGFs are difficult to identify, largely because of their lack of growth persistence and difficulties in predicting which businesses will grow.[56] Since 2007–08, Australia's proportion of HGFs as measured by employment has steadily fallen from 7.2 per cent to 5.2 per cent in 2016–17.[57]

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2.3.3 Businesses changing turnover range

Business-growth patterns can be illustrated by the number of businesses moving from smaller turnover ranges to larger ones over a given period. Of the 682,124 businesses that started with an annual turnover in the range $50k to less than $200k in the year to June 2018, some 93,029 businesses (13.6 per cent) increased their revenue to a higher range in the following year. Of these, 293 businesses moved into the $5m to less than $10m range and a further 264 businesses increased their annual turnover to $10m or more.[58] All of these 93,029 businesses could potentially meet the OECD definition of a high-growth enterprise — if they remain in their higher turnover range for another two years.[59]

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2.3.4 Businesses changing employment range

Business-growth patterns can be illustrated by the number of businesses moving from smaller employment ranges to larger ones over a given period. Of the 554,006 businesses identified as micro businesses (1–4 employees) at June 2018, some 37,250 grew to become small businesses (5–19 employees) by June 2019. A further 1,470 grew to become medium-sized businesses (20–199 employees) and 48 businesses recorded truly exceptional growth by becoming large businesses (200+ employees).[60] A total of 38,768 micro-businesses — 7 per cent of all employing micro businesses — increased their employment range during the year. All of these businesses could potentially meet the OECD definition of a high-growth enterprise — if they remain in their new size range for another two years.[61]

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