New businesses need to hang tough for first year – big gains come in second year

New businesses experience their biggest productivity gains in their second year (see the chart below), after the hard work and investment of the first year have been realised, according to new research published by the ABS (see Firm Dynamics and Productivity Growth in Australian Manufacturing and Business Services). The data in the chart below are based on surviving businesses, so the big productivity gain in the second year isn’t simply a reflection of very inefficient businesses failing in their first year. The ABS research confirms what a lot of business people know: it’s hard starting up a new business and it can take a year or more to start achieving the success you’re targeting.


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