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Enterprise Reports

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March and April seems to have been a busy month for the publication of a range of papers relevant to community based enterprise.

First we had the Enterprise White Paper – more spelling mistakes than original ideas – what a disapointment – or have I missed something?  Supposed highlights include:

  • Improving access to finance for SME’s (now where have I heard that before?)
  • A consultation on the introduction of regulatory budgets, which would cap the new annually recurring cost of regulation for business, including whether to pilot this approach on SME’s or a particular sector;
  • Increased focus in minimising the impact of regulation on SME’s (ditto)
  • Independent review of regulatory guidance (ditto)
  • Further development of enterprise education on secondary schools and extension of it, where possible, into primary and further education (underpinned by a £210 million funding package, as agreed at the 2007 CSR); and
  • Establishment of a National Enterprise Academy (NEA)

Then we had a report from the New Economics Foundation ‘Hitting the Target. Missing the Point: How government regeneration targets fail deprived areas.  This new research from nef, evaluates the impact of one of the government’s flagship programmes: the ‘Local Enterprise Growth Initiative’ (LEGI), suggesting that investment has not been targeted at the places where it would have the most impact because it has not been supported by robust measurement.  This one is still on my reading list!

Finally there has been an interesting publication from London Based Community Links
– Self-employed and micro-entrepreneurs: Informal trading and the journey towards formalisation which must be of relevance to anyone working in community enterprise.

Please do let me know what you make of these reports, especially if you find that any of them have a positive impact on your practice.

Entrepreneurship and community development

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Imagine a community that is seeking to develop itself.

Now imagine that you were given the chance to bring 100 people to the community. You had to choose between:

  • 100 artists
  • 100 politicians
  • 100 planners
  • 100 entrepreneurs
  • 100 writers
  • 100 scientists
  • 100 engineers
  • 100 inventors

Which group would you choose?

Why?

Managing ‘Enterprise’ Support

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DCLG has sparked a renewed interest in enterprise in deprived communities with its investment in Local Enterprise Growth Initiative.  The focus on enterprise is in danger of being overwhelmed by the much larger and wider  investments going into the worklessness agenda (with more of a focus on routes into employment rather than creating your own work).   It must be quite strange from the residents point of view.  One week someone from the ‘Government’ is urging them to get ‘a great business idea’ or ‘start a social enterprise’ and the next week someone else is telling them to ‘brush up their CV’,  ‘join a job club’ and ‘seek work’.  I suppose we should not be surprised that these appear to be competing initiatives at the neighbourhood level – fighting to engage the same people in their respective ‘customer journeys’.   But I would like to think that more could be done to help individual residents to see these as two possible options on their journey.

I think it is interesting to meet the range of service providers involved in the local enterprise work.  Some come from a very ‘public service/third sector’ orientation while others have a much more ‘follow the money’ mentality looking to deliver the outputs (often very poorly specified) at lowest cost.   This latter group usually have more experience of the way that public money is spent and understand that at some point they will be held to account for what they done.  From day one they count and record what they think will interest the funders.   The worrying thing for me is that both sides of this divide need a little bit of what the other side has to offer.  Both risk failure for different reasons.

It is also clear to me the LEGI investments are not an end in themselves but rather provide an opportunity to play a part in a much monger term, potentially lucrative and worthwhile game.  The cities and regions that can show that they can take public sector funding and provide a return on that investment in terms of reduced benefit budgets, improved health and psychological well being, reductions in crime and grime, increased tax takes and NI contributions and a whole range of other social and economic benefits will surely position themselves well for future investment.

Those that deliver a range of occasionally interesting, but ultimately unproven projects, are unlikely to see further funding once the LEGI money runs out.  My worry is that some do not seem to be aware of the possibility of this larger game and are happy to settle for the effective project management of what they already have resigned to the fact that it will all be wound up in a few short years when the money has all been spent.

So the challenge is to create significant value from the current investments and to demonstrate that value in hard cash terms to funders.

Ewing Marion Kauffman Foundation

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The Ewing Marion Kauffman Foundation in the US is one of the world’s top organisations for research and development into the SME sector. Although care has to be taken in translating their work (largely research based in the US) to the UK, I always find their publications to be worth a read.

They have just published a report following a longitudinal study of some 5000 small firms that were founded in 2004, tracking their development through the early years. I think that the report should provide useful insights for policy makers here in the UK and national and local levels as well as for anyone in the game of small business development supporting entrepreneurs.

