Small Talk: Forget the funding... entrepreneurs should bank on having a mentor to give them a flying start
What support do business start-ups need most today in order to get off the ground, grow and eventually prosper?
The obvious answer is funding – especially given the attention focused on the failure of banks to lend to small businesses in recent times – but it may not be the right one. Rather, the evidence increasingly suggests that for large numbers of small businesses, it is decent mentoring support that makes the difference between failure and success.
Research published by the Federation of Small Businesses last year suggested that 70 per cent of entrepreneurs with mentors survive in business for at least five years compared to only 35 per cent of small business founders who don’t have support of this kind. Intuitively, the idea makes sense too – entrepreneurs must have more chance of making it if they can count on the advice of someone who has already done so.
And yet mentoring still feels a little woolly for many people – a fringe benefit it would be nice to have in an ideal world, but not intrinsic to a small business’s chances of success; certainly not more valuable than bank funding. If you feel this way, take a look at the results published last week by GrowthAccelerator, a Government-backed incubator that, via a consortium led by accountants Grant Thornton, provides bespoke advice to growing businesses.
The 15,000 businesses it has worked with over the past two years grew by an average of 32 per cent during the 2013-14 financial year – the typical small and medium-sized enterprise, by contrast, managed only 7 per cent. That growth translated into a 36 per cent increase in the numbers employed by GrowthAccelerator’s clients over the year, compared to the 5 per cent other small and medium-sized businesses managed.
And Cranfield School of Management, which runs a business growth programme for owner-managers of small and medium-sized enterprises, published figures last week from 171 previous participants which showed they grew at almost 20 per cent a year, creating jobs seven times more quickly than other businesses.
For all these success stories, too few small businesses are taking advantage of the mentoring services available. Britain is widely respected by its G20 peers for developing mentoring programmes, but these schemes are of no value to those who don’t use them.
The low take-up rates are doubly frustrating given that in most cases mentors provide their time and expertise at no cost, and the web site Mentorsme.co.uk provides a comprehensive database of accredited mentors. Another initiative that might help launches this week, with accountancy firm Sage hoping that Business Navigators, a new scheme to raise the profile of business mentoring, will persuade more entrepreneurs to seek out support.
The statistics suggest business mentoring works. Those who have used it are overwhelmingly positive about mentoring. And in most cases it is free. So don’t miss out.
Small businesses are the job creators
More evidence, as if it were needed, that it is entrepreneurial small businesses that represent Britain’s best opportunity to drive job creation. Research from accountancy and consulting firm EY shows that, globally, three-quarters of entrepreneurs have plans to hire new staff this year, compared to only 31 per cent of chief executives running large companies. EY said small businesses in Europe are particularly confident about their hiring prospects.
It added, eight in 10 small businesses with hiring intentions are interested in capitalising on investments they have made in new technology. The firm also warns that entrepreneurs are no longer focusing just on home markets for new staff – 55 per cent expect to take on staff in other countries, as mobile working enables them to recruit from a broader talent pool.
“Entrepreneurs, as key drivers of innovation in the global economy, are job creators and are far less risk averse when it comes to employing new people than CEOs of larger companies,” said Maria Pinelly, EY’s global vice chair for strategic growth markets.
Far from technology reducing jobs, it creates employment opportunities, she added.
Mid-cap firms cast a vote for Lib Dems
The beleaguered Liberal Democrats may be having a tough time, but at least one constituency is keen on them retaining a role in government – a survey of medium-sized businesses shows these firms are far more likely to want the Lib Dems to be coalition partners in the next government than Ukip.
The survey, conducted by investment intelligence firm Edison Group, found that if the Conservatives win next year’s general election without an outright majority, 84 per cent of UK mid-caps would prefer to see them forge a coalition with the Lib Dems. Only 16 per cent plumped for Ukip. In the event of Labour being the bigger party, 67 per cent would prefer a partnership with the Lib Dems, though 33 per cent went for Ukip.
Fraser Thorne, managing director of Edison Group, said the findings reflected the desire of businesses to stay within the EU’s remit. “Notably, one in 20 companies state they would plan to move part or all of their business outside the UK to another part of the EU should any UK government try to restrict the EU principle of the free movement of people,” he said. “Business understands the importance of the UK’s relationship with the EU.”
Small Business Person of the Week: Ben Reason Founder, Livework
“Three of us founded Livework in 2000 - my partners were industrial designers and all of us had been working in internet consultancy. We’d increasingly seen that, in the UK at least, people were no longer frustrated with how products worked but with the services they used – they were happy with their BMWs but not their banks.
“We were early pioneers for service design – it’s about taking the same approach industrial engineers have used with manufacturing in order to improve service users’ experience. It’s a relatively new discipline – when we launched we went to talk to the UK Design Council about service design and they told us there was no such thing.
“We were fortunate to get a break from Orange, the telecoms company, which gave us a project that generated sufficient cash to get us started, but in the early days we didn’t earn much – instead, we ran around doing all sorts of different things and building a portfolio.
“Then the recession hit in 2008, which was really tough since we had financial services and public sector clients who just pulled all their work.
“In many ways, we learned more about running a business in those two years than we had in the previous eight, and we kept going – now we’re international with 35 staff and operations in places such as Oslo and Sao Paolo and clients like Channel 4 and the NHS”.
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