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BAB-37 September 2005 Analysis
For the September survey we invited panellists to give their views on graduates seeking advice on starting a business, graduates as promising entrepreneurs, under 25s and enterprise training, Production and Manufacturing start ups, collateral, businesses with more than five full time employees, start ups by sector plus the quarterly trends questions.The trends charts from the responses to the regular quarterly questions can be found via the Trends link on the Home page of the ukbab website.
225 Business Advisers responded to this Survey.
Survey Findings
The National Council for Graduate Entrepreneurship was formed in 2004 and aims to increase awareness among graduates of the possibility of becoming an entrepreneur as a career option. Entrepreneurship has been a growth study area particularly since the launch in 2000 of the Science Enterprise Challenge initiative, and pioneering courses are helping to bring out the innovative dimension, for example through the development of creative problem solving skills
Panellists were asked if they have noticed an increase in the incidence of recent graduates seeking advice on starting a business. There were just over a quarter (26%) of respondents for whom this question was not applicable, but of those for whom it was applicable, 14% have noticed an increase in the incidence of recent graduates seeking advice on business start-ups, while 76% have noticed no change and 9% have observed a decrease or significant decrease.
The perceptions among the communities of both business advisers and smaller business owners were tested with the second question in this month's UKBAB survey. The same question was also asked in the parallel UK Business s Barometer (UKBB) and the results are compared.
There was broad agreement between the two communities - most heavily grouped around average (46% from UKBAB and 51% from UKBB). 21% of the UKBAB respondents felt they would make promising entrepreneurs but 35% thought they would be unpromising or very unpromising.
Note: all the above percentages are quoted after adjusting for those who responded with don't know: these amounted to 20% of UKBAB respondents and 30% of UKBB respondents.
One respondent commented that those with several years post graduate practical experience are more successful as entrepreneurs, but the most successful are the skilled (non-graduate) who decide they want more from life than working for someone else because they appear to have more drive and determination.
In another comment, a respondent thought that students have unrealistic expectations about success due to living in an 'instant' world.
Recent surveys have suggested that young people experiencing enterprise training at school or college are more likely to consider self employment as an option. In spite of this, 71% of respondents say that less than one quarter of their younger clients, aged under 25, had some form of enterprise training at school, while 1% judge that over three quarters of this group have had that background experience.
Note: the above percentages are quoted after adjusting for those who responded with don't know: these amounted to 56% of UKBAB respondents.
Surveys regularly report declining employment in the production and manufacturing sector (manufacturing industry). 68% of respondents (88% after adjusting for those selecting 'don't know') perceive the trend of declining employment in the production and manufacturing sector being reflected as a decline in the number of business start-ups in that sector.
After adjusting for the 7% of respondents who selected 'don't know', 59% of respondents think that using the home as collateral to secure finance is a very common or fairly common practice amongst entrepreneurs. One observation received was that bank managers are still reluctant to introduce schemes such as the Small Firms Loan Guarantee Scheme despite reducing their debt exposure.
Our respondents are drawn from different specialisms of business advice, some of which relate to particular business activities or stages of business, for example advising business start-ups. Responses to the following two questions are very dependent on the differences between types of business advisers.
39% of the Business Advisers responding to the survey state that more than 20% of their clients have more than five full-time employees, although 21% of respondents say that less than 5% of their clients are in this category. 92% have found that the greatest growth in business start-ups has been in the Services sector.
Both of these results are given excluding those selecting 'don't know', i.e. 2% from the former result relating to number of full-time employees and 9% from the latter result relating to sector of start-ups
On start-ups, a comment received made the point that unregulated outsourcing is leading to service sector jobs/opportunities moving abroad in the same way as manufacturing sector industries have in the past. This commentator believes that long term prospects for new business start-ups are therefore very bleak.
Trends Questions
The summer months are experienced by many business advisers as seasonally quiet due to the summer holidays. Our results are not seasonally adjusted.
The overall average number of clients seeking business advice from our respondents has increased over the past three months. Although the proportion of respondents experiencing significant increases is slightly lower than in the June quarter, there was a nearly 9% increase in the percentage of respondents experiencing a slight increase.
Amongst comments received were views that failure to take advice early on frequently leads later to problems with bureaucracy, either from cutting corners or from failing to register with HMRC.
There was a small decrease in the number wanting to start a business in the September quarter of 2005.
Clients' ability to gain access to finance was rated on average as having improved a little over the last quarter (after adjusting for the 'not applicable' responses).
