The best business idea will, without a solid business plan that helps to secure finance, remain just that – an idea.
So, if you want to get that idea off the ground and start a new business or to grow your existing business further, what do you need to consider?
The first step is to qualify your idea, consider whether it will appeal to consumers and if it is a viable commercial proposition. This should include researching your potential market to analyse the demand for the service/product, the overall size of the market and your competitors.
Third-party advice will help you to evaluate your business idea – friends, family or professional advisers should be sought to provide you with a sounding board.
Once you've determined that your idea is commercially viable, you'll need to work out the vision for your business. Do you know what you want your business to achieve?
You need to be clear on where you want to go and how you are going to get there. Set yourself definable objectives in accordance with this and have your assumptions challenged to get an alternative perspective.
It is only once you've qualified your idea and considered what you want your business to achieve that you are in a position to write a business plan that will outline how you’re going to get there.
A business plan is the key to obtaining the much-needed cash to finance your business idea. Whilst a business plan must be written and owned by you, advice at this stage is crucial.
A huge percentage of enterprises fail to obtain financing because they write a poor business plan or approach the wrong people.
When drafting your business plan, it is important to remember that it should be written and owned by you reflecting your character because it will be you that will be answering the questions from the finance providers.
You must be clear about how much and what type of finance you need and who you should approach. Make sure you give them what they want to see, not what you want to write.
For example, whilst lenders want to see immediate success in order to meet quarterly interest payments, they generally seek a return on their investment over a long period of time.
When considering providing finance to a business, both lenders and investors will primarily look at three aspects: its management, its management and its management. A business stands or falls by the strength of its management and they will be looking for this to be communicated in the business plan.
Alongside demonstration of management strength, lenders and investors require a business plan that provides a detailed description of what the business does, what competitors in the market are doing and what makes this business better than its competitors. Investors and lenders both want to understand how and why it will succeed.
The key to any investor or lender's decision will be the financial projections for the business, both in terms of borrowings and in terms of earnings for the business.
Whilst a lender will also want to understand the projected cash flow and estimated sales and profits over the next three years, the investor will be looking more closely at the prospects for growth for the business.
Lenders and investors have to take a calculated risk when providing finance to a business, so it is only natural that they will want to consider the downside. When drafting your business plan aid this process by providing financial assumptions.
Draft two projections, including a worst-case scenario that at least shows the business being able to service the required funding. If you need maximum sales from day one, with money being paid exactly in line with your terms of trade to succeed – ie: no latitude for error – getting the money may prove very difficult. Halving the income and doubling the costs in the early days of a new business venture is a very useful piece of advice.
Never include complicated spreadsheets in the body of the plan and rely on the reader to make sense of them. Include a simple matrix of key information and set out in the text your key assumptions on which these figures are based. If necessary, include them in the appendices and invite the reader to refer to them if they so choose.
By raising as much money as you can from your own resources, friends and family you demonstrate to any investor or lender that you are "putting your money where your mouth is" and sharing the financial risk. There is no better way to demonstrate you truly believe that this enterprise will succeed.
It is also worth remembering that lenders will want to see that the predicted borrowings will be amply protected by security should the business not be the success everyone, including the lender, hopes it will be.
Consider the types of questions you might be asked about your plan and prepare responses to them. Finally, prepare and practice your presentation prior to the event.
The general rule of thumb is that you should spend three times as long practicing your presentation as it will take to actually present it. That should ensure your presentation is as polished as the plan itself.
Last, but not least, good luck! But don't forget that luck is when good preparation meets opportunity...
Showing posts with label entrepreneur. Show all posts
Showing posts with label entrepreneur. Show all posts
Thursday, 29 May 2008
Thursday, 27 March 2008
Teaching Our Next Generation Of Entrepreneurs
The perception of entrepreneurial opportunities and the capacity to exploit them are strongly associated with social norms that encourage venturing, such as the availability of risk capital, access to developing technologies, a quality diverse entrepreneurship education system and a sound professional infrastructure. This has considerable implications for the UK entrepreneurial economy.
Entrepreneurship education, at all levels, could very effectively prepare and train students to start and manage new businesses. This type of education is strong and getting stronger in business schools across the country, but it needs to proliferate outside of the business domain. Very few students undertake business subjects, and not every business school student is required to or chooses to take up an entrepreneurship course. Thus the number of people exposed to higher-level entrepreneurship education is relatively small in the UK. It is critical therefore that entrepreneurship education is expanded.
Engineering and other technology graduates have the capability to generate innovations that may be the basis for high-growth companies. They need to learn techniques for discerning whether or not such innovations have commercial potential. As such, universities need to encourage the integration of their degree requirements between entrepreneurship/management and engineering/technology.
There are often many hurdles to such collaboration, however, including issues of funding; credit allocations; faculty teaching loads; scheduling conflicts, and the lack of available facilities. While a handful of schools are facing and overcoming these issues, there is a real need to see more active collaboration on university campuses.
There also needs to be a more concentrated effort to introduce entrepreneurship and basic economic principles at the primary and secondary levels. At the primary level, these concepts could be integrated throughout the curriculum. At the secondary level, entrepreneurship skills and basic economic principles could be offered as stand-alone courses. Many people enter the workforce without a college education and have no responsibility for exposure to entrepreneurship training.
While not every school graduate has the capacity or desire for higher education, almost everybody has the potential to start a new business. The average high school graduate may not start a fast-growth, high-technology company, but he or she can start a landscaping business, a retail business or some other venture that will employ other people and contribute to economic adaptation. As such, it is critical to provide at least the basic instruction to ensure that these future entrepreneurs have the understanding of and a certain level of proficiency in the skills necessary to implement and manage a business.
