Self-Employment and Business Start ups a viable alternative to paid employment?

Transcription

1 Self-Employment and Business Start ups a viable alternative to paid employment? In November 2014 the organised a learning seminar to discuss the topic of self-employment and business start-ups. The seminar included a presentation by Armando Pardo, from the Association of Community Based Business Advice, on his experience of working with and supporting self-employed people and the viability of self-employment as a realistic alternative to paid employment. This was followed by a discussion, focusing on the following three questions: What is the best way of supporting people to have realistic ambitions about self-employment? Is there too much focus on the start up stage and not enough on support to grow their business? Should the measure of a successful outcome be based on the number who are able to earn a living wage rather than the number of start ups? Key points of Armando s presentation In 2014, 4.6 million people were registered as self-employed in the UK 15% of total employment. From the average median income for self-employed people has fallen by 22% to 207 per week. There are over 2.3 million self-employed people earning below 207 per week. More should be done to highlight the contribution made by microbusinesses. A failure to understand the difference between registering a business and creating a sustainable enterprise exists in both statutory and third party business support services. Small businesses often struggle to attract adequate sales due to the large breadth of suppliers and competitors. Successful entrepreneurs need to be multi-skilled in producing, delivering and selling. The more skilled an individual, the better chance they have of earning a living from business activity. It is important that enterprise should be made available to all, including people experiencing multiple disadvantage. Small business support is fundamental to the creation of successful, sustainable enterprises that provide a living for the individuals and families that run them. It is important that clients should not be treated as outputs by support services targeted, personalised support that makes use of partnerships between different organisations is needed. 1

2 Summary of the Presentation: Armando started his presentation by informing the group that he and Paul had been working in enterprise development for over 30 years, with social change being the primary focus of their work. He defined social change as helping people to create their own jobs to provide for themselves and their families. Armando highlighted the differences between social enterprises, often dismissed as lifestyle businesses, and high growth, high tech, scalable enterprises. Different enterprise development agendas exist; with the wealth creation agenda winning to the detriment of the social agenda, as policymakers and mainstream business support organisations do not always favour the latter. Armando stated his belief that more needs to be done to highlight the contribution being made by microbusinesses. The speaker then discussed business creation and the importance of sustainability. Armando highlighted his belief that an individual registering a business does not automatically lead to a positive output, primarily due to the ease at which a business can be registered. Armando s organisation regularly sees people who have had a company for two or more years but have not made any sales through them. Similarly, people who are registered self-employed but that are not yet making any money. At the heart of the current problems in the support available to help entrepreneurs is the lack of recognition given to the difference between registering a business and creating a sustainable enterprise. The UK has experienced a significant increase in the amount of self-employed people in recent years. In 2014, over 4.6 million people were registered as self-employed, accounting for 15% of total employment. This represents the highest level of self-employment for 40 years. Additionally, there are 356,000 employees who have a second job working as self-employed. The rise in total employment since 2008 has predominantly been among the self-employed. However, whilst self-employment has risen since the recession, the average median income per week from self-employment has fallen markedly 22% from to 207 per week. This means that there are over 2.3 million self-employed people earning below this figure. Armando then discussed the level of income needed for a self-employed individual to earn a living from their business activity, using the Minimum Income Standard ( 16,000 for a single person in London; 27,000 for a lone parent with one child) as an appropriate measure. Armando highlighted the distinction between sales and adequate sales in context of business costs, and how it can take years for businesses to grow into profit-making endeavors. It s difficult for businesses to attract adequate sales because of the age of consumption we now live in. As consumers we are always on the look out for goods and services that meet certain criteria in terms of quality and price. The 2