The average percentage of Advisers' clients experiencing a shortage of skilled labour decreased during the Summer quarter (after adjusting for the 'not applicable' responses).
In the third quarter, Advisers were on average slightly less optimistic about the continuance of their clients trading over the next year. Although 15% of Advisers consider that none of their clients will close over the next year, compared with 13% in June, only 77% thought that up to 20% of their clients might cease trading compared with 85% in the June quarter. Expectations of higher numbers of business cessations increased the quarter to 8% from 2% in June who thought that over 20% of their clients might cease trading over the next 12 months.
Listed below are extracts from feedback into the September 2005 Survey BAB37
Views expressed are those of individual panellists and may not represent those
of the University.
Shortage of skilled labour - this is a misleading statement / question / myth and is a silly way of looking at the issue. In a market economy, Skilled labour can generally be found by paying more. The question that should be asked is "For what jobs are you having to offer higher pay to get the right applicants that you appoint." Most employers shout shortage of skilled labour when they mean they cannot attract the right people at the wage they want to pay / are used to paying / can pay without increasing their prices / efficiency.
Difficulty in obtaining finance for start-up, lack of suitable trained employees and government/EU red tape are increasingly stifling people who wish to start-up in business. In 1997 DTI figures showed that on average a business needed to budget £2K per year for administration costs [insurance, tax etc] this figure of unproductive costs a business has to find has risen to nearly £5K pa.
The clients that I see are in a rural area where the likelihood of manufacturing starts is quite low anyway. There has been an increase in the number of clients looking to start a business and many of them are mature people contemplating a career change after working in the professions, industry or the public sector.
As I am not taking on new clients, I cannot be sure from first-hand experience of what is happening in the business start-up world.
There is still a recurring problem of individuals starting up in business without taking advice from professional accountants, often resulting in late registration with HMRC.
increased employment legislation together with unregulated outsourcing opportunities means that it is expensive and risky to have uk based employees so that all service sector jobs / opportunities will move abroad in much the same way as our manufacturing industries, now long forgotten. there will soon be no need to train UK employees. and the long term prospects for new business start ups are very bleak unless their services can only be carried out in the UK, but it is difficult to see who will be able to afford these services in the future.
I cannot comment authoritatively on the impact of enterprise training in schools. However the overwhelming majority of start up businesses that I encounter that survive beyond two years undoubtedly benefit from undertaking a business start up programme and producing a realistic business plan. Overwhelmingly, virtually all young businesses facing problems who remedially undertake a business start up programme express the view that they wish they had done this at the outset.
New graduates make poor entrepreneurs, since most leave University with a feeling that they know it all. Those with several years post grad. practical experience are much more successful. The most successful start ups of all are the skilled (non graduate) who decide that they want more from life than working for someone else: they appear to have more drive and determination. However they are also the most likely to cut corners in the early years and have problems with bureaucracy.
Reductions in demand or enquiries during past 3 months most likely due to season . i.e. just before and/or during summer holidays when most business slow down.
Question 7 seems so narrow, it misses an opportunity. Why not subdivide and include such things as IT ( marked growth ) cleaning and maintenance 9marked growth)
Glad to see the first four questions in there. I'm a start-up advisor and also the originator of an endorsed enterprise programme delivered in schools (14-19): www.soultradersworkshops.com if anyone's interested...
However, my experience tells me although there is certainly increased enterprise interest and it's finally being pushed (although still with an academic bent rather than business led...sorry guys but it has to be said), too many students have unrealistic expectations about 'success', given that few really understand the meaning of patience, perseverance, resilience, literacy, numeracy, interpersonal skills and effort, raised as most are on a media diet of instant everything, in the midst of overworked underpaid overwhelmed teachers largely uninformed about actual business issues. Okay, rant over...thanks for asking!
Although there has been a slight decrease, this is historically our slow period anyway as seasonal work is readily available. As the summer season ends, we are expecting a return to normal.
Bank managers are still reluctant to introduce schemes such as the Loan Guarantee Scheme despite reducing their debt exposure. They do however seek homes as security for overdrafts and loans, normally tied in with high monthly insurance covers. This does have a detrimental effect on potential entrepreneurs.
It is scandalous that universities/colleges have so many graduates yet we suffer from shortages of doctors, dentists, nurses, electricians, joiners etc. The universities have failed the nation as they continue to turn out large numbers of people with qualifications in 'useless' subjects and we then have to import people to do essential work. Universities should realise that providing comfortable livings for a large number of people is not their primary use.