To avoid problems of duplication, various national experts recommend the establishment of a ‘clearinghouse’ for government programmes. A clearinghouse, perhaps web-based, could provide an efficient means for entrepreneurs to gain knowledge of specific programmes and to access those programmes.
In addition, there is also the need to simplify compliance pressures on entrepreneurial firms. Simplifying compliance requirements would improve entrepreneurial efficiency at the most critical times in the venture’s life. Many new ventures report having a difficult time staying on top of all the reporting requirements. Furthermore, reducing the required paperwork would reduce manpower constraints on new ventures, thereby increasing their chances of surviving the early years.
There is also a reported ‘Gap’ in Seed Stage Financing. If the gap exists, it may be more pronounced in different industries, different geographic regions, or for distinct groups of entrepreneurs. The substantial amount of funding provided through informal channels, orders of magnitude greater than that provided by formal venture capital investments and hitherto unknown and unappreciated, suggests some mechanisms for filling the gap may have developed without recognition.
There may not be a gap in the availability of such capital but, rather, in the entrepreneur’s knowledge of where it resides and how to tap it. Experts may be split over whether a gap exists in seed capital because of the fact that many entrepreneurs choose not to endure the time, cost and bureaucracy involved in the search and seizure of such capital.
Increasing the visibility of entrepreneurs by highlighting their story could prove to be an attractive method of encouraging others to pursue their own entrepreneurial opportunities. It reflects widespread acceptance of entrepreneurship as a career option in the UK.
In the absence of a more comprehensive, long-term research programme on the entrepreneurial process, government policies in the UK regarding new and growth companies will continue to fluctuate in reaction to political whims and pressures from special interest groups. It is essential, therefore, that an increased understanding of the principles underlying entrepreneurship is secured in order to ensure that a sustained growth in the entrepreneurial sector is secured.
Entrepreneurship education, at all levels, could very effectively prepare and train students to start and manage new businesses. This type of education is strong and getting stronger in business schools across the country, but it needs to proliferate outside of the business domain. Very few students undertake business subjects, and not every business school student is required to or chooses to take up an entrepreneurship course. Thus the number of people exposed to higher-level entrepreneurship education is relatively small in the UK. It is critical therefore that entrepreneurship education is expanded.
Engineering and other technology graduates have the capability to generate innovations that may be the basis for high-growth companies. They need to learn techniques for discerning whether or not such innovations have commercial potential. As such, universities need to encourage the integration of their degree requirements between entrepreneurship/management and engineering/technology.
There are often many hurdles to such collaboration, however, including issues of funding; credit allocations; faculty teaching loads; scheduling conflicts, and the lack of available facilities. While a handful of schools are facing and overcoming these issues, there is a real need to see more active collaboration on university campuses.
There also needs to be a more concentrated effort to introduce entrepreneurship and basic economic principles at the primary and secondary levels. At the primary level, these concepts could be integrated throughout the curriculum. At the secondary level, entrepreneurship skills and basic economic principles could be offered as stand-alone courses. Many people enter the workforce without a college education and have no responsibility for exposure to entrepreneurship training.
While not every school graduate has the capacity or desire for higher education, almost everybody has the potential to start a new business. The average high school graduate may not start a fast-growth, high-technology company, but he or she can start a landscaping business, a retail business or some other venture that will employ other people and contribute to economic adaptation. As such, it is critical to provide at least the basic instruction to ensure that these future entrepreneurs have the understanding of and a certain level of proficiency in the skills necessary to implement and manage a business.
To avoid problems of duplication, various national experts recommend the establishment of a ‘clearinghouse’ for government programmes. A clearinghouse, perhaps web-based, could provide an efficient means for entrepreneurs to gain knowledge of specific programmes and to access those programmes.
In addition, there is also the need to simplify compliance pressures on entrepreneurial firms. Simplifying compliance requirements would improve entrepreneurial efficiency at the most critical times in the venture’s life. Many new ventures report having a difficult time staying on top of all the reporting requirements. Furthermore, reducing the required paperwork would reduce manpower constraints on new ventures, thereby increasing their chances of surviving the early years.
There is also a reported ‘Gap’ in Seed Stage Financing. If the gap exists, it may be more pronounced in different industries, different geographic regions, or for distinct groups of entrepreneurs. The substantial amount of funding provided through informal channels, orders of magnitude greater than that provided by formal venture capital investments and hitherto unknown and unappreciated, suggests some mechanisms for filling the gap may have developed without recognition.
There may not be a gap in the availability of such capital but, rather, in the entrepreneur’s knowledge of where it resides and how to tap it. Experts may be split over whether a gap exists in seed capital because of the fact that many entrepreneurs choose not to endure the time, cost and bureaucracy involved in the search and seizure of such capital.
Increasing the visibility of entrepreneurs by highlighting their story could prove to be an attractive method of encouraging others to pursue their own entrepreneurial opportunities. It reflects widespread acceptance of entrepreneurship as a career option in the UK.
In the absence of a more comprehensive, long-term research programme on the entrepreneurial process, government policies in the UK regarding new and growth companies will continue to fluctuate in reaction to political whims and pressures from special interest groups. It is essential, therefore, that an increased understanding of the principles underlying entrepreneurship is secured in order to ensure that a sustained growth in the entrepreneurial sector is secured.
Friday, 7 March 2008
The Importance Of Entrepreneurs
In the newly-elected New Labour Government which swept into power in 1997, the new mantra for economic renewal emanating from the then Iron Chancellor, Gordon Brown, was one of enterprise, enterprise and even more enterprise, to turn Britain into an economy driven by the entrepreneurial nature of its citizens well-versed in how to make money. In the government white paper, “Our Competitive Future: Building the Knowledge Driven Economy”, the economic aims of the new Labour administration were made absolutely clear: “Entrepreneurship and innovation are central to the creative process in the economy and to promoting growth, increasing productivity and creating jobs. Entrepreneurs sense opportunities and take risks in the face of uncertainty to open new markets, design products and develop innovative processes”.
