Description
Better marketing of Government initiatives to support new and developing businesses.
GROWING
A REPORT ON GROWING MICRO BUSINESSES
Lord Young, May 2013
Y
O
U
R
BUSINESS
THE SECOND PART OF THE REPORT ON SMALL FIRMS
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URN BIS/13/729 - Growing Your Business
Lord Young’s ?rst report as the Prime Minister’s adviser on enterprise and SMEs was Make
Business Your Business, 2012.
Growing Your Business | iii
Contents
Foreword by Lord Young 1
Executive Summary 3
A new package of support for growing small businesses 4
The Vital 95% 6
The Growing Importance of Small and Micro Businesses 6
Factors In?uencing Growth 12
A Focus on Micro Enterprises 12
Using What We
Have in Better Ways 17
Business Schools as “Anchor Institutions” 17
Universities and Colleges 18
The Customer to Grow: Public Sector Procurement 19
Programmes and Schemes to Help Businesses Grow 24
Finance to Grow 30
Employment and Attracting Specialist Skills 36
Relationships with Big Businesses 40
Locations 43
Summary of Help for Growing Small Businesses 47
Acknowledgements 50
Meetings and Engagements 51
Notes 53
Growing Your Business | 1
Foreword by
Lord Young
M
y ?rst report on small ?rms,
Make Business Your Business,
was published last year and
dealt with start-ups and the development
of small business. The second instalment
published today, Growing Your Business,
deals in the main with micro-businesses
and small ?rms employing fewer than 25
people. This is an area of some strength
in our economy for we have one of the
best environments in the world for the
creation of new ?rms. What this report
endeavours to do is to help and encourage
all those new ?rms to grow and become an
important part of our economy.
Today we have some 4.8 million ?rms in
existence, a sixfold increase on the number
of ?rms at the time of the Bolton Report in
the early seventies, but of all these ?rms
no fewer than 3.6 million are sole traders
without employees. Programmes like Start-
Up Loans are creating many thousands
more and the purpose of this report is to
help the sole trader take on his or her ?rst
employee, and the micro ?rms to expand
and grow their business.
The UK is one of the few countries in the
EU which has seen the number of people
in employment grow since the 2009
recession. Despite a considerable reduction
in public sector employment over 2010–12,
the private sector has expanded to more
than make up the di?erence. But we are by
no means at the end of this road. Estimates
by the Department for Business Innovation
and Skills (BIS) suggest that if we were
as entrepreneurial as the United States we
would have nearly a million more ?rms.
“
If we were as entrepreneurial
as the United States we would
have nearly a million more ?rms.
Even without that, if we could just help
the million micro ?rms that employ
between one and nine people to employ
on average one more employee we would
transform the economy. If we helped even
a small portion of sole traders to become
employers it would further improve the
unemployment ?gures and our prospects
for the future.
Growing Your Business | 2
Is this possible? Yes, I believe it is. In the
last recession in the early nineties, small
?rms were in debt for over four years. This
time small ?rms have had money in the
bank throughout. Figures from the O?ice
for National Statistics (ONS) indicate
that large corporates are sitting on over
£720 billion. When ?rms large and small
are sitting on cash and not investing, the
missing ingredient for growth is simply
con?dence. Indeed con?dence, or rather
the lack of it, is the origin of many a
recession. If merely £10 billion of this cash
was injected into our economy – in addition
to current levels of business investment
– the UK would see business investment
return to pre-crisis levels.
No report, no matter how well intentioned,
can provide that missing con?dence. What
it can do, and what I hope this report does,
is to highlight the help and assistance that
already exists – or will soon exist – to give
businessmen and women the ability to
grow their businesses. Here are the tools;
now it is up to you.
Lord Young, 2013
Lord Young of Gra?ham
The Rt Hon the Lord Young of Gra?ham PC DL graduated from University College
London before becoming a solicitor. He spent a year in the profession before moving on
to establish a number of successful businesses. He became Chairman of the Manpower
Services Commission in 1982, entered the Cabinet in 1984, became Secretary of State
for Employment in 1985 and in 1987 became Secretary of State for Trade and Industry
and President of the Board of Trade. He was Executive Chairman of Cable and Wireless
plc from 1990 to 1995 and thereafter Chairman of Young Associates Ltd, which invests
in new technologies.
Lord Young is an adviser to the Prime Minister on small business and enterprise. He
published a report on start-ups, Make Business Your Business, in May 2012.
Growing Your Business | 3
Executive
Summary
Prime Minister,
R
ecord numbers of people are starting a business each year, as part
of a burgeoning population of over 4.8 million ?rms in the UK
today.
1
Although three quarters of these ?rms are sole traders there
are nearly a million micro ?rms (with one to nine employees), many with
opportunities for growth.
The purpose of this report is to highlight the abundance of opportunity and support
available for small and medium-sized enterprises (SMEs) and is aimed at policy makers
and all those who advise and champion small businesses.
I want to highlight three areas that I believe create the right conditions for businesses to
ful?l their growth potential:
1.
Con?dence – not only in the economy and overall prospects for growth, but also in
their conviction to make it happen.
2.
Capability – by improving a ?rm’s skills and performance. The evidence is
unequivocal: businesses that seek and engage external help are more likely to grow.
But much more needs to be done to encourage ?rms to invest in their capability.
3.
Coherence – businesses need support that is designed and marketed in a way that
they understand, trust and can ?nd.
Growing Your Business | 4
Capability and skills
•
A greater role for business schools
in the local economy with the
establishment of a new national
“Supporting Small Business Charter”
and accompanying award scheme to
incentivise business schools to help
SMEs grow. This will include advising
small ?rms and increasing the ?ow of
highly quali?ed students and graduates
into SMEs. Business schools will also
become a key part of the referral
process and provision of Start-Up Loans
and Growth Vouchers.
•
A £30 million Growth Vouchers
programme to ?nd innovative
approaches to help SMEs overcome
behavioural barriers to increasing
growth. Funded by Government, this will
aim to unlock growth potential among
small businesses who are holding back
on investing in growth and encourage
them to seek external advice.
Finance
•
In response to high demand, Start-Up
Loans will be boosted by a further £30
million to provide important funding
and mentoring to help young people get
their business ideas o? the ground. The
age limit for entrepreneurial candidates
has been increased from 18-24 up to 30,
and I recommend removing the age cap
altogether.
• SME Growth Loans, to be piloted from
the summer of 2013 and as part of the
Enterprise Finance Guarantee (EFG)
scheme. These will facilitate loans of up
to £25,000 targeting SMEs in their third
year seeking access to growth capital.
This accompanies a new EFG Trade
Credit pilot which uses a Government
guarantee to facilitate additional Trade
Credit provided by suppliers to boost
liquidity for SMEs.
•
£100 million of new funding to SMEs
from the Business Finance Partnership
which promotes new sources of ?nance
to businesses, including peer-to-peer
and crowdfunding.
Public sector procurement
•
A new “single market” commitment
to ensure a simple and consistent
approach is taken across public sector
procurement. Government will consult
public sector bodies and will make this
a legal requirement.
•
The pilot of a proactive function for
Government’s Mystery Shopper to
hold contractors to account in their
relationships with SMEs.
A NEW PACKAGE OF SUPPORT FOR
GROWING SMALL BUSINESSES
In my review of start-up businesses in 2012, I asked the Government to put in place a ?rst
important building block for young entrepreneurs through the creation of Start-Up Loans.
This programme has begun well and should make a considerable di?erence in years to
come.
This review on growing small ?rms accompanies a number of new developments.
Growing Your Business | 5
•
A ?rst national competition to ?nd the
best Councils to engage small suppliers
in local government procurement.
Marketing of Government
schemes
•
Better marketing of Government
initiatives to support new and
developing businesses. I am proposing
a commitment for up to 5% of future
initiatives to be spent on marketing
and advertising, and with a view to
sustaining a commitment over time
where marketing is showing bene?ts.
•
This report will also highlight the range
of existing and new help targeted
at growing SMEs. This includes the
development of a new digital capability
programme for SMEs to make more
e?ective use of the internet and
technology as well as help to export,
take on a ?rst employee and innovate. A
summary of these starts on page 47.
Much of the analysis and support for
business described in this report is
applicable to all parts of the UK. However,
my review and its conclusions focus on
the position in England, accepting that
other arrangements apply in the devolved
administrations.
Growing Your Business | 6
The Vital 95%
THE GROWING IMPORTANCE OF
SMALL AND MICRO BUSINESSES
O
ver recent decades there has been
a remarkable transformation in the
fortunes of the UK economy. In the
early 1980s fewer than 24 million people
were in employment. Today that ?gure
is close to 30 million.
2
It has never been
higher.
Likewise there has been an inexorable
rise in the number of businesses in the
economy. The Bolton Report identi?ed
around 820,000 small ?rms in the UK in
1971.
3
By the turn of the century, according
to o?icial Government estimates of the
business population, this ?gure had
increased to 3.5 million.
Evidently, this rise in the number of
enterprises is part of a long-term trend.
Even more encouraging is the rise in the
number of businesses in recent years. In
2008 there were 4.26 million businesses.
By 2012 this had increased to 4.8 million
– a rise of around half a million from the
onset of the recession.
A number of factors contributed to this
growth. One key factor is the impact of
the internet. It has never been easier to set
up a business, with the internet enabling
greater access to markets, advice and
guidance, marketing opportunities and cost
savings than previously feasible.
The UK also has one of the most e?icient
labour markets in the EU – such ?exibility
and light regulation provides tangible
bene?ts to us all. Economic growth and
employment raises income and improves
living standards. Our employment rate is
well above the EU average and exceeds
that of the United States too.
