Just last month I was asked to partake in a panel at the House of Lords to talk about what the government could do to encourage, support and nurture small businesses in order to ensure continual growth and success and, in doing so, boost the UK economy as a whole.
It was my work with start-ups and hands-on experience with various ongoing ventures – as well as my own entrepreneurial tendencies – that prompted the request to appear on the panel.
Now I’m a realist and I fully acknowledge that we’ll never get it 100 per cent right. Perfection just seems such a long way off. However, I do believe the following 10 point plan could certainly let us get a very long way down that road:
Scenario: Fewer people today are willing to take the risk of starting up their own business venture.
Problem: Many people tell me they won’t start up a business because they fear being declared bankrupt and regarded as a failure in some people’s eyes. They’ll also be forced to spend a year without any credit and bank cards. I can understand – when my first business venture went belly up I was a bankrupt for three years. To me that was like a prison sentence. And why was I labelled a bankrupt? Not because I did anything wrong – on the contrary my business was aimed at helping the economy and creating jobs. It happened because I believed in myself enough to follow my dream. Seems a harsh punishment does it not?
Solution: Remove the threat of bankruptcy for start-ups run by enthusiastic owners which fail for genuine business reasons. That way we’ll reduce the fear and encourage more entrepreneurs to go start up their own company because we’ll have made self-employment as risk-free as employment. At the same time perhaps we can change our culture to one of acceptance of failure and where it’s viewed as a valiant attempt to achieve something, rather than an indicator of weakness. Perhaps more training and education on self-employment is needed to engender entrepreneurial confidence.
Motivate More Mentors
Scenario: One in three businesses in the UK is failing every year. Cashflow is a factor but equally as devastating to start-ups is a lack of experience amongst owners and other key personnel.
Problem: There just aren’t enough mentors out there to help fledgling companies and young would-be entrepreneurs. But should we really be surprised? Mentors are too busy running their own businesses to be able to take time off and coach others – unless they’re being paid for it of course. And that’s where the government comes in…
Solution: Encourage entrepreneurs and business leaders to mentor start-ups and small companies by allowing them to take a stake in the company they’re providing the expertise and guidance for and giving them a tax break on that share. They could also receive a tax break on the time they spend mentoring. After all – very few business owners can afford to give their time for free. Consider virtual mentors too via regular Skype chats – we live in a high-tech age after all. Organisations such as the Federation of Small Businesses (FSB) are great for general advice but a mentor is someone in that start-ups particular industry who knows the ins and outs of the sector and the potential pitfalls.
Loosen up access to Lending
Scenario: The start-up loan scheme is to be expanded. This is great news and means a further 50,000 would-be business owners should benefit from the added funding.
Problem: Many enthusiastic and capable entrepreneurs will be refused loans because of the qualifying criteria for the scheme.
Solution: Stop banks and other lending institutions giving out start-up loans based on personal credit ratings. Instead introduce advisors who have an entrepreneurial and sympathetic mindset – and one which can understand commercial opportunities when they present themselves. Without these types of advisors lending to start-up businesses is doomed to failure.
And let’s face it; you only have to take a look at the outcome of Project Merlin and the Enterprise Finance Guarantee Scheme to know that the banks and other high street lending institutions don’t have the expertise to make informed lending decisions when it comes to awarding start-up loans. My own credit rating wasn’t great when I was starting out. That’s because when money was tight I chose to keep my business going rather than pay suppliers or make loan payments. It didn’t make for a good credit rating – just like thousands of other entrepreneurs out there I’ll bet.
Having said that, I’m hugely encouraged by the success of crowd source funding, which is taking decisions away from the banks and empowering the individual. It allows him or her to promote their business via social media platforms such as Twitter.
Axe the Ageism
Scenario: Older entrepreneurs (ie those aged 30 years and over) are finding it difficult to access enough funding and access to help to start up their own business.
Problem: More encouragement goes to young entrepreneurs rather than their older business counterparts – the recently announced Virgin StartUp Scheme which focuses on entrepreneurs in the 18 to 30 age bracket is a typical example. So too is the Shell LiveWIRE awards which again, is only available to those aged under 30 years. It means older entrepreneurs aren’t qualifying for the same funding opportunities or assistance younger individuals are, resulting in the outcome that many older entrepreneurs with great ideas, drive, skills and life-experience, don’t have the cash to go forth and prosper. They’re being penalised because of their age.
Solution: It couldn’t be simpler – remove the age barriers to start-up funding schemes. This will send out the message that every entrepreneur is important, regardless of age. After all, I didn’t achieve my first success until I was aged over 30. I haven’t done so badly since…
Scenario: In order for the UK economy to grow and flourish start-ups and small businesses need to export goods and trade overseas.