Nowhere was this zeitgeist more clearly defined than in the advent of the dot.com revolution, with its young instant (New Labour-supporting) paper millionaires using technology to create the companies of tomorrow. The convergence of a new creative and innovative government, combined with the explosion in the possibilities for business and consumer use of the internet, was New Labour’s equivalent of Harold Wilson’s “White Heat of a second industrial revolution” thirty five years earlier. We had a Labour Administration introducing specific policy interventions to encourage enterprising behaviour, including programmes for spin-offs within the university sector, financial inducements for entrepreneurs to invest in smaller innovative ventures, and the encouragement of share ownership by employees within smaller firms. This overshadowed anything previously introduced under Howe, Lawson, Lamont or Clarke during the various Conservative budgets of the 1980s and 1990s.
The last few years has seen entrepreneurial behaviour becoming increasingly acceptable within business life in the UK. Today, entrepreneurs are no longer relegated to the caricatures of Mike Baldwin, Arthur Daley and Del-Boy. In enterprising Britain, the majority of school children wish to become an owner-manager at some stage of their lives, dream of fortunes to be made from the Internet and name Richard Branson, the UK’s premier entrepreneurial personality, as the person to whom they aspire.
There was, as there always had been, a suspicion of the term ‘enterprise’, given the long history of exploitation by the entrepreneurs of the slate, iron and coal industries, the legacy of which still lived on in the hearts and minds of many of the population of industrial Britain. The mere association of the term ‘enterprise culture’ with the Thatcher era meant that entrepreneurs, and their development, were anathema to many policy-makers and politicians. However, led by the current Government’s love affair with entrepreneurs, a number of significant events have occurred that have begun to change the previously hostile attitudes towards enterprise.
There was the realisation that we could not continue with the policy of concentrating much of our industrial expenditure on attracting inward investment. It has not been the actual policy of inward investment which has been problematic, rather the lack of targeting which meant that new jobs were more important than any other strategic consideration, such as the type of employment created, the sectors attracted, and the future of those industries in a quickly globalising economy.
While our neighbours in Ireland were busy attracting internationally-traded services in the financial and software sectors, we were begging companies in the maturing (and highly competitive) sectors such as automotive and consumer electronics to bring branch plant jobs, then repeated the same mistakes with call-centres. Whilst individuals spinning off from companies such as Microsoft and Intel were creating a vibrant indigenous Irish software sector, assembly workers in the UK continued to, well, assemble. All this while highly skilled (and highly paid workers) within the financial and software sectors in Dublin were demanding better restaurants, shops and leisure facilities, creating countless opportunities for local entrepreneurs.
Although we have previously looked to inward investors as the main source of new jobs, in many other regions the main contribution of the small firm to their economies lies in the creation of new employment opportunities. This began with work by David Birch in the United States during the late 1970s, who demonstrated that large firms, despite their influence on the volume and nature of world trade, could not be regarded as the major source of new jobs. Instead, this role had now fallen to the small firm, with Birch estimating that firms with less than 20 employees had generated 66 per cent of net new jobs in the United States.
At the time, these findings were hard to believe for a number of reasons. They contradicted the assumptions of most businesses and governments during the 1960s and 1970s that healthy big business meant a healthy economy, predominantly because of the assumed efficiency of large firms through the use of economies of scale to keep down costs. As a result, doubts were raised about the policies (pursued by Western governments of all political persuasion) of encouraging mergers between companies to form large corporations, keeping afloat large companies in trouble, and attracting large firms to economically depressed areas, all of which were seen as possibly an expensive and inefficient way of creating employment (although clearly this did not stop such policies being implemented in the UK during the last twenty years).
It was mainly as a result of the Birch study that many governments regarded small firms during the 1980s as the panacea for high unemployment during times of recession. This was illustrated most clearly in the United States: although 34 million jobs were lost in the period 1980 to 1986, 44.7 million new jobs were created, with 32 million of these being generated from the birth of new businesses. During the recessionary period of 1980-82, small firms provided almost all of the new jobs in the US economy.
Similarly, in the European Community, large firms experienced employment loss in nearly every member state, whilst employment by small firms grew considerably. According to data from the European Observatory, SMEs accounted for 68 million jobs in the European Community in 1995, with large firms employing approximately 35 million people. Many of the smaller businesses were set up with the considerable support of governments, which had moved towards abandonment of expensive policies aimed at propping up large firms in industrially depressed areas. Instead, various incentives were being targeted at the small firm sector to encourage new firm formation as the more cost-effective antidote to the shedding of jobs by larger organisations.
Apart from the creation of employment, small firms play another important role by providing a productive outlet for enterprising and independent individuals, some of whom may be frustrated under-achievers in a larger, more controlled environment. Companies as diverse as the Ford Motor Company and Microsoft were started by creative individuals who perceived an opportunity in the market-place and, using a small company as a vehicle for their ideas, grew rapidly into international giants.
Small firms also have close symbiotic relationships with larger companies. Although large firms, through their economies of scale in production and distribution, contribute greatly to a thriving market economy, many of them could not survive without the existence of small companies. As well as selling most of the products made by large manufacturers direct to consumers, small firms provide large businesses with many of the services and supplies they require to run a competitive business. It is estimated that about 500 small suppliers and distributors and about 3000 retailers support each major manufacturing firm in the US. The largest industrial company in the world, General Motors, buys from more than 30,000 suppliers, most of which are small companies, and spends more than half of each sales dollar on purchases from small firm suppliers. One of the main factors in the remarkable success of Japanese industry over the last decade has been the contribution of small businesses, with the high degree of international competitiveness being achieved through the creation of a strong subcontracting system, which has combined the flexibility of small firms with the economies of scale and market power of larger organisations. Without the close relationship that exists between small subcontractors and the large industrial conglomerates, the Japanese economy would not have progressed to its powerful industrial position today.