Growing Your Business | 7
Number of people in employment aged 16 and over, 1983 to 2012 and Number of private sector
businesses in the UK, start of 2000 to start of 2012
The contribution of micro ?rms to the economy is huge
At the start of 2012, 95.5% (4.6 million) of private sector businesses in the UK were micro
?rms (0–9 employees). Micro businesses together accounted for 32% of private sector
employment (7.8 million) and 20% of private sector turnover.
Share of private sector businesses, employment and turnover by employment size-band, 2012
Growing Your Business | 8
This contribution has been increasing over recent years
The contribution of micro businesses to the economy has been increasing in recent
years. The growth in the business population has been driven by micro ?rms which have
increased by 40% since 2000.
Change in the number of UK private sector micro businesses by size band, 2000–2012 (indexed)
But growth has come from ?rms with few employees
Within the micro business population itself growth has been driven predominantly by
businesses without employees. Another interesting trend has been the fall in the number of
businesses with just one employee, particularly since the onset of the recession in 2008.
Change in the number of UK private sector businesses by size band, 2000–2012 (indexed)
Growing Your Business | 9
Coupled with their contribution in other areas, this justi?es a strong focus on helping
micro ?rms to move forward. New and growing small businesses drive economic growth by
stimulating innovation, by creating a competitive spur to existing businesses to increase
their productivity,
4
and by making a disproportionate contribution to job creation.
5
An excellent time to start a business
The rise in the number of businesses in recent years shows that a recession can be an
excellent time to start a business.
The following chart shows that despite tough economic conditions the number of new
businesses has remained remarkably resilient and at historically high levels. Business
closures have remained stable and lower than pre-recession levels.
Estimated business population, start-ups and closures (truncated scale)
One factor that has contributed to the relatively small number of business closures across
2008–12 when compared to previous recessions is the improved ?nancial position of SMEs.
The next chart shows that, in the early nineties, lending to SMEs outstripped their deposits
and so SMEs were net borrowers. In 2007 this position had reversed and SMEs were net
depositors. This meant that SMEs were better able to weather the economic storms that hit
from 2008.
Growing Your Business | 10
Net ?nancial position of SME sector, total lending minus total deposits (SMEs with less than £1
million turnover)
It has always been the case that a recession can be a good time to grow a business. This is
true for a number of reasons. Competitors who fall by the wayside enable well-run ?rms to
expand and increase market share. Factors of production such as premises and labour can
be cheaper and higher quality, meaning that return on investment can be greater.
Research shows that well over half of the companies on the 2009 Fortune 500 list (a yearly
ranking of America’s largest businesses) began during a recession.
6
World renowned ?rms
such as GE, Microsoft and Disney all started during a recession.
Opportunity rather than necessity
Most people in the UK who start up a business do so because they view it as an
opportunity rather than a necessity (motives for growing that business are di?erent, as
we shall see later). The Global Entrepreneurship Monitor (GEM) measures Total early-
stage Entrepreneurial Activity (TEA).
7
The following chart shows that, in the UK, most
entrepreneurial activity is opportunity-driven with less than a ?fth driven by necessity.
Growing Your Business | 11
Total and Necessity entrepreneurship in participating G7 countries, 2012
The next chart shows just how the enterprise activity has strengthened in recent years.
Between 2002 and 2009 the TEA rate stood at around 6%. Since then it has increased year-
on-year reaching 9.8% in 2013. This has seen us pull away from Germany and France and
begin to chase down the US.
Total Early Stage Entrepreneurship in select G7 countries, 2002–2012
Small ?rms and economic growth
Economic growth raises income levels and improves living standards. One of the main ways
this occurs is through job creation; and new and growing small businesses fuel job growth.
A recent study found that of the jobs created each year between 1998 and 2010, small ?rms
and start-ups created around two-thirds.
8
Growing Your Business | 12
Factors In?uencing
Growth
F
or the past 12 to 18 months, I have seen many small businesses grow, often keeping a
low number of employees despite rapid growth in pro?t and turnover.
This is being achieved through:
•
increasing adoption of technology to innovate, raise ?nance and ?nd new customers
•
increasing use of shared services and outsourcing specialist functions, enabling business
owners to keep costs down, stay nimble and respond rapidly to new opportunities.
Growth needs to be measured not just by job creation but also by the economic activity
these ?rms are generating through the ?exible use of people, technology and services.
A FOCUS ON MICRO ENTERPRISES
We know that SMEs dominate the stock of
businesses and the majority of these will
start and remain small – nearly 95% of
all ?rms are micro enterprises employing
fewer than ten people; 75% have no
employees.
9
Government is right to focus much
of its attention on SMEs with high
growth potential and I welcome the
development of GrowthAccelerator
(www.growthaccelerator.com) and other
programmes to support these businesses.
But I know from experience that it is not
easy to spot the high-?yers at an early
stage or to make predictions about their
long-term success. That is why I am keen
that Government keeps up its e?orts to
build the capacity of the wider population
of SMEs, including those that start very
small and have a strong desire to grow.
Growing Your Business | 13
This report concentrates on the
early stages of growth for new micro
businesses – from a sole trader and its
?rst employee, up to ten and beyond.
These will be businesses across a range of
sectors, trading for a couple of years and
establishing themselves, and now thinking
about growth opportunities. But these
lessons could also apply to established
?rms looking to make a step-change in
their performance.
My report emphasises a number of
important factors in?uencing small
business growth:
1. Con?dence remains key
This report will demonstrate how small
businesses, unlike in previous recessions,
have for the most part remained strong
with good growth prospects since 2008.
I meet many small ?rms who ?t this
pro?le – strong viable businesses with very
good growth prospects. But for many of
these ?rms there is no current inclination
or preparation to expand. Over a third
of SMEs in recent research cited the
economic climate as the main obstacle to
the success of the business. 56% of SMEs
that express a need for ?nance say they
do not apply because they do not want
to take on additional risk; and fewer SME
employers aim to grow in 2012 compared
with 2010, particularly among micro
?rms.
10
Challenging economic periods can be a
prime time to strike for growth – markets
that appear to be at their lowest point can
o?er gaps and openings as customers
seek new solutions and alternatives to
the way things were before, and suppliers
become more competitive to win your
business. This is how successful brands
like Screw?x, The Body Shop and Hackett
saw it when they were starting out. These
businesses started very small and faced
many of the challenges small ?rms face
today. When others were pulling back or
just holding on, these businesses were
spotting new market openings and making
the most of opportunities to grow and
expand.
A little later in this report we shall meet
Crux Product Design. This business started
in 2003 as a two-man product design team
and made the decision to expand in 2008.
Crux have now become synonymous with
Great Britain’s London Olympic success as
the designers and makers of the Team GB
cycling helmets. For Crux and many others,
a decision to expand was as much about
a survival strategy as it was about growth
success. Not investing now can make it
much harder to make the most of the
opportunities for growth when economic
prospects start to improve.
2. Strength of ambition matters
Ambitious SMEs are more likely to grow
in terms of turnover and employment.
11
However, while the majority of SMEs
assert that they want to grow, relatively
few achieve this in practice. Fewer than a
quarter of SMEs have what is described
as ‘a substantive ambition to grow’ – in
other words, a desire to grow met with
determination, opportunity and a strong
level of leadership and management to
make it happen.
There will always be “lifestyle” ?rms with
little or no growth ambition, but there will
also be many other ?rms that do not grow
but are well placed to do so. These could
be SMEs that have downsized due to the
recession with a strong desire to grow back
to previous levels. There are others like
the ‘ambitious but unprepared’ that have
a strong aspiration but little awareness
of the opportunity and help available to
them. And then there are social enterprises
Growing Your Business | 14
looking to develop their business model
and extend their help to the people they
employ and the communities they serve.
3. Perceptions a?ect ambition
I am also struck by how much perceived
obstacles can stunt not just a ?rm’s ability
to grow, but also the owner’s desire to
grow. These can be di?iculties navigating
regulations, hiring sta? or exporting. These
psychological barriers sti?e ambition and
discourage people from taking growth
plans forward. I am therefore keen that
one of the results of this review will be to
demystify the misperceptions out there
about growing a business.
4. Small ?rms are using
technology like never before
We are seeing the increasing adoption
of technology amongst small ?rms to
innovate, raise ?nance and ?nd new
customers. These ?rms are realising that
the internet and digital technology is no
longer an optional extra, but a key driver
to growth. An example of this is rising
customer demand for 4G (high-speed
mobile internet) which will both increase
commercial opportunities for SMEs and
test their ability to remain competitive.
5. Small businesses that use
external help are more likely
to grow
Outside assistance has a strong and
positive impact on the growth of a small
business. However, much more needs to be
done to encourage ?rms to invest in their
own performance. As well as an overall
mood of con?dence in the economy, ?rms
need to build con?dence in their own skills.
Intrinsic to this is the strength of a ?rm’s
leadership and management.
This makes it imperative that we
encourage ?rms to improve in the key
areas which can make a sustainable
di?erence to their business. This is why I
have asked Government to put in place a
Growth Voucher programme available for
small and micro ?rms seeking support to
tackle their key growth challenges.
6. SMEs need to broaden their
awareness of sources of
?nance
Small businesses continue to complain
that they are unable to access bank
?nance. But this should not prevent small
?rms from accessing the ?nance they
need – whether from micro ?nance
12
or
alternative sources of ?nance provided by
crowdfunding platforms.
7. There is more Government
itself can do to facilitate new
and growing enterprises
I want new and existing business support
schemes to belong to a coherent package
of help for growing small businesses. This
should include:
•
Better use of existing assets, for
example by helping business schools to
play a central role in the development
of local businesses through better
engagement with their students and
facilities, or by unlocking the huge
growth potential for SMEs through
government procurement.