Here are some soundbites from the report – and the questions that they provoke for me:

  • Nearly 60 percent of the businesses had no employees in their first year. Just under three-quarters of businesses had one employee or less, while about one-quarter of businesses had two or more employees. Very few businesses (less than 4 percent) had more than 10 employees.
    • How do the stats on our start-up work compare with this? Is number of employees in year 1 linked in to entrepreneurial success? Does a ‘slow’ start lead to a ‘slow’ future?
  • More than a third of businesses (37 percent) had no revenue in their first year of operation. About 45 percent of businesses experienced a profit during their first year, while about 55 percent of businesses that experienced a loss. About 17 percent of businesses had profits in excess of $100,000.
    • How realistic are our entrepreneurs forecasts on profit and turnover?
    • How good a job do we do in helping them to develop realistic forecasts?
    • What can we do to help entrepreneurs recognise that profit may only accrue after a long period of working at the business?
  • Nearly 44 percent of new businesses had no debt financing during their first year of operation. Many businesses were started with very little debt financing: 17 percent of businesses started with $5,000 or less; nearly 11 percent started with $100,000 or more.
    • What percentage of businesses that we support are adequately financed at the outset? How can we help entrepreneurs to consider their financial structures and approach re-structuring as an opportunity if necessary?
  • About 80 percent of businesses had some positive equity investment in their business in the first year. Nearly 10 percent invested $100,000 of equity into their business, while another 33 percent invested between $10,001 and $100,000. About one-quarter of businesses invested some amount less than $5,000.
    • How does equity finance work in poorer communities?
    • What alternatives to equity finance exist?
  • The vast majority of equity invested came from the business owners themselves. Just 10 percent of the businesses used external equity sources in their first year. Parents were the most common source of external equity (3.4 percent), while spouses provided equity to 1.6 percent of businesses. Non-family informal investors and venture capitalists were used very infrequently (2.7 percent and 0.6 percent, respectively).
  • Nearly 70 percent of businesses in the Kauffman data were owned by men and just over 30 percent were owned by women. Whites owned more than 81 percent of the businesses, while blacks owned 9 percent, Asians owned 4 percent, and the remaining 5 percent were owned by individuals of other racial groups. About 6.6 percent of the businesses were owned by Hispanics.
    • How effective are we at engaging the full spectrum of race, gender, sexuality and faith in feeding their enterprising soul?
  • Just under 9 percent of firms closed in calendar year 2005, and the survival rates vary by owner demographics. For example, 88 percent of black-owned businesses survived, compared with 92 percent of white-owned businesses and 91 percent of Asian-owned businesses. Women-owned businesses had a survival rate of 89 percent, about three percentage points lower than businesses owned by men.
    • What are we doing to track survival rates and understand patterns in them that may point to problems in the quality or accessibility of our services?
    • Starting a business is (relatively) easy. Starting a successful business that provides a vehicle for personal and professional development and allows us to develop as happy human beings is a whole different ball game. How are we tracking the ‘happiness’ of the entrepreneurs we work with?
    • Are business survival, jobs created and profitability the only important metrics? or should we looking at other aspects of the entrepreneurs satisfaction and well-being?
    • If we succeed in increasing business birth rates, should we also accept an inevitable increase in business failure rates?
    • Do we understand the full cost of business failure – economic, emotional, mental etc?

Each year the Kauffman Foundation produces an excellent ‘Thoughtbook’ that summarises it research findings and showcases some of the excellent work that the Foundation funds to support a wide range of entrepreneurs.  You can request a  copy here.

Which websites and organisations do you use to access information and support?

Supply and Demand

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Supply and Demand

So David Cameron wants to double the number of Health Visitors. Those tackling the worklessness agenda want to use caseworkers to get people off of benefits and back into work. On the Enterprise agenda we have community motivators, enterprise champions, enablers and streetwalkers – all working in communities to encourage individuals to consider self-employment and starting a business.

Two problems:

  • Service providers on the supply side compete with each other to attract individuals onto their programmes so that they can count them in their outputs. Some can threaten to remove benefits unless individuals from target groups take up their services. Others spend lots of cash on marketing and sales, saturating the marketplace with messages about how their services will transform individuals and communities;
  • There is little or no demand for their services in the target communities. There is no demand side. People are cynical, feeling manipulated, threatened, belittled and demonised. Their communities are saturated with outreach workers from the supply side looking to sign them up to their programmes. They are subject to advertising campaigns, leaflet drops, door knocking and telesales.

Perhaps what is required is a much more client centred (rather than policy led) engagement on the (distinct lack of) demand side – helping individuals to decide for themselves what might constitute progress for them (rather than for the policy makers) – and then helping them to access service providers that can help. Community workers who are not looking to sell policy objectives but just to respond effectively and with commitment to individuals who want to try to make things better for themselves and their families. Workers who are trained to leave people alone unless they ask to be helped. Outreach workers with nothing to sell – just the skills to help and extensive networks into the expertise and infrastructure that has already been developed on the supply side.

This would be a very different model of engagement and one that might just work.

The case workers might just start to help people move forward on agendas that matter to them. To become more enterprising in improving their own circumstances and ability. To start again exploring and developing their own potential

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