Small firms have also become important for technological innovation within developed economies, with research demonstrating their valuable contribution to technological innovation within a number of high technology industrial sectors, usually those characterised by fast changing markets, low capital intensity and small dependence on economies of scale. Such markets are thus better suited to smaller firms, due to the entrepreneurial nature and lack of bureaucracy in decision-making within such organisations. For example, comprehensive research into the relationship between firm size and the level of innovation in the UK has revealed that small firms' share of innovations had increased by over 50 per cent since 1945 and now accounts for over a quarter of the total number of innovations in the UK.
Moreover, in certain sectors, such as computing services and scientific instruments, their contribution is highly significant, with small companies developing the majority of innovative products and processes. Indeed, within such ‘knowledge-intensive’ sectors of the economy, small firms have accounted for nearly all of the employment growth during the 1980s and 1990s. In addition, a number of studies show that technologically innovative SMEs in the UK have a higher-than-average growth in assets, retained profits and exports, lower closure rates than businesses in other sectors and have demonstrated high degrees of resilience, especially in times of recession.
Clearly, while small firms have been important in the past, this seems set to continue and grow in the future. For example, many of our business and consumer markets have changed to essentially reflect the strengths of smaller firms. In today’s business climate, economies of scale are no longer important as 20th Century standardisation has disappeared in favour of 21st century consumer sophistication and business specialisation. In many cases, small firms, with faster reaction times and closeness to the market-place, are perfectly placed to deal with an environment where businesses require specialist support and consumers demand customized products and services. Clearly, the age of Ford’s ‘any colour of car as long as it’s black’ has been consigned to the dustbin of industrial history as the small firm, whose decline was forecast only thirty years ago, drives forward today’s economies.
But the short-term nature of much of the funding for business support initiatives without co-ordinated dissemination of best practice, and the fragmentation of business support services with limited entrepreneurial content, means that the time is right for an overall national strategy for entrepreneurship. We sincerely hope that Entrepreneur Secrets will be at the forefront of this strategy.
Nowhere was this zeitgeist more clearly defined than in the advent of the dot.com revolution, with its young instant (New Labour-supporting) paper millionaires using technology to create the companies of tomorrow. The convergence of a new creative and innovative government, combined with the explosion in the possibilities for business and consumer use of the internet, was New Labour’s equivalent of Harold Wilson’s “White Heat of a second industrial revolution” thirty five years earlier. We had a Labour Administration introducing specific policy interventions to encourage enterprising behaviour, including programmes for spin-offs within the university sector, financial inducements for entrepreneurs to invest in smaller innovative ventures, and the encouragement of share ownership by employees within smaller firms. This overshadowed anything previously introduced under Howe, Lawson, Lamont or Clarke during the various Conservative budgets of the 1980s and 1990s.
The last few years has seen entrepreneurial behaviour becoming increasingly acceptable within business life in the UK. Today, entrepreneurs are no longer relegated to the caricatures of Mike Baldwin, Arthur Daley and Del-Boy. In enterprising Britain, the majority of school children wish to become an owner-manager at some stage of their lives, dream of fortunes to be made from the Internet and name Richard Branson, the UK’s premier entrepreneurial personality, as the person to whom they aspire.
There was, as there always had been, a suspicion of the term ‘enterprise’, given the long history of exploitation by the entrepreneurs of the slate, iron and coal industries, the legacy of which still lived on in the hearts and minds of many of the population of industrial Britain. The mere association of the term ‘enterprise culture’ with the Thatcher era meant that entrepreneurs, and their development, were anathema to many policy-makers and politicians. However, led by the current Government’s love affair with entrepreneurs, a number of significant events have occurred that have begun to change the previously hostile attitudes towards enterprise.
There was the realisation that we could not continue with the policy of concentrating much of our industrial expenditure on attracting inward investment. It has not been the actual policy of inward investment which has been problematic, rather the lack of targeting which meant that new jobs were more important than any other strategic consideration, such as the type of employment created, the sectors attracted, and the future of those industries in a quickly globalising economy.
While our neighbours in Ireland were busy attracting internationally-traded services in the financial and software sectors, we were begging companies in the maturing (and highly competitive) sectors such as automotive and consumer electronics to bring branch plant jobs, then repeated the same mistakes with call-centres. Whilst individuals spinning off from companies such as Microsoft and Intel were creating a vibrant indigenous Irish software sector, assembly workers in the UK continued to, well, assemble. All this while highly skilled (and highly paid workers) within the financial and software sectors in Dublin were demanding better restaurants, shops and leisure facilities, creating countless opportunities for local entrepreneurs.
Although we have previously looked to inward investors as the main source of new jobs, in many other regions the main contribution of the small firm to their economies lies in the creation of new employment opportunities. This began with work by David Birch in the United States during the late 1970s, who demonstrated that large firms, despite their influence on the volume and nature of world trade, could not be regarded as the major source of new jobs. Instead, this role had now fallen to the small firm, with Birch estimating that firms with less than 20 employees had generated 66 per cent of net new jobs in the United States.
At the time, these findings were hard to believe for a number of reasons. They contradicted the assumptions of most businesses and governments during the 1960s and 1970s that healthy big business meant a healthy economy, predominantly because of the assumed efficiency of large firms through the use of economies of scale to keep down costs. As a result, doubts were raised about the policies (pursued by Western governments of all political persuasion) of encouraging mergers between companies to form large corporations, keeping afloat large companies in trouble, and attracting large firms to economically depressed areas, all of which were seen as possibly an expensive and inefficient way of creating employment (although clearly this did not stop such policies being implemented in the UK during the last twenty years).