Growing Your Business | 15
•
Greater emphasis on marketing
Government initiatives. There is an
abundance of support available to
growing businesses, but it is not always
marketed to the small ?rms that need it
most. When I think back to my time as
the Secretary of State for Employment
in the 1980s, I am reminded that the
popularity of the Enterprise Allowance
Scheme (EAS) was due to strong and
well-resourced coverage and a simple
and clear message to unemployed
people looking to set up their own
business. Some of the companies set up
with the assistance of the EAS are even
listed today in the FTSE 100.
I have put forward a proposal to
Government which would enable
departments to use all relevant marketing
channels at our disposal to ensure that
schemes like Start-Up Loans, Growth
Vouchers and the Seed Enterprise
Investment Scheme (SEIS) are e?ectively
targeted at entrepreneurs and potential
investors in enterprises. If we can do this,
I am con?dent that we can repeat the
success of businesses like Superdry and
Warehouse, which were started with the
help of programmes like EAS, and produce
a new generation of successful businesses.
You may not have heard of Crux
Product Design, but you’ve probably
seen the cycling helmets they
developed for Team GB at the 2012
Olympics and Paralympics…
Crux started in 2003 as a two-man
team and you’re now a global brand,
famous for the Team GB cycle helmets.
How did that happen?
When the recession hit, growth was a
necessity rather than a luxury – we were
overly exposed to a small number of
client accounts, so we quickly went about
expanding our client base. It was essential
that we had the con?dence and conviction
to continue with our plans whilst managing
risk. The biggest risk was doing nothing
at all – if we’d battened down the hatches
we’d be out of business.
We also found that being in a recession
meant we could negotiate good deals on
premises and new sta?, as many other
businesses were cutting back.
What key steps were critical to your
growth?
Two key changes have driven our growth:
new premises and new people. Taking on
new sta? was not about increasing our
headcount – it was about investing in a
skillset that could give us that competitive
edge.
Recruiting a
person with
sales and
marketing
expertise
immediately
boosted
Crux sales
and has
CASE STUDY
CRUX PRODUCT DESIGN | James West, Director
Growing Your Business | 16
given us a strong strategic direction to
expand into new markets and develop the
Crux brand.
Moving from a small o?ice to a fully
functioning design studio and rapid
prototyping workshop was also key – it
gave us the room and facilities to expand
and underlined our drive to develop from a
surviving micro ?rm to an ambitious and
sustainable business.
What has been your biggest mistake?
Not understanding the value of marketing
and PR early enough.
What does social media mean to your
business?
Social media is a great way of gathering
market intelligence. We monitor the
interests and trends of prospective
clients, thinking about how we might
o?er solutions to their needs. A key part
of winning the Team GB cycling helmet
contract was the approach we made to UK
Sport via LinkedIn.
What would be your top tip for other
micro businesses?
Keep a close eye on costs: only make
business expenditure on items that you
really need. Start a cash ?ow forecast
from day one and keep it up-to-date.
Maintaining a positive cash balance gives
you speed and ?exibility to capitalise on
business opportunities that may come
your way. And use universities. They’re
an important resource for your business.
Academia and the corporate world
are merging ever closer. Setting and
supporting university projects, for example,
can yield excellent results for both parties
at low cost.
www.cruxproductdesign.com
Growing Your Business | 17
Using What We
Have in Better Ways
T
here is often a call for the Government to come up with new schemes and
programmes to help businesses, yet right under our noses we have assets which can
be developed to o?er further bene?ts to SMEs. I want to use this chapter to highlight
some of these, including business schools and the wider education sector, and government
procurement.
BUSINESS SCHOOLS AS “ANCHOR
INSTITUTIONS”
There are no fewer than 130 business
schools across the country, the majority
attached to universities. These business
schools are seen as one of the big success
stories of UK higher education, producing
large numbers of talented students
of business, management and related
disciplines. Many of their students will go
on to ?nd placements and careers in large
corporate and mid-cap ?rms here and
abroad.
However, in the main, these business
schools play a variable role in the local
economy – graduates generally do not
have ambitions to take up employment
opportunities in small ?rms and small
businesses do not see business schools as
a useful source of help in the local area.
Without direct contact with the small
business sector, I believe business schools
are underselling themselves in terms of
their expertise. Nor do they provide the
breadth of skills and experience students
need to enter the wider world of business,
entrepreneurship and commerce.
I want this to change. I have found that
I am pushing on an open door with
the Association of Business Schools
(ABS). The ABS is equally committed to
increasing direct contact between local
SMEs and business schools, and ensuring
that the latter become a force in their
Growing Your Business | 18
local community. The ABS has agreed to
lead a national programme to recognise
and encourage good practice in the
relationship between business schools,
their faculty and students, and small
businesses. The imperative is to extend
such activities more widely across the
business school community and develop
the capacity of business schools to act as
anchor institutions, supporting economic
development on a sustainable basis.
Incentives and rewards for
business schools
I have asked the ABS to develop a
“Supporting Small Business Charter” and
an associated award scheme to incentivise
business schools to help small ?rms to
grow. This will include the provision of
small ?rm growth programmes, advice
clinics, improving the ?ow of highly
quali?ed graduates into small businesses,
and increasing export potential through
engagement with international students.
As an indication of the high regard to
be associated with this charter, I intend
that business schools in receipt of the
‘Supporting Small Business’ awards should
bene?t by gaining a role in the delivery
and referral for Start-Up Loans, Growth
Vouchers and other elements of the SME
support identi?ed elsewhere in this report.
I will explore this by hosting a summit
at Number 10 in the summer of 2013
which will bring together deans and
other relevant representatives of business
schools, business organisations and other
key players in the local enterprise agenda.
I would like to see a charter and award
scheme in place for the next academic
year.
This charter and award scheme would
underpin a coherent package of help
on o?er from business schools to small
businesses, making the schools easily
identi?ed as places where students and
sta? are keen and able to work with
small ?rms on the specialist areas that
drive their growth. I believe in future such
schools should also encompass resources
such as incubators where small ?rms
and entrepreneurs can interact with the
facilities and students in business schools.
And there should be initiatives to support
high quality academic research into key
issues facing the SME community, such
as crowdfunding and the value of SMEs in
public sector procurement.
UNIVERSITIES AND COLLEGES
As well as business schools, I am
constantly reminded of the expert advice,
collaboration, student placements and
technical support that universities and
colleges provide to local businesses and
?rms operating in specialist areas.
There are many good examples of higher
and further education institutions working
in their local communities to support small
business. Many colleges have dedicated
business development centres open to
businesses for sta? development and
technology improvement. New College
Nottingham, for instance, worked directly
with 1,346 companies in 2011–12, of which
80% were SMEs.
I would like to see universities at the
heart of clusters of innovative businesses.
Knowledge transfer between local
businesses, universities and the research
Growing Your Business | 19
councils will be a key driver for growth.
One way this is already happening
is through the Technology Strategy
Board (TSB) and Knowledge Transfer
Partnerships (KTPs). These support UK
businesses wanting to improve their
competitiveness by bringing a recently
quali?ed graduate into their businesses for
up to three years.
As well as KTPs, I am a ?rm believer
in the value of students undertaking
internships and placements in small
businesses. Students can provide fresh
thinking, opportunities and new talent. In
this report’s chapter on Employment and
Outsourcing I will look more closely at the
issues of graduate recruitment in SMEs. I
also want to ensure that students from all
education institutions (not just business
schools) are given the con?dence and
support to start their own businesses – not
just to be employed in them.
THE CUSTOMER TO GROW: PUBLIC
SECTOR PROCUREMENT
Government procurement has the potential
to create signi?cant business and growth
opportunities for SMEs – £230 billion
per year is spent on goods and services
across the whole public sector.
13
For
small suppliers, winning a share of this
market could be transformational for their
business. This can include procurement
supply chains which can o?er businesses
the opportunity to build capacity and
know-how in what is a huge marketplace.
In this report I want to draw closer
attention to the innovative solutions SMEs
are bringing to the public sector. I also
want to put the spotlight on the approach
taken by local authorities and NHS trusts
to open up opportunities for SMEs in
their procurement, including the way
small suppliers are treated in the contract
process. I am recommending that all parts
of the public sector agree a set of “single
market” principles which all suppliers
can expect when doing business with the
public sector.
A stocktake on progress
There are signs of steady progress in
central government opening up the
procurement process to small suppliers,
marked by a decision to remove Pre
Quali?cation Questionnaires (PQQs) for
contracts under £100,000 in value. This
has demonstrated that procurers can
manage procurement e?iciently without
adding additional burden on themselves
and suppliers.
But the fact is, central government will
need to almost redouble its spend with
small ?rms if it is to achieve its target of a
25% SME market share in procurements by
the end of this parliament (2015).
Moreover, Whitehall procurement only
accounts for about 20% of overall public
sector business won by small ?rms. It is
local government and the NHS which
present the biggest opportunities for
these suppliers – some 70% of small ?rms
supplying the public sector sell to these
two markets alone. However, Government’s
Mystery Shopper (www.gov.uk/doing-
business-with-government-a-guide-
for-smes) shows that Councils and NHS
Growing Your Business | 20
trusts in particular continue to be the most
complained about authorities for their PQQ
practices.
My own conversations with SMEs back
this up. Findings from my review point to
signi?cant constraints in the procurement
process and discouragement across the
wider population of SMEs that public
procurement is impenetrable to new
entrants. The fact that so many small
?rms do not consider government work
an option is a measure of the scale of the
turnaround required.
What can be done about this? I have
identi?ed three areas where I believe
change could make a big di?erence to
SMEs’ ability to win public sector contracts.
1. A greater focus on what
SMEs can o?er
First and foremost SME engagement with
the public sector is about delivering better
value in procurement. I continue to ?nd
examples of small suppliers producing
spectacular gains and at a lower cost than
larger (and often incumbent) government
contractors.
