Finance: Wanted: an ABC for greenhorn entrepreneurs

Many small companies desperately need business advice, Roger Trapp reports, if they are to weather their early years.

The optimistic business climate is boosting start-ups in much the same way that it is helping other companies; new starts are running at a seven- year high and showing annual growth of 11.5 per cent. But, in its latest report on small and medium-sized enterprises (SMEs), the Institute of Chartered Accountants warns that growth and development among smaller companies could be jeopardised by a lack of properly structured advice.

The survey, "Going for Growth", published this week, indicates that many small businesses have no clear strategy for growth, many do not have a written business plan, and fewer than half have stated growth targets.

The institute identifies three categories of business: micro-businesses, with no more than 10 employees; small businesses, with between 11 and 50 employees; and medium-sized businesses, with between 51 and 200 employees. It sees significant differences between the categories, so that, while lack of strategic and growth planning was found to be most acute among micro- and small businesses, it was also clearly evident within the sector of medium-sized businesses.

Richard Longley, chairman of the institute's enterprise group, said: "The feel-good factor is very apparent among SMEs, not least due to the positive political mood, which has recently seen Tony Blair declaring that small and growing firms are the bedrock of a successful enterprise economy. Equally evident, however, is the concern among the chartered accountants who advise these businesses that many of them are embarking on their expedition into the commercial arena without a map or even a clear destination in mind. There can be no doubt that help is at hand, but our findings indicate that the support network is still often unclear, with the role of government and other official bodies not yet clearly communicated or explained."

The research underlines this lack of clarity regarding the support services - some 40 per cent of respondents are unwilling to suggest where to seek advice on training, marketing or exports. Moreover, there are clear indications that the intended co-ordinating role for business links is not yet fully established, and even when they were aware of support agencies, many respondents were reserved in their response.

Among the report's other findings are that information technology could make a far greater contribution to developing the growth potential of smaller businesses. The research also reveals the need for wider training, particularly in financial skills. The greatest passion, though, is reserved for the effects of regulations, or "red tape".

Asked what was the single most important change they would like to see the Government make to assist smaller businesses, there was a resounding cry of "reduce the stranglehold of regulation" - though this feeling was not so pronounced as in previous years. This suggests, says the institute, that, while it remains a hot issue, "the corner may have been turned". Mr Longley added that there was a more positive feeling than in the previous two years that surveys had been conducted, when the titles of the reports were "Burdens on Smaller Businesses", and "Barriers to Growth".

This impression was reinforced by the drop in business failures, which are reportedly down to their lowest level since 1990, and 12 per cent down on the corresponding period last year. But he said: "Almost inevitably, there are a number of clouds to which this silver lining comes attached. What is clear is that some positive steps should be undertaken to overcome a variety of obstacles that continue to stand between the SMEs and growth."

If SMEs are going to seize the opportunities offered by a buoyant economy and a new sense of optimism, "they need both the environment in which to convert those positive elements into real growth and development, and the ability to find the right guidance through which to map out their course".