3 seemingly limitless breadth of suppliers is often to the detriment of new businesses, and means they need to produce and sell goods and services at the right standard and price, whilst also being able to attract paying consumers. This dual criterion requires a myriad of skills: producing, delivering and selling. Therefore, successful entrepreneurs need to be multi-skilled. Invariably however some people may be skilled in one of these areas but not all three. As a result it is the most skilled clients that have the better chance of earning a living from business activity. The priority for those who do not possess the necessary skills required to be successful is firstly to fill the skills gap and secondly to extend the time frame available to pursue their business ideas. Armando concluded his presentation by emphasising the importance of making enterprise accessible to all, including people experiencing multiple disadvantages. The real predicament is how best to support people in those situations. He highlighted the importance of building partnerships between different bodies and organisations, as well as being sure to not treat clients as outputs that can t be referred to or shared amongst providers. Small business support is fundamental to the creation of successful, sustainable enterprises that provide a living for the individuals and families that run them. In a society in which a multi-layered approach to earning is increasingly becoming the norm rather than the exception, such targeted support is crucial. Summary of key discussion points It is important to be realistic to individuals wishing to go into selfemployment, whilst not quashing their entrepreneurial spirit this is a tough path to navigate for small business support advisors. Lack of industry-specific mentoring and advice from individuals who have been successful in their particular field this issue could be addressed by engaging with the commercial sector to acquire both capital and knowledge. Enterprise support offered by Jobcentre Plus is inadequate and delivered by staff not properly trained in the field. There is a gap in practical support available to new businesses on a range of issues including finding office space and taxation. There seems to be a lack of a coordinated approach and support to alleviating and mitigating against small business failures 80% of businesses in the UK fail in the first five years. Too much of an emphasis on high-tech, scalable business proposals more interest needed in facilitating and supporting small businesses. Fundamental changes are needed in the measurement of selfemployment outputs funders (statutory and voluntary/charity sector) focus too heavily on hard outputs such as the number of the businesses registered. Capturing softer outcomes (e.g. skills development) would help put more emphasis on supporting the development of businesses, not just the creation of them. The Living Wage and Minimum Income Standard should be incorporated into any new methods of measuring outcomes. 3

4 The discussion: 1. What is the best way of supporting people to have realistic ambitions about self-employment? The balance between being realistic and quashing entrepreneurial spirit is tough to navigate for small business support advisors and organisations. It is important to not quash that spirit if a business idea seems unrealistic or badly planned out. If an individual has a passion for something (e.g. producing music), then that passion must drive the individual if they wish to be selfemployed. Its up to organisations like those in attendance to facilitate and help develop that passion into a potential business. A number of arts organisations were at the seminar and it was agreed that this particular sector lends itself to collaboration and forming partnerships, even if a sustainable income is only possible for a few. Example: Monster Playground, born out of Raw Material by Miles Romans-Hopcraft. Miles devised the project and is now testing its business model. It requires a team of people with a wide range of skills including sales, marketing, DJing, music production and photography. Lack of industry-specific mentoring and advice from individuals who have been there and done it in their particular field of expertise. This is an issue that could potentially be addressed by engaging with the commercial sector as a means of acquiring both capital and knowledge. This needs to include mainstream stakeholders for example Metro Bank and Virgin Money were cited as two such organisations. With regards to employment support, it was agreed that the enterprise support offered by JCP is inadequate, and is delivered by staff not properly trained in the field. Further to this, employment support is currently not regulated. This is something that, according to those in attendance, should be addressed. Additionally, the support available for the self-employed is inconsistent in terms of quality compared with the support available for normal jobseekers. Also raised during the discussion was who was eligible for selfemployment support. For example how disadvantaged do these people need to be? Are there parallels with those looking for normal work? It was suggested that a breakdown analysis of the journey of starting a business would be helpful to disseminate to policymakers and influential business people, as a way of promoting and shaping small enterprise support. 2. Is there too much focus on the start up stage and not enough on support to grow their business? The group identified a void in practical support available to new businesses on issues including finding office space and how to handle taxation. 4

5 Lack of a coordinated approach. There seems to be a lack of support to alleviate and mitigate against potential business failures 80% of businesses in the UK fail within the first five years. Too much emphasis on high-tech, scalable business proposals. More interest needed in social enterprises and how best to support and facilitate both their inception and development. There is an issue of offering start-up enterprise loans to people who then have no way of paying it back and subsequently find themselves in debt. This would indicate a focus on the start-up phase as a means of getting people off JSA, with little thought about how individuals can develop and sustain a profit-making business. 3. Should the measure of a successful outcome be based on the number who are able to earn a living wage rather than the number of start ups? The group agreed that an alteration in the measurement of selfemployment outputs was key to initiating change within the sector. Funders (both statutory and voluntary/charity sector) focus too heavily on the hard outputs associated with self-employment schemes. Capturing more nuanced soft outcomes other than the number of registered businesses or the income gained (e.g. skills development) is one way of altering this focus. Changing outcome interpretations would help put more emphasis on supporting the development of businesses, not just the creation of them. It was agreed that both the Living Wage and Minimum Income Standard should be incorporated into any new method for measuring successful self-employment outcomes. List of Attendees: Katy Jones Miles Romans-Hopcraft Tim Brown Steve Kerr Armando Pardo Paul Mayhew Sarah Ewans Clive McIntyre Sioned Churchill Douglas Gunn Marcus Langley The Work Foundation Raw Material Raw Material LVSC ACBBA (Speaker) ACCBA Heart n Soul Havering Mind November