Despite the extraordinary savings small
suppliers like these are o?ering, I am not
convinced that the value of SMEs is being
fully exploited across the whole public
sector.
What I want is a more direct route for
innovative SMEs into procurement. This
should include programmes like the
Small Business Research Initiative (SBRI)
which are speci?cally aimed at helping
businesses provide new technical solutions
and products to solve speci?c problems
identi?ed by Government departments.
I am pleased that ministers across
Government have committed to promoting
greater use of SBRI in their departments.
And I welcome the increase in pre-
dialogue and the publication of medium-
term procurement plans through sector
speci?c “pipelines” in Government, which
give SMEs the opportunity to help shape
procurements before the start of the formal
procurement stage.
An SME, Redfern Travel Limited, was
awarded a four-year contract in 2011
to deliver national travel services
to Government. This recognised the
e?iciencies to be gained by aggregating
spend from 17 central Government
departments all with similar travel
requirements, into a single national and
international contract. Redfern was able to
deliver a high quality service signi?cantly
cheaper than the next best bidder, with an
estimated saving of £20 million (a saving
of over 70% versus existing costs).
SMEs are also delivering extraordinary
value in Government IT contracts. For
instance, a recent Home O?ice hosting
and server procurement has seen a 90%
reduction in cost from £73,000 to £7,000
by awarding the contract to a small
provider.
The launch of the innovative Government
Procurement Service (GPS) G-Cloud
framework – where more than 70% of
the 470 suppliers are SMEs – has given
Government departments an easy route
to ful?l cloud-based ICT requirements
and allowed small, innovative suppliers
to compete against the traditional large
ICT providers. Departments are quoting
savings on bids from incumbent and large
suppliers from 30% to 90% by using the
G-Cloud to open up the market to a more
diverse and innovative range of suppliers.
Growing Your Business | 21
Small suppliers (particularly in the area
of IT) are put at a disadvantage when
contracting authorities stipulate existing
security clearance as a prerequisite for
recruiting a contractor. Large companies
are often able to keep their sta? security
clearances up to date which is not always
possible for new and very small ?rms. I am
pleased that new guidance has been issued
to all departments that makes it clear that
pre-security clearance should not be made
a condition of a procurement unless there
are exceptional circumstances.
I also welcome the Cabinet O?ice Digital
Procurement Framework which will open
up digital services to SMEs to the bene?t
of both. I particularly welcome the fact that
this will create a regional digital market as
well as a national one.
2. A “single market” for all
parts of the public sector
Chief amongst the criticisms from SMEs
about public sector procurement is the
complexity, cost and inconsistency when
trying to sell to more than one authority.
An obvious example is the disparity
between central government’s removal of
PQQs for small value procurements and
their continued use by the wider public
sector, usually with di?erent thresholds
and often requiring burdensome details
and the “gold plating” of training, health
and safety policies and wider objectives
of the contracting authority. SMEs want
procedures in place to make contracts
quicker to award, and more certainty about
the likely success of a tender.
A key recommendation in this report is
the creation of “single market” principles
to provide a simple and consistent
approach to procurement across all public
sector agencies, where SMEs can gain
better and more direct access to contract
opportunities. This would apply ?ve
common principles:
1. Access
The public sector removes all PQQ
requirements for contracts below the EU
Threshold (€200,000).
Above this, all public authorities use a
single standard PQQ: this would allow
public authorities to assess a supplier’s
suitability to bid based on considerations
about technical skills and capacity, but
would avoid gold plating with a plethora of
di?erent locally-determined objectives.
The public sector adopts a “single-
passport” system to allow companies to
enter pre-quali?cation data once on the
standard form, to be approved by one
public body and then counted as the PQQ
for all their bids across any other authority.
2. Visibility
To locate all contract opportunities in a
single place using the existing Contracts
Finder platform (www.gov.uk/contracts-
?nder). This would not preclude additional
advertising through an authority’s own
local and sector led communication
channels.
3. Completion bonds
There is some evidence that the demand
for completion bonds from the public
sector unfairly tilts the playing ?eld
against small and medium-sized ?rms.
Large ?rms that have substantial assets
do not ?nd any di?iculty in providing
suitable bonds but the small ?rm will often
?nd that the only way they can provide
such bank bonds is at the expense of
their overdraft facilities which e?ectively
prevents them bidding. I recommend that
the Business Bank investigate whether they
Growing Your Business | 22
can, by way of joint-venture with a ?nance
provider, introduce an insurance scheme to
replace the necessity for completion bonds.
4. Payment
All authorities’ payment terms are made
standard for all procurements.
5. Accountability
For all authorities to monitor and collect
data on public sector spend with SMEs,
and for Government to report it in one
place.
How can we make this work?
It is clear from my discussions with
Government departments that there is
strong willingness to support a single
market approach.
The Department of Health is working
closely with the NHS to embed these
principles in new guidance it will issue
to trusts in summer 2013. This will
include clear advice that trusts should
not apply PQQs for contracts below the
EU threshold; and training and closer
engagement with non-executive members
of hospital boards to ensure they have
the ability to challenge the way in which
SMEs are being considered in procurement
decisions.
The Department for Communities
and Local Government and the Local
Government Association are also clear that
local councils need to be more active and
visible to create a competitive environment
for SMEs in their procurement. I was
pleased to join the Secretary of State for
Communities in January 2013, to launch
the ?rst national “Best councils to do
business with” competition.
This competition has produced a good
response from councils. We will be
looking to the best of these for examples
of councils that recognise the bene?ts
of doing business with small ?rms
and are actively removing the barriers
which impede their ability to compete
successfully for contracts. I am proposing
that the winners of the competition
become the early adopters of single market
principles. The winners will be announced
in May 2013.
I want this positive response from
departments to extend to all parts of
the public sector. To make it happen I
have asked the Government to lead a
consultation with public bodies to consider
their appetite to adopt these single market
principles and then embed these principles
into procurement practice through a legal
requirement. This should take account
of good procurement practice across the
whole of the public sector and the ability
of public bodies to respond ?exibly to local
or sector-based needs. But above all, I
want the simpli?cation of PQQs and other
procurement practice to be recognised
as a deregulatory measure that increases
business and growth opportunities for
small ?rms in local areas and the sectors
in which they do business.
I believe that the combination of the
abolition of PQQs together with the
replacement of completion bonds by an
insurance scheme would transform the
opportunities for small ?rms and result
in a stronger SME sector and at the same
time save the taxpayer considerable
expenditure.
Growing Your Business | 23
3. Enforcement and
accountability – an enhanced
Mystery Shopper
SME suppliers not only report problems
in their direct relationship with public
procurers but also in their engagement
through public procurement supply chains.
Central government commits to pay
invoices in ?ve working days. However,
a prime contractor can often take
several months before they pay their
subcontractors. The introduction of Project
Bank Accounts is a welcome development
and allows a procurement authority to put
in place a mechanism for timely payments
to all contractors in a supply chain, not
just the prime contractor. This has begun
in construction procurement and I would
like to see this rolled out across all main
areas of government procurement where
possible.
My review has also unearthed a practice
where large companies partner a small
?rm to use their specialist skills to secure a
contract as equal partners, and then lean on
the small ?rm to reduce the junior partner’s
contractually agreed share of the work.
The Government’s Mystery Shopper
scheme can hold public bodies and
supply chain managers to account when
malpractice is reported. But this approach
is reactive and reliant on the supplier
coming forward – often reluctantly when
they are in the midst of a commercially
sensitive contract relationship. I have
asked the Cabinet O?ice to review how
Mystery Shopper can strengthen its hand
by becoming proactive, and to embed a
stronger inspectorate function to ensure
that procurement contract agreements are
better enforced.
From March 2013 a new approach
to Mystery Shopper has been piloted
to enable spot checks on advertised
procurements to ensure good procurement
practice, as well as checks on supply chain
payments and terms of business between
a prime contractor and its partners and
subcontractors. If a department is not
satis?ed, it may cancel contracts as
well as exclude contractors from future
government work. Where slow payment
is discovered, contractors will be named
through the reports of Mystery Shopper
cases published online.
I have also asked the Cabinet O?ice
to increase awareness of the published
Mystery Shopper results. This will enable
business representatives, local councillors,
hospital board members and all others
involved with small ?rms and the delivery
of public services to increase pressure on
public bodies in their areas, when abuses
in procurement practice are committed by
procurers or the prime contractors they do
businesses with.
Growing Your Business | 24
Programmes and
Schemes to Help
Businesses Grow
I
now want to consider programmes
and schemes that the Government
supports which are speci?cally aimed
at improving the internal capabilities of
SMEs.
We need to get from a position where too
few SMEs access external help, to where
they routinely identify the support they
need to improve and know where they can
?nd it. I see the task as twofold:
1. to stimulate demand amongst SMEs by
raising awareness of the bene?ts and
trustworthiness of the advice on o?er
2. to target the areas of help businesses
need most.
This is why I have asked the Government
to put in place a Growth Vouchers
programme for small and micro businesses
seeking support to tackle key growth
challenges. This would focus on the
key areas that we know can make a
sustainable di?erence.
Online advice and guidance
Entrepreneurs and small ?rms are
increasingly turning to the internet,
including social media platforms like
LinkedIn and Twitter, to seek guidance
and encouragement. The internet also
o?ers Government the opportunity to
deliver practical and relevant advice to a
large number of SMEs in an e?icient and
targeted way.
The transformation of Government
business support services has resulted in
a new digital o?ering – GOV.UK (www.
gov.uk). This is designed as a simpler
and faster means for all ?rms to access
business information, and I anticipate
many businesses using it to ?nd answers
about compliance and regulation. However,
that only works when people know what
they are looking for; and there remains a
problem when looking for advice including
support and encoragement: it is not o?ered.
