Recently released data by the Australian Bureau of Statistics (ABS) on the number of businesses operating in the printing industry shed some important light on the dynamics of business entries and exits, business survival rates and the employment and turnover bands printing businesses fall under. Given the significant structural changes that have taken place in the industry in recent years with the industry being exposed to major technological and competitive pressures, remarkably the overall number of businesses has not declined as dramatically compared to other key industry measures such as print volumes and overall industry turnover levels.
Number of businesses
According to the data there were a total of 5,615 businesses operating in the printing industry at the start of the 2014-15 financial year with the number falling to 5,418 by the end of the financial year. The net decline of 197 businesses represents an overall decline of 3.5 per cent in the number of printing businesses. The number of printing support businesses increased from 556 to 589 over the same period of time representing an overall increase of 5.9 per cent.
A large proportion (41.5 per cent) of printing businesses in operation comprise of non-employing businesses. The balance that employ accounting for some 3,169 businesses comprise of businesses employing between 1-19 employees which accounted for 91.5 per cent of total employing businesses. Mid-size employing businesses accounted for 8.0 per cent of total employing businesses while large businesses accounted for less than 0.5 per cent.
Printing support services numbered 589 at the end of the 2014-15 financial year comprised of 298 non-employing businesses (50.6 per cent). Of the 291 employing businesses the vast majority 278 or 95.5 per cent comprised of businesses employing between 1-19 employees while the balance comprised of mid-sized businesses employing 20-199 employees.
Geographical distribution
The data also shows the geographical breakdown of printing businesses with 35.8 per cent operating out of New South Wales (NSW); 30.0 per cent operating out of Victoria; 17.4 per cent operating out of Queensland; 6.1 per cent operating out of South Australia; 8.3 per cent operating from Western Australia; 1.3 per cent operating from Tasmania; 0.3 per cent operating out of Northern Territory and 0.8 per cent operating in the Australian Capital Territory (ACT). The industry continues to be highly concentrated geographically with 84 per cent of businesses operating out of the eastern states and ACT.
Some 34.5 per cent of printing support services businesses operated out of NSW; followed by 29.0 per cent who operate in Victoria; 17.5 per cent operate in Queensland; 7.6 per cent out of South Australia; 9.2 per cent out of Western Australia; 0.8 per cent out of Tasmania and 1.4 per cent operate out of the ACT. Similar to printing, the sector is highly concentrated in the eastern states and territories where 82.4 per cent of businesses operate from.
Survival rates
The survival rates of existing printing businesses ranged from a low of 56 per cent in the ACT to 66 per cent in Western Australia and Tasmania during the period June 2011 to June 2015. The survival rate of new entrants was noticeably lower ranging from a low of zero percent in the Northern Territory to a high of 60 per cent in the ACT.
The advantage of incumbency seems an important factor in determining business survival rates, as shown by the following chart, in all jurisdictions with the exception of the ACT, incumbent businesses reported higher survival rate relative to new entrants.
Survival rates by size
Analysis of the data reveals that there is a strong correlation between the size of business and overall business survival rates. The larger a business is as measured by turnover the higher tends to be its survival rate. In NSW for instance established printing businesses with turnover of less than $50,000 had a survival rate of only 37 per cent between June 2011 to June 2015 compared to a survival rate of 86 per cent for printing businesses with turnover of $2m or more.
The same pattern is reflected in other states and territories as depicted by the following table. It seems the chances of survival for established businesses improve in-line with increased business turnover levels.
When applying the analysis to new printing business entrants the correlation between size and survival rates generally still holds but it is a noticeably weaker relationship compared to established businesses as shown by the following table depicting the business survival rates for new entrants. A new printing business entrant tends to have a higher survival rate the higher its turnover (business size) upon entering the industry.
Businesses by turnover
Given the majority of printing businesses are small employers the turnover ranges also reflects this small business aspect.
The following table provides a breakdown of printing businesses by turnover ranges applying at the end of financial year 2014-15.
The data confirms that 88.7 per cent of printing businesses had a turnover of less than $2m. A significant number of printing businesses (45.5 per cent) are micro-businesses with a turnover of less than $200,000 per annum. The vast majority of these businesses will be non-employing businesses given such low turnover levels.
Victoria has a higher share of larger printing businesses (turnover of $2m or more) followed by New South Wales and Queensland. The eastern states and ACT accounted for 84.1 per cent of large printing businesses.
An even higher proportion (95.1 per cent)) of printing support businesses reported turnover of less than $2m for financial year 2014-15. The proportion of businesses that are micro-businesses is also significantly higher for this sector compared to printing accounting for 61.5 per cent of total businesses operating in the sector.
Concluding comments
Despite the ongoing industry consolidation efforts the latest data on number of printing businesses continue to show more than 5,000 operators nationally. Consistent with historical trends the bulk of printing businesses operate out of the eastern states. While on net basis the overall number of printing businesses declined by close to 200 during the most recent financial year, the decline would have been more significant if the number of industry exits which totalled 484 businesses were not offset by new business entrants totalling 681.
Almost 60 per cent of the new printing business entrants comprised of non-employing businesses while non-employing printing businesses accounted for 67 per cent of those who exited the industry during the financial year.
The printing industry continues to display the characteristics of small business both in terms of turnover and employment parameters as almost 92 per cent of employing businesses employ less than 20 employees and almost 89 per cent generated turnover levels of less than $2 million.
Business survival rates confirm a close correlation exists between overall business size and survival rates which are also naturally reflected in reported differences in business survival rates between employing and non-employing printing businesses.
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