The publicly-funded support landscape for helping new businesses through the critical time from post-start to sustainability, and then taking both those businesses and established, existing businesses looking for growth to the next stage of development, is fragmenting into non-existence.
What is the emerging business support landscape? At the start-up end, there is the national Work Programme, largely ignoring enterprise and self-employment in favour of trying to get people off benefits and into a decreasing number of jobs. Also new on the scene is the New Enterprise Allowance for unemployed people on Job Seeker’s Allowance for six months or more and who have a viable business concept. If and when the NEA client starts up a business and registers with HMRC, their benefits reduce from £66 per week to zero over the next 26 weeks, after which time the voluntary mentoring support also ends.
Local authorities – if they have any money – have been able to procure additional start-up services under the ‘Solutions for Business’ product range. These were designed to provide specialist support alongside the national ‘generic’ Business Link service, and most are targeted at under-represented enterprise groups such as women, BAME, over-50s and long-term unemployed, especially those living in deprived communities.
By November, the national Business Link service will be replaced by a web portal and a national call centre, removing face-to-face support for businesses, unless they can find a mentor through the new www.mentorsme.com website.
YTKO knows a lot about ‘business sustainability’ – characterised by a transition, of unknown duration, from high risk, flux and fragility, with more unknowns than knowns, to a situation of stability, more certainty around market needs, pricing and profitability. For example, through our Outset programmes, we support over 2000 clients annually to determine if enterprise is for them, and support around 500 through the sustainability stage each year.
The one critical requirement for achieving both sustainability and growth is simple: getting and retaining more customers at the right price. There is a vital need therefore to ensure – before starting up a business – that people really understand how to validate the fit between their product or service and the market needs and wants. By market, I mean prospects, clearly profiled, targeted segments or organisations, whose needs are known, and where the new business has a clear advantage over the competition in order to meet them.
This is the only way to de-risk the business for the owner and for potential funders, and to shorten that transitional period from start-up to sustainability. Unprepared start-ups, and under-capitalised start-ups in particular, always struggle to reach the other side of the chasm. Public sector investment in start-up support has delivered a poor rate of return because projects were measured on ticking ‘start-up’ boxes, rather than business survival and sustainability rates.
In fact, robust monitoring and evaluation of the sustainable impact these projects have made to the economy a year or two down the road is almost non-existent. This lack of rigour has allowed a large number of small delivery agencies as well as national service providers to go on unchecked, complacently spending taxpayers’ money on delivering the same old, same old. Typically, they push generic three-day business start-up courses that don’t address the real fundamentals at all, or in sufficient depth: How is this business going to make money? Who is going to buy from it? Why should they? How will you reach these prospects? How long until break-even? This problem about quality is exacerbated because many business advisors have not had direct experience of being self-employed or running a business.
At the growth end of the spectrum, the government has chosen to put all its money - £200m - only into supporting those businesses with “high growth potential”. By their own admission, this is only about 10,000 SMEs. Like the investors on Dragons’ Den, and the whole venture capital industry, they are placing one big bet on trying to find, identify and support the potential biggest winners.
BIS statistics for 2009 show nearly five million businesses in the UK, of which almost four and a half million are micro-businesses with less than five employees. Another 400,000 or more are within the SME category of less than 249 employees. The UK’s SME business stock produces half the business turnover in the country, but now where do they go to get help if they are ambitious to grow, but aren’t in the superstar 10,000 category?
Enterprising Women, a community dedicated to supporting women’s entrepreneurship, recently surveyed over 220 women entrepreneurs across the UK to ensure that its growth programmes were still meeting the right needs in an economic downturn. Women running businesses of all different sizes and across many sectors responded, with a total turnover of £41m, saying they were ambitious to grow but ‘stuck’ in some way.
If they could get the right help to overcome barriers and unlock that potential, they forecast that, within three years, they would contribute £232 million to the economy, and create over 2000 additional new jobs. Even if only 10% of UK’s SMEs are hungry for, and able to, grow, supporting them will deliver a far bigger and more certain return on our public investment.
If you conceptualise the UK’s business profile as a very shallow triangle, there are four key intervention stages. Taking on the first employee, moving from micro-business and growing up to nine staff, growth up to 50 employees, and expanding beyond 50 into a large SME. Each stage is characterised by quite different needs, although growth is still driven by the three fundamentals of business: customers, people and money.
It is vital to ensure new enterprises continue to enter the market at the bottom of the triangle, but it’s equally as vital to ensure those that want to go to the next level are helped to do so, not betting the bank on the very tiny tip at the top of the iceberg.
In the same way that social mobility in the UK has worsened, are we now seeing the start of a two-tier business community: the haves and the have-nots of government support?
Bev Hurley, Chief Executive, YTKO
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