The migration of some but not all
BusinessLink business advice content
to GOV.UK (along with material from
Directgov) has opened up a gap in the
Growing Your Business | 25
online provision of this advice to small
?rms. This poses a danger that we undo a
great deal of the good work Government
and its partners have done to help people
make a business idea happen. That is why
I want to encourage the private sector to
step forward with proposals to provide
advice and inspiration to help people start
and develop their businesses. Much of this
can arise out of exploiting the treasure
trove of data held by Government, and
GOV.UK are shortly going to release the
APIs to enable access to this.
14
I hope
that this will enable many organisations
to create web sites of their own o?ering
relevant and e?ective advice.
I would expect this external provision
of advice to sit alongside existing
programmes like the British Library’s
Business & IP Centre (www.bl.uk/
bipc), which will soon be part of a
national network in partnership with
many city libraries. I hope that they will
be joined by business schools, Local
Enterprise Partnerships (LEPs), business
organisations and private companies
o?ering web sites based upon the GOV.
UK data that will greatly assist new and
growing companies.
Mentors
Alongside online advice, I see a strong role
for face-to-face and interactive specialist
help for businesses. Mentoring has proven
to be popular as a way to build businesses’
con?dence and know-how, and is often the
?rst step towards use of external advice
and support. It also meets a common
preference for learning to be informal,
delivered by peers and tailored to the
needs of a business. Mentors are not there
to run someone’s business, but to make
themselves available to help with problems.
We need to get more business owners
recognising the bene?t of using this
type of support. It is as vital for growing
businesses as it is for start ups – as little
as 280,000 (6%) of all SMEs used a mentor
in the last 12 months. Many mentors are
available via the BBA’s Mentorsme.co.uk,
which provides a single point of access to
around 27,000 business mentors. So we
have the supply – the priority now needs to
be to encourage more businesses to make
use of this valuable source of help.
Intensive help and tailored
solutions
Once businesses have a better
understanding of their needs, they should
be looking for bespoke solutions to drive
growth. However, over 800,000 micro
and small ?rms in the UK have not taken
advice from the private sector in the last
three years, despite 100,000 recognising
a clear need for it.
15
This includes just 25%
of SME employers who rate themselves as
strong at accessing external ?nance and
fewer than half (42%) who feel they are
strong at introducing new products and
services.
16
Why don’t SMEs access external help?
The reasons can be varied. Most of all,
though, small ?rms’ awareness of the value
of advice to their businesses is low. This
makes them reluctant to pay for it. Matters
are not helped by the market for accessing
advice being fragmented and di?icult to
navigate.
Growth Vouchers
The proposal for Growth Vouchers began
with a British Chambers of Commerce
suggestion to jump start small businesses’
take up of specialist help by way of a
voucher scheme.
Growing Your Business | 26
I believe that if we can use a voucher
scheme that encourages small ?rms to
seek external help, we can make a real
impact on their performance. However,
what remains uncertain is how best
to structure and target this scheme to
encourage the appropriate use of advice.
The Government has agreed to commit
£30 million over two years to trial a variety
of innovative approaches to help small
?rms overcome the barriers that hold them
back. This will test the type of support
a scheme should o?er and the amount
provided. There are a number of problems
that almost all small and micro ?rms seem
to have in their early days. Taking on
their ?rst employee means they have to
master the delights of PAYE and National
Insurance. Few small ?rms understand
the importance of cash ?ow, particularly
when applying for a ?rst bank loan. And
I suspect that many ?rms could improve
their performance by increasing their
mastery of technology.
The scheme will also consider which ?rms
to target, and in what form to o?er support.
One thing I would like to ensure is that
businesses pay part of the cost, for I have
found over the years that free schemes
are valued by the recipient at cost. We
should also test whether this support is
best delivered by giving ?rms advice and
training or if their capability is increased
by buying in a particular service. And it
will be important to consider the most
appropriate delivery channel to ensure
?rms know where to ?nd this support and
can access it.
If we can get the model and the delivery
right, the potential prize to increasing the
growth capability of small ?rm will be
signi?cant.
More e?ective use of the
internet and digital technology
Today the business environment is going
through revolution rather than evolution
largely due to the use of the internet. The
web and associated technology is not an
optional extra, but a key driver to growth.
A report in late 2012 showed that digital
technology could help SMEs to unlock
£18 billion in revenue.
17
Over half of SMEs
using the internet across their businesses
see increased sales as a result of e?ective
online marketing and wider geographic
reach;
18
and SMEs with a strong web
presence grow more than twice as quickly
as those with minimal or no presence –
and create more than twice the number of
jobs.
19
As well as individual internet sites,
specialist portals like Trivago and trading
platforms like eBay and Etsy are providing
online shop windows for ?rms to get their
products and services known.
This technology also makes it perfectly
possible for micro ?rms to become
exporters. A common characteristic of
many internet businesses is that they don’t
see themselves as exporters even when
they are already selling goods and services
abroad. These are “inadvertent exporters”,
with little awareness of their export
activity until they require more postage to
dispatch their products abroad. Analysis
of online sales and internet search engine
activity shows that UK businesses, by and
large, o?er the most competitively priced
products and services across Europe.
20
PayPal reports that 25% of its payment
transaction activity in the UK is from
overseas trading. I see this as a rich source
of undetected business activity which
could usefully contribute to UK export and
domestic economy statistics.
Growing Your Business | 27
Despite these opportunities, many small
?rms’ use of technology still falls short.
82% of small businesses have not adopted
anything new in the last 12 months and
still spend an average of 11.4 hours per
week on administrative tasks which
could be more e?iciently managed using
technology.
21
By increasing their use
of technology they could signi?cantly
improve their productivity. This includes
the speed and e?iciency of payment. I am
pleased to see Government increasing its
use of e-invoicing in its procurement with
SMEs, and I hope this can be adopted
more widely in business-to-business
transactions, including supply chain
relationships.
I was pleased to be part of early dialogue
between Government departments and the
private sector to discuss the importance
of digital technology. This has resulted in
a major programme of work, expected to
be announced later in 2013, as part of the
Information Economy strategy and the
Government’s wider industrial strategy.
The programme will look at reaching
up to 250,000 SMEs over the next ?ve
years with practical help for exploiting
the web to achieve growth and exports. It
will also aim to drive take-up of superfast
broadband and other ICT supply services.
Access to fast, a?ordable and reliable
broadband is essential for new and
growing small businesses but for many
rural SMEs broadband is slow or non-
existent. That is why Government is
investing £530m through its rural
broadband programme to ensure
universal broadband. The target is for
at least 90% of premises to have access
to superfast broadband by 2015. And
the complementary Rural Community
Broadband Fund will provide grant funding
for superfast broadband projects which
would not otherwise receive it under the
main programme.
Innovation and high growth
While this review on small business has
focused primarily on very small and low-
technology ?rms, I want to complete the
growth picture so that ?rms with the
potential to grow quickly can understand
how they can access help.
Fast-growing technology companies
can require intensive help to realise
their potential. There are some
promising results with companies
helped by GrowthAccelerator (www.
growthaccelerator.com) and I look
forward to hearing about more successes
as this programme develops.
Innovative creative businesses can also
take advantage of programmes supported
by the Technology Strategy Board (www.
innovateuk.org), including Innovation
Vouchers, funding and knowledge transfer
partnerships with universities and colleges.
These are accompanied by guidance and
services o?ered by the Design Council
(www.designcouncil.org.uk) and the
Intellectual Property O?ice (www.ipo.gov.
uk) to enable companies to commercialise
and protect their ideas.
Growing Your Business | 28
The Government is backing high-growth
social enterprises with the Cabinet O?ice’s
Investment and Contract Readiness
Programme that provides grants to
ambitious social enterprises to improve
capacity to raise investment or to bid for
public service contracts.
Contacts for all of these initiatives are
available on pages 48–49.
The Goldman Sachs “10,000 Small
Businesses” programme, hosted by four
English universities, provides high-quality,
practical support to the owners and leaders
of established small businesses and social
enterprises as they seek to grow. For the
participants, the core of the program
is a practically-focused business and
management education, delivered over 12
sessions lasting a total of approximately
100 hours. During the course of the
programme every small business owner
develops a customised growth plan to
direct their organisation’s business strategy
and expansion.
CASE STUDY
SUGRU | Jane Ní Dhulchaointigh, Inventor and CEO
Jane Ní Dhulchaointigh came up with
the idea for sugru while studying
product design. She knew that a self-
setting rubber which could be formed
by hand and used to ?x and improve
things had commercial potential and
gathered together a team of scientists
and entrepreneurs to turn the idea into
a business. It took six years before
she was ready to launch, but now
the company employs 40 people and
exports worldwide …
Did you use advice or help to develop
your business?
Yes! Lots! I would say one of the most
important things that has allowed sugru to
be a success is that I have not been afraid
to ask people for help and advice.
NESTA had a grant scheme to fund
“Creative Pioneers” – creative people with
a genuinely groundbreaking business
idea. This was a three-week residential
business course speci?cally for 30 creative
graduates each year. They inspired us to
think big by inviting all kinds of incredibly
inspiring people to come talk to us, like
Lord Puttnam, who told us about his long
career in advertising, producing Hollywood
?lms and as UK President of UNICEF. I
was so inspired by all these people – they
showed me that it was possible to dream
big and do things your own way.
My co-founder Roger Ashby is a serial
entrepreneur with a background in science
and engineering, so he was able to give me
the con?dence to start building a team of
scientists to develop our technology with
me. Over the years, I have also bene?ted
from the Design Council’s advice through
Growing Your Business | 29
their Innovate programme. All of these
and many more were instrumental to our
success.