It was mainly as a result of the Birch study that many governments regarded small firms during the 1980s as the panacea for high unemployment during times of recession. This was illustrated most clearly in the United States: although 34 million jobs were lost in the period 1980 to 1986, 44.7 million new jobs were created, with 32 million of these being generated from the birth of new businesses. During the recessionary period of 1980-82, small firms provided almost all of the new jobs in the US economy.
Similarly, in the European Community, large firms experienced employment loss in nearly every member state, whilst employment by small firms grew considerably. According to data from the European Observatory, SMEs accounted for 68 million jobs in the European Community in 1995, with large firms employing approximately 35 million people. Many of the smaller businesses were set up with the considerable support of governments, which had moved towards abandonment of expensive policies aimed at propping up large firms in industrially depressed areas. Instead, various incentives were being targeted at the small firm sector to encourage new firm formation as the more cost-effective antidote to the shedding of jobs by larger organisations.
Apart from the creation of employment, small firms play another important role by providing a productive outlet for enterprising and independent individuals, some of whom may be frustrated under-achievers in a larger, more controlled environment. Companies as diverse as the Ford Motor Company and Microsoft were started by creative individuals who perceived an opportunity in the market-place and, using a small company as a vehicle for their ideas, grew rapidly into international giants.
Small firms also have close symbiotic relationships with larger companies. Although large firms, through their economies of scale in production and distribution, contribute greatly to a thriving market economy, many of them could not survive without the existence of small companies. As well as selling most of the products made by large manufacturers direct to consumers, small firms provide large businesses with many of the services and supplies they require to run a competitive business. It is estimated that about 500 small suppliers and distributors and about 3000 retailers support each major manufacturing firm in the US. The largest industrial company in the world, General Motors, buys from more than 30,000 suppliers, most of which are small companies, and spends more than half of each sales dollar on purchases from small firm suppliers. One of the main factors in the remarkable success of Japanese industry over the last decade has been the contribution of small businesses, with the high degree of international competitiveness being achieved through the creation of a strong subcontracting system, which has combined the flexibility of small firms with the economies of scale and market power of larger organisations. Without the close relationship that exists between small subcontractors and the large industrial conglomerates, the Japanese economy would not have progressed to its powerful industrial position today.
Small firms have also become important for technological innovation within developed economies, with research demonstrating their valuable contribution to technological innovation within a number of high technology industrial sectors, usually those characterised by fast changing markets, low capital intensity and small dependence on economies of scale. Such markets are thus better suited to smaller firms, due to the entrepreneurial nature and lack of bureaucracy in decision-making within such organisations. For example, comprehensive research into the relationship between firm size and the level of innovation in the UK has revealed that small firms' share of innovations had increased by over 50 per cent since 1945 and now accounts for over a quarter of the total number of innovations in the UK.
Moreover, in certain sectors, such as computing services and scientific instruments, their contribution is highly significant, with small companies developing the majority of innovative products and processes. Indeed, within such ‘knowledge-intensive’ sectors of the economy, small firms have accounted for nearly all of the employment growth during the 1980s and 1990s. In addition, a number of studies show that technologically innovative SMEs in the UK have a higher-than-average growth in assets, retained profits and exports, lower closure rates than businesses in other sectors and have demonstrated high degrees of resilience, especially in times of recession.
Clearly, while small firms have been important in the past, this seems set to continue and grow in the future. For example, many of our business and consumer markets have changed to essentially reflect the strengths of smaller firms. In today’s business climate, economies of scale are no longer important as 20th Century standardisation has disappeared in favour of 21st century consumer sophistication and business specialisation. In many cases, small firms, with faster reaction times and closeness to the market-place, are perfectly placed to deal with an environment where businesses require specialist support and consumers demand customized products and services. Clearly, the age of Ford’s ‘any colour of car as long as it’s black’ has been consigned to the dustbin of industrial history as the small firm, whose decline was forecast only thirty years ago, drives forward today’s economies.
But the short-term nature of much of the funding for business support initiatives without co-ordinated dissemination of best practice, and the fragmentation of business support services with limited entrepreneurial content, means that the time is right for an overall national strategy for entrepreneurship. We sincerely hope that Entrepreneur Secrets will be at the forefront of this strategy.
Thursday, 14 February 2008
The Importance Of Making Money
The Global Economic Monitor concludes that as much as one-third of the differences in national economic growth may be due to differences in entrepreneurial activity. In America, as many as 8.4 out of every 100 US adults are right now trying to start businesses of their own. Looking at a business birth-rate strategy in the UK should be a priority for Government.
The fact is that small businesses create the majority of new jobs – 1.6 million (or 64 per cent) of the 2.5 million new jobs created in the U.S in 1996, for example. Since 1980, Fortune 500 companies have cut more than five million jobs while the rest of the economy has added 34 million new jobs.
These statistics are very impressive, but when compared with such statistics for the UK, it can be deduced that the British economy gains considerably more from the small business community. For instance, small businesses account for over 50 per cent of employment outside the public sector, and contributes half the GDP of UK Plc. It follows logically from this, therefore, that small businesses and their ability to create such wealth and employment should be focused on more favourably by our government.
Education in entrepreneurial skills is virtually non-existent in UK primary and secondary schools, as is economic knowledge in general: as a whole we lack a strong understanding of basic economics. But what should we do to address this? The best place to start is to look across the pond at the bastion of entrepreneurial activity: America.
Hundreds of US colleges and more than 90 university-based centres of entrepreneurship now offer entrepreneurship training. Twenty years ago, only a handful of colleges even offered entrepreneurship courses. Today, education in this arena is proliferating across the country.