Problem: There just aren’t enough government incentives to help small businesses trade in a global sense.
Solution: Give tax breaks to companies which can help and educate small businesses to export and trade overseas based on the total amount exported. It should also be possible to incentivise the small UK businesses that are willing to venture into those global markets by providing much-needed tax rates. Outsourcing overseas can help UK companies make bigger profits which they can then invest back into the company to help it expand and take on more staff.
Encourage leading entrepreneurs from other shores to come to Britain and set up business thereby helping the UK economy – the government’s Trade & Industry Sirius scheme does just that – but let’s expand that effort.
Rise above Rents
Scenario: It’s important for small business owners – especially those in retail – to be able to physically display their products. For others it’s necessary to have a high street presence. Despite this there are hundreds of empty shops in Britain’s high streets, giving these once busy streets a haunted and derelict look.
Problem: Many small business owners simply can’t afford the rents for retail premises or high street offices. Owners of commercial premises have to incentive to rent them out to small businesses who they fear probably won’t be able to pay the rent anyway at some point further down the line.
Solution: Penalise owners of commercial property if the unit remains empty for a certain period of time (this could make them look into renting out the units for pop-ups). Otherwise incentivise the landlords to rent out the premises at an affordable rate to small businesses. The government could also encourage broadband/telecommunications companies to provide more cost-effective services for small businesses, helping them cut back on overheads and put more money into the actual business goods or services. Help local business owners look at starting up joint schemes (i.e. a pop-up market) in empty commercial premises.
Initiate an Information Source
Scenario: Many entrepreneurs start up businesses without the high quality information and advice necessary to ensure continued success. That’s because they don’t know where to look.
Problem: Information for start-ups isn’t centralized. As a result many entrepreneurs get bogged down in the sheer volume of advice out there from government agencies and private companies (Business Link which is now web-based, Local Enterprise Partnerships (LEPs) and commercial platforms. Some of this advice is conflicting, which makes it all the more difficult to wade through. It also takes too much time for small businesses to source and research the advice – which is the last thing an entrepreneur can afford, considering their main priority is to run their actual business. A recent survey actually found that only 17 per cent of those polled described government-funded services as “helpful.”
Solution: Provide one easy-to-access source of quality information. Get advice organisations to work together so that information isn’t continually duplicated and that small businesses can benefit in the long run. I personally will be working with Lord Laird’s team to help make this happen.
Scenario: Start-up advice and information isn’t getting to those who need it the most.
Problem: Certain geographic areas and sectors just aren’t getting the information they need to succeed.
Solution: Set up a task force to identify which areas need help most and then implement it. This would typically be more deprived areas in the north of the UK rather than London and the south which are, in contrast, inundated with help schemes and successful companies on which to mould themselves. Make sure these mentors and members of the task force are individuals with experience in start-ups and commercial ventures rather than classroom educators.
Scenario: Unemployment is falling but the number of individuals who are under-employed is rising.
Problem: There aren’t enough jobs out there yet many start ups could benefit from the skills and knowledge of thousands of unemployed graduates who are currently languishing on the dole or working in jobs which don’t utilise their skills and knowledge. Graduates in this country just aren’t being given the opportunities to expand and use their recently-acquired knowledge here on their own doorstep, making them more likely to go abroad and leading to a future ‘brain drain’ in the UK.
Solution: Encourage more graduates to become entrepreneurs or work for start-ups either during term time or once they leave university. In this way the UK will help train up-and-coming businesses and entrepreneur-type mindsets. At the same time it will provide a legacy for Britain to create a robust and successful economy well into the next decade and beyond. The creation of 20,000 new apprentices was certainly a good move but what about those older individuals aged 30 years or over? We need schemes to help them get back to work or achieve self-employment status too.
Look to Lifestyle businesses
Scenario: Many ‘lifestyle’ companies out there need support too.
Problem: Many government measures seem to be aimed at already flourishing and successful businesses with high-growth and long-term potential. For instance, the BIS is providing a coaching programme for 10,000 ‘high-potential’ businesses to double their growth over a three year period. By high potential they are referring to businesses with more than 10 employees who have the ability to increase their turnover or employment by 20 per cent over that time period or, those with less than 10 employees who can turnover 75k. The final category is for start-ups with 10 employees over three years and the ability to achieve a turnover of £1m.
Solution: Encourage private enterprises to hook up with these lifestyle businesses by providing tax incentives or other worthwhile benefits. That’s because even a lifestyle business which brings in around 50k a year net is better than the same individual earning an annual salary of 25k.