Your stock sold out six hours out after
launching – how did you adapt your
business to ensure you were able to
meet demand?
What a great problem to have! We
managed to get people excited about
sugru online by giving sugru to writers
and bloggers who wrote about the topics
we cared about – innovation, design and
the maker movement – and their readers’
reactions were beyond our wildest dreams.
Our ?rst batch of 3,000 sugru packs looked
like they were made in a factory, but we
actually made them in our lab. We didn’t
have the money to pay or build a factory.
But after the sell-out, that all changed.
Investors started approaching us, and we
raised enough money to start hiring a
small team, get bigger premises, and buy
machinery. We shut down for six months,
and then opened up for business again with
a scalable manufacturing set-up.
sugru sells in many stores around
the UK – how did you approach retail
sellers?
For the ?rst two years, we concentrated
almost entirely on selling online, and our
business has doubled each year to £1
million turnover in 2012. We now employ
almost 40 people and are continuing to
grow fast. Recently we secured our ?rst
order from a major UK retailer who will
launch sugru in their 360 stores around
the UK. Introductions really help. We’ve
found making genuine connections and
building good relationships the key to all
our best opportunities.
What tips would you give to other
micro businesses?
The best advice I have ever had came at
a turning point for my business. Back in
2008, the recession had hit and it was
impossible to raise funding to launch
sugru. After spending four years of my
life developing it, it was uncertain if sugru
would have a future. I had always been
dreaming big, and so my plans required
a lot of funding. Then a friend said to
me: ‘Start small and make it good.’ She
changed my perspective completely. I
decided to forget about shops for now
and to launch sugru online, and focus on
getting people excited about my mission to
help people ?x and create. So start small
and make it good – if it’s right, it’ll grow
from there.
www.sugru.com
Growing Your Business | 30
Finance to Grow
I
have learnt from many years of
investing in businesses that small
and well-targeted ?nance can make
a big di?erence in the early stages of a
company.
Start-Up Loans have begun well. Since
the scheme’s launch in September 2012,
3,520 new businesses have bene?ted,
drawing on £19.2 million of loan capital
and bene?ting from further business and
mentoring support of over £3.5 million. In
January 2013, the Prime Minister agreed
an additional £30 million over the next
three years, to meet high demand, as well
as to extend the age limit up to 30 years of
age.
This brings the total amount of funding
available for Start-Up Loans to over £117.5
million. I am now asking the Government
to go further and remove the age cap for
all entrepreneurs, to enable the board of
the Start-Up Loans Company to work
towards extending the bene?ts of the
scheme to all start-ups.
For other businesses, the Enterprise
Finance Guarantee (EFG) is in place and
I have asked the Government to use this
facility more ?exibly to create Growth
Loans and EFG Trade Credit for small
growing businesses.
It should not be forgotten that through
Start-Up Loans many thousands of new
businesses will be created. As the ambition
of these and other businesses grow, so
will the scale and nature of their funding
requirements. This may be to invest in new
products, premises and people, or to fund
marketing and new market opportunities.
Whereas a small ?rm may start with
very modest ?nance, often from personal
savings and credit, ?nance for growth can
require a more structured approach to
attract funding from external sources like
banks and business angels.
Making ?nance available
A criticism I hear from businesses is that
they don’t know where to ?nd ?nance
when they need it. These businesses not
only report the di?iculty of accessing
bank ?nance but also remain unsighted
about alternative ?nance options available
Growing Your Business | 31
Discouragement or an unsuccessful
application for ?nance from a bank does
not spell the end for a ?rm looking for
funds.
Credit and working capital
As well as Growth Loans, I have asked
Government to be more innovative in the
way it uses EFG to bring other ?nance
providers, not just banks, to the ?nance
market for small growing ?rms. An
excellent example of this is the EFG Trade
Credit pilot which is using the Government
guarantee to facilitate additional trade
credit provided by suppliers. Trade credit
is increasingly important for SMEs and is
often a simpler and more appropriate form
of credit than bank ?nance.
This pilot is providing support to the
building and construction sector, trail-
blazed by King?sher, with the Government
keen to extend the programme to other
trade credit providers across a range of
business sectors. And this joins other
private sector entrants into this market
such as PayPal and its Merchant Cash
Advance pilot aimed at supplying capital
to help small ?rms run and grow their
businesses.
23
to them. My focus is to ensure that micro
enterprises have the awareness and the
encouragement to approach these other
types of ?nance. I hope that the new
Government-backed Business Bank will
play a key role in the future provision of
funding for new and developing small
businesses – and this could include
funding for Start-Up Loans.
I also look forward to seeing proposals for
this bank and how it can deliver much-
needed simpli?cation of the support that
Government currently o?ers small ?rms by
making it easier for businesses to ?nd it.
Growth Loans
I have spoken at length with banks to
understand the circumstances in which
small ?rms can access loans for growth
capital. Thirty years or so ago when banks
started to remove the manager from their
branch network they inadvertently broke
many of their links with SMEs. This has
had a disastrous e?ect. Lending decisions
have become based on the personal credit
rating of an individual within a business
and not on that business’s performance
or viability. Evidence has identi?ed credit
scoring as the main reason for loan
declines, accounting for 39%, followed by
a?ordability at 26%.
22
I believe that Government interventions
such as EFG should be adapted to address
the credit scoring and a?ordability issues
behind the majority of loan declines.
Government has responded with SME
Growth Loans as part of the EFG. Initially
as a pilot, this will facilitate loans of up
to £25,000, targeting SMEs in their third
year seeking access to growth capital.
This will ?ex the EFG scheme to support
more marginal but still viable lending
applications that banks process through
credit-scoring systems and enable a lender
to take account of both ?nancial and
non-?nancial aspects of the business not
captured by the credit score. The pilot will
begin from the summer 2013.
GROWING WITHOUT A BANK
Growing Your Business | 32
Micro ?nance
I am aware of the increasing importance of
micro ?nance providers – often described
as Community Development Finance
Institutions (CDFIs) – and their lending to
businesses and individuals who are unable
to access ?nance from more traditional
sources, including the gap left behind by
the banks.
CDFIs have emerged as strong delivery
partners for Start-Up Loans and I want
to encourage more of these organisations
to come forward as demand rises for
the loans. Yet the value of CDFIs lies not
just in assisting start-up companies, but
in helping micro ?rms to develop their
businesses. This has been recognised by
£30 million of funding from the Regional
Growth Fund (RGF) which has been
matched with a further £30 million by the
Co-operative Bank and Unity Trust Bank
to drive investment in small, micro and
social enterprises.
Even with support from the RGF, it is clear
that there remains a signi?cant space for
the micro ?nance sector to ?ll if they are
to prove themselves as a viable alternative
to banks. This requires su?icient scale in
the sector to enable these lenders to access
cheaper capital to pass on to ambitious
SMEs. That requires community lenders
to be equally ambitious. I hope they step
forward.
Peer-to-peer lending and
crowdfunding
The di?iculties SMEs face accessing
bank credit has created a widening
?nance gap for SMEs which peer-to-
peer lending (directly connecting ?rms
in need of cash with investors) and
crowdfunding (where small amounts are
raised from a large number of funders) is
increasingly ?lling. These have the added
attraction of direct access to a diverse and
numerous pool of lenders and investors
who would not otherwise be in contact
with SMEs. Asset-based ?nance is also
becoming much more accessible and more
competitively priced with the advent of
invoice ?nance exchanges, facilitated by
crowdsource platforms like MarketInvoice
(marketinvoice.com) and Platform Black
(www.platformblack.com).
It is important that we continue to promote
these sources of alternative ?nance.
Small business survey data indicates
that awareness of peer-to-peer funding
amongst micro ?rms falls below that of
other SME companies (27% compared
to 35% and 45% for small and medium
sized SMEs respectively).
24
And micro
?rms are even less sighted when it comes
to knowing where to ?nd this type of
?nance – with 16% level of awareness
amongst micro ?rms compared with 24%
and 33% for small and medium sized ?rms
respectively.
Awareness of these types of funding not
only needs to be raised directly with
micro ?rms but also the intermediaries
and advisers that they rely on for
?nance advice. These include chartered
accountants; and I am pleased that the
ICAEW (www.icaew.com) is raising
awareness amongst its members of these
alternative types of ?nance.
There have been several important
developments in the last 12 months which
I believe will go further to strengthen the
credibility and awareness of this sector:
•
An announcement by HM Treasury
that the peer-to-peer lending sector
will have its lending and borrowing
activities overseen by the UK’s new
market regulator, the Financial Conduct
Authority, from April 2014. I see this
as a major step to bring credibility to
Growing Your Business | 33
this sector and provide the protection
lenders and borrowers seek if they are
to have con?dence in these lending
platforms.
•
The £100 million award of new funding
to SMEs from the Business Finance
Partnership (BFP), as part of the
Government’s drive to diversify sources
of ?nance to business. BFP provides
a welcome opportunity to promote
new entrants in the peer-to-peer and
crowdfunding market. This will instil
con?dence in investors when it comes to
putting their money into internet-based
?nance platforms and encourage small
?rms to see the opportunities of seeking
investment in this way.
•
The increasing application of these
?nance internet platforms at the local
level. An example of this is Lancashire
County Council which has committed to
lend £100,000 initially, with a possible
multi-million pound investment in time.
The Council will use these funds to
participate in loans through Funding
Circle to help suitable local businesses
secure important growth capital. For this
Council, investing through an existing
and established platform provides an
e?icient funding mechanism which is
highly visible to other local investors
and businesses.