The National Council on Economic Education has focussed on the teaching of complex entrepreneurship skills such as opportunity recognition, utilising resources in pursuit of opportunity, and mastering long-term vision.
Mini-Society is one of the programmes designed by the Kauffman Centre for Entrepreneurial Leadership to teach entrepreneurship to elementary and secondary school children. The programme is an experience-based approach directed at children ages 8 to 12. Through Mini-Society, children design and develop their own society and identify tasks for which they can earn money.
Ultimately, the children identify opportunities and establish their own businesses to provide goods and services to their fellow citizens. Throughout the 10-week programme, the instructor or course leader conducts in-depth briefings with each student to introduce and explain the concepts underlying the learning experiences. More than 3,500 teachers and youth leaders across the country have been trained to teach Mini-Society. Furthermore, the National Foundation for teaching Entrepreneurship (NFTE) has designed programmes (e.g. summer camps) to teach low-income teens how to start their own businesses.
There are also programmes that are attempting to bridge the gap between the science and business communities (e.g. Stanford University; University of Chicago; University of Colorado-Boulder; University of Iowa; University of Texas-Austin etc). Such programmes will serve as future role models for encouraging the integration of entrepreneurship and technical skills-based education.
A great example of American entrepreneurship can be seen in my following economic tip courtesy of my company Entrepreneur Secrets. Ink is known as ‘black gold’: at printer market leaders Hewlett-Packard, ink and toner supplies make up more than 50% of their annual profits, although they bring in less than a quarter of the company’s $80 billion in sales. At $34 an ounce, it is more expensive that Chanel No.5 eau de Parfum, Dom Perignon 1990 vintage champagne, and 22-year-old Rosebank single malt whisky.
But a new breed of fast-growing upstarts is out to crash the profit party. Across America, retail stores are cropping up in strip malls among the Gaps and Wal-Marts where consumers and small business owners can go to have empty printer and toner cartridges refilled – usually for half of what it costs to buy a new one.
The largest of these outfits, Cartridge World, based in Australia, just passed 1,000 stores worldwide, and its North America affiliate has opened 275 stores in the US. The company is signing up a new US franchisee daily and plans to top 3,000 stores in the country by early next decade, a phenomenal achievement.
There have been ways to reduce printing costs for years for shoppers willing to deal with messy do-it-yourself refill kits or buy from online outfits with iffy-quality products. But the new retail chains will make re-use an option for millions of mainstream PC owners. Customers can either wait for a few minutes for their cartridge to be refilled, or pick up a ‘pre-filled’ one in stock. Most refill franchisees also have their own vans to do pickups and deliveries to local businesses, usually at no extra charge.
The fact is that small businesses create the majority of new jobs – 1.6 million (or 64 per cent) of the 2.5 million new jobs created in the U.S in 1996, for example. Since 1980, Fortune 500 companies have cut more than five million jobs while the rest of the economy has added 34 million new jobs.
These statistics are very impressive, but when compared with such statistics for the UK, it can be deduced that the British economy gains considerably more from the small business community. For instance, small businesses account for over 50 per cent of employment outside the public sector, and contributes half the GDP of UK Plc. It follows logically from this, therefore, that small businesses and their ability to create such wealth and employment should be focused on more favourably by our government.
Education in entrepreneurial skills is virtually non-existent in UK primary and secondary schools, as is economic knowledge in general: as a whole we lack a strong understanding of basic economics. But what should we do to address this? The best place to start is to look across the pond at the bastion of entrepreneurial activity: America.
Hundreds of US colleges and more than 90 university-based centres of entrepreneurship now offer entrepreneurship training. Twenty years ago, only a handful of colleges even offered entrepreneurship courses. Today, education in this arena is proliferating across the country.
The National Council on Economic Education has focussed on the teaching of complex entrepreneurship skills such as opportunity recognition, utilising resources in pursuit of opportunity, and mastering long-term vision.
Mini-Society is one of the programmes designed by the Kauffman Centre for Entrepreneurial Leadership to teach entrepreneurship to elementary and secondary school children. The programme is an experience-based approach directed at children ages 8 to 12. Through Mini-Society, children design and develop their own society and identify tasks for which they can earn money.
Ultimately, the children identify opportunities and establish their own businesses to provide goods and services to their fellow citizens. Throughout the 10-week programme, the instructor or course leader conducts in-depth briefings with each student to introduce and explain the concepts underlying the learning experiences. More than 3,500 teachers and youth leaders across the country have been trained to teach Mini-Society. Furthermore, the National Foundation for teaching Entrepreneurship (NFTE) has designed programmes (e.g. summer camps) to teach low-income teens how to start their own businesses.
There are also programmes that are attempting to bridge the gap between the science and business communities (e.g. Stanford University; University of Chicago; University of Colorado-Boulder; University of Iowa; University of Texas-Austin etc). Such programmes will serve as future role models for encouraging the integration of entrepreneurship and technical skills-based education.
A great example of American entrepreneurship can be seen in my following economic tip courtesy of my company Entrepreneur Secrets. Ink is known as ‘black gold’: at printer market leaders Hewlett-Packard, ink and toner supplies make up more than 50% of their annual profits, although they bring in less than a quarter of the company’s $80 billion in sales. At $34 an ounce, it is more expensive that Chanel No.5 eau de Parfum, Dom Perignon 1990 vintage champagne, and 22-year-old Rosebank single malt whisky.
But a new breed of fast-growing upstarts is out to crash the profit party. Across America, retail stores are cropping up in strip malls among the Gaps and Wal-Marts where consumers and small business owners can go to have empty printer and toner cartridges refilled – usually for half of what it costs to buy a new one.
