Six in Ten Companies Opened in Brazil in 2012 Closed Down Within Five Years

RIO DE JANEIRO, BRAZIL – Approximately 40 percent of the 597,200 companies set up in 2012 were still active in 2017. This figure, used as a survival rate, suggests that six out of ten companies ceased operations in the five years. The data are from the Business Demographics and Entrepreneurship Statistics, released on October 17th, by the Brazilian Institute of Geography and Statistics (IBGE).

In 2017, the survey shows that there were some 4.5 million companies in Brazil, 22,900 less than the previous year. Electricity and gas were the activities with the highest proportion of new companies in the year (23.3 percent), while the construction sector recorded the highest percentage of companies shutting their doors (20.8 percent).

Research analyst Denise Guichard explained that the balance of companies in the market had been positive for several years until 2013. “There were almost 4.8 million companies active in the country, with a balance of 175,000 compared to 2012, and the number of companies growing. But this number has been decreasing, with negative balances in every year since 2014, when it saw its largest drop of almost 218,000 companies”.

The trend is for the survival rate to decrease over the years. For instance, 78.9 percent of the organizations established in 2012 survived after one year of operation, 64.5 percent after two years, 55 percent after three years, 47.2 percent after four years and 39.8 percent were open in 2017. Of the 558,600 companies created in 2008, 47.8 percent survived for five years.

Considering only the survival rate in the first year, the highest was recorded in 2008 (81.5 percent), dropping in the following years, to reach 71.9 percent in 2013, but grew in 2014 (77.2 percent) and 2015 (78.3 percent), returning to 73.2 percent in 2016.

Among the surviving companies in 2017, 60 percent have at least one paid employee. “Most of the companies that close down are made up only of owners and partners,” explained Denise.

She also points out that, among the surviving companies, 14.3 percent of paid employees are college graduates. “In the new companies, the personnel with a higher education level is only 8.7 percent. In those that have closed, it corresponds to 7.6 percent of the salaried personnel”, concluded the research analyst.

In the entrepreneurial analysis, the research examines, among other aspects, high-growth companies, which are those with ten or more paid employees in the first year of observation and which showed average annual growth of paid staff of at least 20 percent for a period of three years.

The survey shows that the 20,306 high-growth companies represent the lowest number of the series started in 2008 (30,954), while the highest was recorded in 2012 (35,206). Between 2016 and 2017, there was a reduction in the number of high-growth companies, both in absolute terms, 692 companies, and relative, 3.3 percent.

This group represented 0.5 percent of active organizations, 0.8 percent of companies with paid employees and 4.5 percent of those with ten or more paid employees.

Source: IBGE