•
The increase of reward-based
crowdfunding for small enterprises
looking to fundraise, develop and pre-
sell exciting new projects. This has been
marked by the merger of Peoplefund.it
(www.peoplefund.it) and Crowdfunder
(www.crowdfunder.co.uk) to become a
much bigger portal and the expansion
of US-based Kickstarter (www.
kickstarter.com) to the UK. As the
popularity of this sector increases, I see
many more opportunities for new and
growing businesses looking to fund and
test innovative new products.
BUSINESS FINANCE PARTNERSHIP:
SMALL BUSINESS TRANCHE
The £100m small business tranche
of the Business Finance Partnership
(BFP) aims to increase the supply of
capital through non-bank channels
to businesses with a turnover below
£75m. The lenders which have recently
been appointed are …
Funding Circle (www.fundingcircle.com)
is an online marketplace enabling savers
and investors to side-step banks and lend
directly to small businesses. Set up in
August 2010, Funding Circle has helped
businesses borrow over £60 million. Each
loan is comprised of small sums from
many di?erent people who compete to lend
to the business in question. This enables
businesses to borrow at a better rate. With
no bank in the middle, both investors and
borrowers achieve a much better deal, with
investors receiving an average 9.1% yield
on their money.
Growing Your Business | 34
Zopa (www.zopa.com) is the peer-to-peer
online platform that brings together people
who are good with their money, to reward
them with better rates on their borrowing
and saving. Responsible, creditworthy
borrowers get access to loans cheaper
than banks o?er, with no additional fees
for paying some or all the loan o? early.
By lending to these people, savers get
in?ation-beating returns far higher than
those paid by banks’ savings accounts.
Zopa has now arranged more than £250
million in peer-to-peer loans in the UK, all
at rates that borrowers and lenders have
e?ectively agreed between themselves.
Zopa now accounts for around 2% of all
personal loans issued in the UK each
month.
BOOST&Co (www.boostandco.com)
has been providing credit solutions to
growing and innovative small businesses
throughout Europe since 2011. It is
management-owned and funded by some
of Europe’s largest private equity investors
and family o?ices. It has o?ices in London,
Paris and Berlin. The Business Finance
Partnership funds will allow BOOST&Co to
provide loans to British small businesses at
scale.
Credit Asset Management Ltd (CAML)
(www.craml.co.uk) is a subsidiary of
City of London Group plc which uses a
traditional merchant banking model across
its business platforms to provide specialist
?nancing to the SME sector. Credit Asset
Management Limited provides leasing
and professions loans. CAML also enables
institutional investors to secure e?icient
exposure to the SME sector.
MarketInvoice (marketinvoice.com)
gives small businesses ?exible access to
advances on invoices from their blue-
chip corporate customers. Funds come
from a network of institutional investors
and high net-worth individuals, who
bid competitively to buy the invoices.
MarketInvoice launched in February 2011,
and now closes over 70 auctions each
month, with an average auction value of
£60,000 (range of £10,000–£500,000).
Since its launch, the platform has funded
over 800 auctions, representing close to
£50 million of invoices.
URICA (urica.biz) is launching a new
model of supply chain ?nance within
the UK SME market that provides SME
suppliers with the option to receive cash
from Urica 14 days from the invoice
issuance date in return for accepting a 2%
early settlement discount. The customer
will then pay Urica the full value of the
invoice on day 60. URICA is working in
partnership with one of the world’s largest
credit insurers to give direct access to a
proven credit assessment engine.
Beechbrook Capital LLP (www.
beechbrookcapital.com) was established
in May 2008 to provide long-term loan
capital to businesses in Northern Europe.
The new fund will deploy a diversi?ed
portfolio of mezzanine loans to SMEs in
the UK.
Growing Your Business | 35
Business angels
Business angels can be pivotal in the
early stages of a small ?rm trying to grow.
They o?er expert knowledge of a market
or sector and important contacts to help
a business to the next level which can be
just as important as the ?nance they invest
in these businesses.
In the last year, I have chaired a business
angel working group with an explicit
intention of increasing the number of
angels investing in early growth ?rms. This
has been helped by the success of the £50
million Business Angel Co Investment Fund
(CoFund) created with funds from the RGF.
Business angel investing became even
more attractive in 2012 with the launch
of the Seed Enterprise Investment
Scheme (SEIS). SEIS aims to encourage
investment in small and early stage
companies by o?ering a range of tax
reliefs to the investor. My support for
SEIS has been matched by a concern that
too few potential investors know about
this scheme or are encouraged to use it.
I welcome the SEIS regional road shows
led by Doug Richard, the entrepreneur
and business angel last autumn and the
development of a dedicated SEIS website
(www.seiswindow.org.uk). But this is an
area where Government should do more to
market the scheme to potential investors.
Growing Your Business | 36
Employment and
Attracting Specialist
Skills
T
he changing nature of employment
has had a signi?cant impact on
attitudes to business. Business
population statistics testify to an
increasing number of people choosing to
be their own boss. Some of these will be
freelancers or contractors, choosing who
they work for and when. But for many the
intention is to create a permanent living in
a full-time business venture.
The statistics provide the full scale of this
activity – 3.6 million sole traders in the
UK. But what is most interesting in recent
labour market statistics is the recruitment
trends amongst businesses. While the data
indicates a rising trend of ?rms with two or
more employees, the number of businesses
operating as sole traders is increasing
despite a clear business need to take on
more sta?.
My experience in the SME sector fully
supports the mounting evidence that not
taking on your ?rst employee is the most
important brake on growth ambitions.
Research by BIS found that just 9% of sole
traders expected to employ someone in a
year’s time.
25
Challenges of SME recruitment
I see these as the challenges facing SME
recruitment:
1. The process seems too complicated and
too fraught
Many sole traders are put o? by what
they see as the daunting and complex
regulatory burdens of recruitment. Part of
the solution is to provide businesses with
an accurate picture of the recruitment
process and how the relatively few
requirements on them can be met in a
manageable way. This could include the
use of Growth Vouchers to enable sole
traders to navigate the process using
expert help.
The launch of the “Taking on an Employee”
portal last year was a good start – and
helped to disentangle the myriad of
guidance about recruitment. Further work
has happened this year to streamline this
Growing Your Business | 37
advice further using GOV.UK. But I would
like this to go much further. The actual
employment process should be simpli?ed.
We need to ensure that employers can
complete the actions required of them
more seamlessly. Ultimately I would like
us to create a one-stop shop which can
service all of the tasks involved in taking
on an employee.
2. Recruiting with con?dence
Often, the decision not to take on a ?rst
employee is based on the fear of getting
the recruitment wrong. Businesses cite the
?nancial implications if the individual is
not right or concerns about being hit with
a tribunal claim.
I have engaged extensively with the
Institute of Recruiters (IoR) (www.theior.
org.uk) to understand how we can help
employers manage these risks e?ectively
and provide the con?dence they require
to recruit the right people with the right
skills. This has resulted in a new guide,
Your First Employee – the essential 10 step
guide which addresses the con?dence and
decision-making issues involved in hiring
and managing sta?.
In addition, BIS and ACAS (www.acas.
org.uk) have developed new online
guides to help small business employers
manage issues with sta? behaviour and
performance. This simple, step-by-step
guide will walk them through the relevant
processes and provide easy access to
information on common issues and
resolutions.
3. Attracting a?ordable specialist skills
Small ?rms can require very specialist
skills to enable them to move forward,
often in key areas like ?nance, legal
services, business administration and IT.
They will only recruit if they are con?dent
that the investment in sta? will deliver
?nancial bene?ts to the business. And
even then the question of a?ordability
may in?uence whether and how they bring
these skills into the business on a full-time,
part-time or contract basis.
Outsourcing
Some ?rms on limited resources are
outsourcing secretarial and more specialist
services to help them build scale and
growth into their business. This is being
achieved through a well-connected and
?exible use of people, technology and
services. Alago, pro?led later in this report,
outsource their design and manufacturing
needs to take an idea from concept to
market.
Firms like these make a rational
assessment that outside expertise can
perform a task better, faster or more cost-
e?ectively than an in-house option. By
acting accordingly, business owners are
focusing on what they do best. But Alago
has also built a core workforce. And like
them, for many businesses a time may
come when investment in sta? (as well
as, or instead of, outsourcing) delivers
sustainable and long-term commercial
advantages to the business.
The graduate labour market
I believe a fertile ground for small ?rms
looking to bring high calibre people
into their businesses is o?ered by
graduates from universities and colleges.
I am also keen to promote the value of
apprenticeships where small businesses
can bene?t from the fresh talent and
a?ordable skills that apprentices bring
from their training. The earlier section on
universities and colleges highlighted the
value students can o?er as placements
and interns. But when I look into graduate-
recruitment trends amongst small ?rms,
the picture is less promising.
Growing Your Business | 38
The research points to a mutual lack of
understanding about the bene?ts to both
sides.
26
Small ?rms tend to undervalue the
contribution of graduates to the business,
based on concern about their experience
and the need for supervision. Graduates
can have negative perceptions about levels
of pay, career progression and working
conditions.
But studies also ?nd that the potential
bene?ts and opportunities of working
in small businesses exceed graduates’
expectations, particularly with regards to
levels of autonomy, ?exibility and input
into the business.
27
I believe this supports
the case for doing more to encourage
graduate employment in the SME
sector, and through some encouraging
initiatives this is beginning to work. For
instance, the National Association of
College and University Entrepreneurs
(NACUE) has piloted a BIS proposal
for SME Launchpads. The pilot (called
SME Milkround) brought SMEs and 20
university enterprise societies together to
facilitate student internship and graduate
job opportunities. NACUE will extend this
programme to a further 18 university
enterprise societies and 5,000 students. BIS
also continues to fund the Graduate Talent
Pool, where 87% of the 7,000 registered
employers are SMEs.