The largest of these outfits, Cartridge World, based in Australia, just passed 1,000 stores worldwide, and its North America affiliate has opened 275 stores in the US. The company is signing up a new US franchisee daily and plans to top 3,000 stores in the country by early next decade, a phenomenal achievement.
There have been ways to reduce printing costs for years for shoppers willing to deal with messy do-it-yourself refill kits or buy from online outfits with iffy-quality products. But the new retail chains will make re-use an option for millions of mainstream PC owners. Customers can either wait for a few minutes for their cartridge to be refilled, or pick up a ‘pre-filled’ one in stock. Most refill franchisees also have their own vans to do pickups and deliveries to local businesses, usually at no extra charge.
Friday, 1 February 2008
What Is Entrepreneurship?
There is no universally accepted definition of entrepreneurship, but a definition supplied by Eugene Luczkiw, Director of the Institute of Enterprise Education, aptly describes enterprise and its link with education:
"to facilitate development of enterprising individuals who possess a positive, flexible and adaptable disposition towards change seeing it as normal and an opportunity rather than a problem. To see change in this way an enterprising individual has a security borne of self-confidence and is at ease when dealing with insecurity, risks, difficulties and the unknown.
An enterprising individual has the capacity to initiate creative ideas, develop them, and see them through into action in a determined way. An enterprising individual is able, even anxious to take responsibility, and is an effective communicator, negotiator, influencer, planner and organiser. They are active, confident, purposeful: not passive, uncertain and dependent."
Entrepreneurship and the extent of entrepreneurial activity within the UK has only just started to command attention over recent years. With regards to employment and the workforce at large, the emphasis had been on assigning much resources to attracting inward investment –large companies with the capability of employing a vast amount of people at one time.
Repetitive failures on behalf of government to successfully secure foreign investors over the past few years (let's face it, who can compete with the tiny wages paid in the Far East and Eastern Europe) has only served to confirm doubts about the viability and the 'economic sense' in attaching as much importance to achieving inward investment.
I have long argued for a substantial re-addressing of the existing balance between: resources awarded to encouraging the growth and development of indigenous businesses; and resources awarded to attracting employers from overseas to invest in our infrastructure and, more specifically, our workforce.
The prime argument behind this is that the latter is essentially a short-term solution to the problems of the UK economy. It is also damaging as it often proves insensitive to the culture and environment of the local area, and eventually causes a severe unemployment situation – this is particularly dire when the vast majority of the working population of the area were employed by the company who had set up in the area only a few years ago.
Early indications show that the former is increasingly 'catching up' with the latter, if only in the 'discussion' sense for the time being.
The future of entrepreneurship lies with our young population. If a strong and sustainable entrepreneurial culture is to exist, it is essential that it is fostered at the earliest possible stage. If more emphasis is placed on teaching the basic principles of entrepreneurship, thereby encouraging people to develop commercial awareness and attaching a more outward-looking view, we would be in a better position to encourage a greater percentage of business start-ups and expansions.
So in the strong tradition of my company, Entrepreneur Secrets, what would I advise would-be entrepreneurs to do? This is where I come into my own –to give people ideas to just 'go out and do'. And here is a great example that I've actually been working on since 2006! It involves the biggest industry in the world – the food industry – and the fact that it has been on the threshold of a great change for two years, in Europe at least. And with it will bring great opportunities for those who will be ready for these changes.
Agriculture has been one of the flagship areas of European collaboration since the early days of the European Community. In negotiations on the creation of a Common Market, France insisted on a system of agricultural subsidies as its price for agreeing to free trade in industrial goods. The Common Agricultural Policy began operating in 1962, with the Community intervening to buy farm output when the market price fell below an agreed target level.
This helped reduce Europe's reliance on imported food but led before long to over-production, and the creation of 'mountains' and 'lakes' of surplus food and drink. The Community also taxed imports and (from the 1970s onward) subsidised agricultural exports. These policies have been damaging for foreign farmers, and made Europe's food prices some of the highest in the world. European leaders were alarmed at the high cost of the CAP as early as 1967, but, despite this, radical reform began only in the 1990s.
The aim has been to break the link between subsidies and production, to diversify the rural economy and to respond to consumer demands for safe food, and high standards of animal welfare and environmental protection. There are some French arguments for saving the CAP which sound respectable. Jacques Delors, a former head of the European Commission, put it best when he said he would not sacrifice the French countryside on the altar of world trade. The beauty of France and the glories of its food and wine are indeed splendid, and help make the country the world's most popular tourist destination.
But the idea that the CAP is all about helping rustic smallholders to keep making rare cheeses has very little to do with reality. In fact, 80% of the EU's farm subsidies go to the 20% of the Union's farmers with the biggest farms. Because EU subsidies are linked to production, they encourage ugly, intensive, industrial farming. The people the CAP helps most are big businessmen with vast fields of sugar beet in northern France or miles of bright-yellow oil-seed rape in southern England.
The key reform proposed by the European Commission is to cut the link between farm subsidies and production. The same amount of taxpayers' money would continue to pour into the European countryside, but under the Commission's proposals it would increasingly be directed towards environmental protection and rural development, and away from intensive farming.
Those who think farming is dead and that there is no money in it need to think again. The almost mass exodus from the countryside means that farms are now exchanging hands for relatively little money but, if run properly, could soon turn into goldmines under the new subsidy regime. Farms which concentrate early on goals that ordinary people genuinely support, such as beautifying the countryside, will do particularly well. This is because more money would be spent on these activities as the Commission caps the amount that the largest farms receive, so ending the anomaly of the wealthiest landholders, such as England's Prince Charles, doing particularly well out of the CAP.
