Every business start-up has a cost, and if you’re on the dole you can’t easily afford to buy basic equipment. At the moment the only start-up cash available from the “new deal” for unemployed people trying to start a business is £400. We don’t think that’s nearly enough, so we’ll give the business start-up specialists the ability to fund costs of up to £2,500, and then reclaim the money from the benefits saved once the business is up and running.
Chris Grayling – How to Lift the EconomyWith an Army of Entrepreneurs
On the face of it this looks like a great idea. The logic is both simple and compelling. Startups cost money. People don’t have it. Let’s give them it, funded out of future benefits savings.
Several reasons why I think this might not work in practice:
- It will attract a lot of people to the £2500 who are not sufficiently committed to enterprise and self employment – enterprise professionals will spend hours of their time wading through the sharks to find the genuine latent entrepreneurs.
- It will encourage some people into enterprise for whom it is almost certainly not the best option – business failure rates are likely to increase with this type of soft start-up provision – damaging the enterprise culture in the medium term. Only if we use robust investment criteria will this be avoided. This means turning a proportion of applicants down – leading to bad word of mouth.
- If business ideas are viable they will find investment – the problem is still not lack of cash – it is lack of investment ready business plans. Let’s spend our money here on providing inspirational coaching and good technical advice (NB there is already plenty of technical advice out there – labeit patchy in quality)
- Sources of funding and sources of advice need to be kept separate. It is too easy to tell the funder what they need to to hear if they are to release the money. You MUST be able to speak the unvarnished truth with your advisers.
There maybe ways to overcome most of this stuff.
However IF the only reason a business gets started is because of a £2500 gift from the government – offset against future benfits savings – then I for one would worry. Unless there is real commitment, passion, talent and skill to invest in I can see lot of cash going down the tubes.
Your thoughts?