In addition, biofuels could provide a major income for Britain’s arable farmers. Even without demand for the 'green' fuel, recent falls in output – thanks to drought and low stocks – will keep prices high. Prices will rise by between 20% and 50% by 2016. Production in the US, which mainly uses domestic corn, is expected to jump by 50% in 2007 – and to double by 2016. Meanwhile in Brazil, currently the world's fastest growing ethanol producer, biofuel output is set to hit 44bn litres over the next 10 years, 145% more than in 2006.
The idea of picking up a cheap farm which prices are still low is an attractive proposition, and one that should be considered carefully before farm prices go the same way as house prices over a ten-year period.
"to facilitate development of enterprising individuals who possess a positive, flexible and adaptable disposition towards change seeing it as normal and an opportunity rather than a problem. To see change in this way an enterprising individual has a security borne of self-confidence and is at ease when dealing with insecurity, risks, difficulties and the unknown.
An enterprising individual has the capacity to initiate creative ideas, develop them, and see them through into action in a determined way. An enterprising individual is able, even anxious to take responsibility, and is an effective communicator, negotiator, influencer, planner and organiser. They are active, confident, purposeful: not passive, uncertain and dependent."
Entrepreneurship and the extent of entrepreneurial activity within the UK has only just started to command attention over recent years. With regards to employment and the workforce at large, the emphasis had been on assigning much resources to attracting inward investment –large companies with the capability of employing a vast amount of people at one time.
Repetitive failures on behalf of government to successfully secure foreign investors over the past few years (let's face it, who can compete with the tiny wages paid in the Far East and Eastern Europe) has only served to confirm doubts about the viability and the 'economic sense' in attaching as much importance to achieving inward investment.
I have long argued for a substantial re-addressing of the existing balance between: resources awarded to encouraging the growth and development of indigenous businesses; and resources awarded to attracting employers from overseas to invest in our infrastructure and, more specifically, our workforce.
The prime argument behind this is that the latter is essentially a short-term solution to the problems of the UK economy. It is also damaging as it often proves insensitive to the culture and environment of the local area, and eventually causes a severe unemployment situation – this is particularly dire when the vast majority of the working population of the area were employed by the company who had set up in the area only a few years ago.
Early indications show that the former is increasingly 'catching up' with the latter, if only in the 'discussion' sense for the time being.
The future of entrepreneurship lies with our young population. If a strong and sustainable entrepreneurial culture is to exist, it is essential that it is fostered at the earliest possible stage. If more emphasis is placed on teaching the basic principles of entrepreneurship, thereby encouraging people to develop commercial awareness and attaching a more outward-looking view, we would be in a better position to encourage a greater percentage of business start-ups and expansions.
So in the strong tradition of my company, Entrepreneur Secrets, what would I advise would-be entrepreneurs to do? This is where I come into my own –to give people ideas to just 'go out and do'. And here is a great example that I've actually been working on since 2006! It involves the biggest industry in the world – the food industry – and the fact that it has been on the threshold of a great change for two years, in Europe at least. And with it will bring great opportunities for those who will be ready for these changes.
Agriculture has been one of the flagship areas of European collaboration since the early days of the European Community. In negotiations on the creation of a Common Market, France insisted on a system of agricultural subsidies as its price for agreeing to free trade in industrial goods. The Common Agricultural Policy began operating in 1962, with the Community intervening to buy farm output when the market price fell below an agreed target level.
This helped reduce Europe's reliance on imported food but led before long to over-production, and the creation of 'mountains' and 'lakes' of surplus food and drink. The Community also taxed imports and (from the 1970s onward) subsidised agricultural exports. These policies have been damaging for foreign farmers, and made Europe's food prices some of the highest in the world. European leaders were alarmed at the high cost of the CAP as early as 1967, but, despite this, radical reform began only in the 1990s.
The aim has been to break the link between subsidies and production, to diversify the rural economy and to respond to consumer demands for safe food, and high standards of animal welfare and environmental protection. There are some French arguments for saving the CAP which sound respectable. Jacques Delors, a former head of the European Commission, put it best when he said he would not sacrifice the French countryside on the altar of world trade. The beauty of France and the glories of its food and wine are indeed splendid, and help make the country the world's most popular tourist destination.
But the idea that the CAP is all about helping rustic smallholders to keep making rare cheeses has very little to do with reality. In fact, 80% of the EU's farm subsidies go to the 20% of the Union's farmers with the biggest farms. Because EU subsidies are linked to production, they encourage ugly, intensive, industrial farming. The people the CAP helps most are big businessmen with vast fields of sugar beet in northern France or miles of bright-yellow oil-seed rape in southern England.
The key reform proposed by the European Commission is to cut the link between farm subsidies and production. The same amount of taxpayers' money would continue to pour into the European countryside, but under the Commission's proposals it would increasingly be directed towards environmental protection and rural development, and away from intensive farming.
Those who think farming is dead and that there is no money in it need to think again. The almost mass exodus from the countryside means that farms are now exchanging hands for relatively little money but, if run properly, could soon turn into goldmines under the new subsidy regime. Farms which concentrate early on goals that ordinary people genuinely support, such as beautifying the countryside, will do particularly well. This is because more money would be spent on these activities as the Commission caps the amount that the largest farms receive, so ending the anomaly of the wealthiest landholders, such as England's Prince Charles, doing particularly well out of the CAP.
In addition, biofuels could provide a major income for Britain’s arable farmers. Even without demand for the 'green' fuel, recent falls in output – thanks to drought and low stocks – will keep prices high. Prices will rise by between 20% and 50% by 2016. Production in the US, which mainly uses domestic corn, is expected to jump by 50% in 2007 – and to double by 2016. Meanwhile in Brazil, currently the world's fastest growing ethanol producer, biofuel output is set to hit 44bn litres over the next 10 years, 145% more than in 2006.
The idea of picking up a cheap farm which prices are still low is an attractive proposition, and one that should be considered carefully before farm prices go the same way as house prices over a ten-year period.
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