The idea for Alago heated sports and
leisure gloves began when Tony Curtis
watched his son playing rugby in
the freezing cold. Tony transformed
his kitchen into a laboratory to turn
his idea into a product but had very
little funds to employ people or buy
expensive equipment. Alago is now
an award-winning business selling to
customers in over ten countries …
How did you build your business on a
shoestring budget?
I think it’s fair to say I started with little
more than an idea – no scienti?c training,
no product development skills and not
much cash. But my kitchen table served
me well for developing initial ideas and a
business plan. I then outsourced through
experts and professionals to gain the
specialist help I needed in areas like
product design and developing prototypes.
As the business got o? the ground, I
also procured important functions like
manufacturing, accounts, warehousing,
packaging and PR. Outsourcing was
absolutely key at that early stage because I
simply could not a?ord the overhead costs
of doing these operations in-house.
How did you know who to ?nd and
what you needed?
I tried to use as many local services as
possible including my accountant and PR,
and other services were sourced from
further away, even other countries. I used
CASE STUDY
ALAGO | Tony Curtis, Founder
Growing Your Business | 39
the internet for most of the searching
and sites like Alibaba and Elance to ?nd
speci?c expertise. In fact I still use them
now for product development.
What drove your decision to take on
sta??
Recruitment for me was about investing to
improve the performance and capability
of my business. I was getting healthy
interest in my product but needed a better
way to target customers and generate
sales. Fundamental to this was getting my
website right and making it pro?cient and
widely recognised – not skills I had or had
time to learn.
My ?rst employee was a web designer.
This was followed by a communications
specialist. Both have had a dramatic
impact on the productivity and turnover
of Alago. We are now able to ?nd and
facilitate trade from overseas in key
markets like Argentina, Canada, Norway
and Sweden, and target our marketing
through social media and other
communication channels.
And how did you ?nd the experience of
taking on sta??
The prospect was terrifying – to be
responsible for paying wages and your
employee’s career development is pretty
scary. But the process was ?ne and
pretty straightforward. My lawyer drafted
employment contracts and my accountant
sorted out PAYE. That was it – I had my
team!
I had to change my mindset from being
a one-man band to being the boss and
my relationship to the business changed.
The bene?t of taking on these ?rst
appointments was not just about bringing
in skills; it was also about freeing up
my time and capacity to concentrate on
?nding new opportunities to take the
business forward. This took enormous
pressure o? my shoulders and provided me
with a team to bounce ideas o?.
My advice to a small ?rm in a similar
position would be to look at what jobs you
need doing. If they are small or one-o?s
then look at using a freelance specialist.
This will cut costs enormously whilst also
supporting people who are self-employed.
If the work needed is on-going, is essential
for growth and frees up your time then
seriously consider taking on a member of
sta?. Building even a small team will not
only support the growth of your business
but also support you as the leader.
Did a new team and an expanding
business result in new commercial
premises?
That seemed like the logical next step but
after a few months in a new commercial
outlet, I realised that this wasn’t cost-
e?ective and more importantly it really
wasn’t necessary.
The combination of outsourcing, the
availability of communications technology
and the provision of virtual o?ices and
?exible work spaces mean that I can
run a very lean operation and grow the
business without the associated increase
in costs and overheads. My team all work
from their homes and we use the Bristol
and Bath Science Park and its business
facilities when we need to meet up, or
engage clients. This provides us with the
professional image we need, but most of all
it gives us ?exibility and an e?icient way
to run a pro?table small business.
www.alago.co.uk
Growing Your Business | 40
Relationships with
Big Businesses
B
ig businesses have capital and
access to markets and customers.
Small businesses are often more
agile and innovative and can provide
niche products or services. By bringing
these elements together, big and small
businesses are well placed to work
together through commercial relationships
and collaboration.
Supply chain relationships
An SME’s strength in a supply chain
relationship is often its ability to provide
a specialist product or service that larger
businesses cannot provide themselves, or
cannot provide as cheaply. This positions
small ?rms as problem solvers and as
small but signi?cant players in terms of
their value to the prime contractor and the
client.
A key advantage for a small ?rm in
these relationships is access to markets.
Supply chains create a way in for small
businesses; they can use the opportunity
to build capacity and reputation in a
sector. Research also shows improvements
in productivity and performance in such
?rms when they work in supply chains.
They bene?t from the mentoring and
experience of the larger companies they
work with,
28
and the insistence on quality
standards by larger businesses often
improves quality in SMEs, enabling them to
win contracts with other companies.
Supply chain ?nance allows small ?rms to
secure funds to ease cash ?ow and invest
in other ventures. But small ?rms will
also expect to receive the share of work
agreed in accordance with the terms of the
contract; and, importantly, they will expect
to get paid on time. The earlier section
on “The Customer to Grow: Public Sector
Procurement” looked at this, including
how small ?rms can take advantage of a
partnership or sub-contract relationship
with a large company without being put at
a disadvantage.
Growing Your Business | 41
100%Open work in the ?eld of open
innovation – helping large companies
innovate by working with partners,
in particular with small businesses.
Originally part of Nesta, the co-
founders Roland and David spun out
100%Open in 2010, and it now works
with the likes of LEGO, P&G, E.ON,
Fujitsu, Interface, Ordnance Survey
and Oxfam …
How do small ?rms bene?t from
working with large ?rms?
The bene?t for small ?rms is the
opportunity to rapidly scale their
businesses, which in turn creates
opportunity to access new markets and
build their brands through association.
Often small companies have great
ideas and capabilities but lack the
channels, investment and infrastructure
to implement them at a global scale. In
addition, many growth-orientated small
companies become overly focused on
securing expensive equity investment. That
de?nitely has a role to play, but only in the
minority of cases. Much more frequently
the route to market for their products
and services is best delivered through
partnership with a larger organisation.
Small companies can of course go it alone
and become the big players of tomorrow.
However, the vast majority of small
company exits are through trade sales to
larger customers.
And what does the big ?rm get out of
it?
In many ways large companies need
small companies more than vice versa,
and it certainly wasn’t always that way.
Most large companies need to sustain
a minimum level of growth to satisfy
their shareholders, which becomes more
di?icult the bigger they become. This is
partly because operating at scale leads
to risk aversion; but also in?exibility and
homogeneity that inhibit innovation. And
so the innovation comes increasingly from
outside – from customers, from suppliers,
and from non-competing partners. If done
well this becomes a much better, faster
New collaborative relationships
– “open innovation”
As well as supply chains, many SMEs
and their networks are involved in R&D
partnerships or engage in joint ventures
with large ?rms.
An interesting development is an
increasing appetite among large
companies to drive innovation through
collaboration with SMEs. “Open innovation”
encourages organisations to look outside
to develop new products, services and
revenues, innovatively and often at lower
cost. It provides good opportunities for
the more specialised small ?rms with the
result that they can share risk and reward
with their corporate partner.
CASE STUDY
100%OPEN | Roland Harwood and David Simoes–Brown, Co-founders
Growing Your Business | 42
and cheaper way of innovating than
traditional methods. As well as revenue
and growth opportunities, working with
small companies can have tremendous
uplift on other aspects of the business
such as building a buzz around their brand,
and providing creative and entrepreneurial
opportunities for sta?.
What’s the key to successful
collaboration?
In our experience the key to successful
collaboration between large and small
companies comes down to having a clear
process, collaborative business model and
metrics that works for both sides. This
requires an open and collaborative mindset
that looks to create shared value, not
just maximise returns for one side or the
other. It also requires trust and empathy
to enable honest conversations to surface
and work towards a successful outcome
together.
What are the key challenges?
In our experience one of the key challenges
comes down to the risk aversion of the
large company, which puts too much risk
on the shoulders of the small company.
This is ampli?ed by the very di?erent
timescales and resources that large
and small companies are able to deploy.
Ultimately, collaboration can only happen
through equals so even with an obvious
buyer/seller situation, we work hard to
understand the motivations on both sides
and align incentives so everybody has
“skin in the game”. For large companies the
challenge can be that the sheer number
of potential relationships is so great that it
becomes too complex to manage them all,
exposing the organisation to risk and IP
contamination if not dealt with carefully.
What approach should a small ?rm
take if it’s thinking of working with a
big company?
Small companies should take time
to understand the needs of the big
organisation. These are often published
and publicly available, though di?icult
to ?nd. They should take care to tailor
their pitch. You only get one chance to
make a ?rst impression. And ?nally they
should start with “why” – namely why
customers would want what they are
o?ering, and what is the unmet need that
they can solve. It can require considerable
investment of time and energy but if
handled smartly, collaboration can lead to
much bigger opportunities than growing
organically.
www.100open.com
Growing Your Business | 43
Locations
M
any SMEs will start as home-
based businesses because of low
set-up costs and the ?exibility
it gives them to test the viability of their
business. When their business begins
to take o? or their ambition increases,
the ?rm will face a new set of growth
challenges to do with space and access to
customers.
A leap from the kitchen table to a
commercial lease and investment in
expensive equipment and services may
remain beyond the resources of the ?rm
at this stage. This is where access to
a?ordable spaces and shared facilitates
is becoming increasingly popular and is
helping businesses make the transition
from a micro enterprise to an expanding
business.
Locate to grow
Expanding outside the home can mean
anything from using access to WiFi in
a local café, to a fully serviced o?ice
providing secretarial services. Use of these
has greatly expanded over recent years.
Coworking spaces – A growing
phenomenon is the development of
coworking spaces (or “uno?ices”). There
are now more than 2,000 coworking
spaces worldwide.
29
Rather than
committing to a ?xed term o?ice rental,
freelancers and entrepreneurs can rent a
desk in a shared space with others and
gain access to meeting rooms to engage
clients and colleagues. These venues not
only o?er space but sometimes services
like childcare and the opportunity for
business networking and peer learning.
Virtual o?ices – Along with coworking
spaces many micro businesses are using
virtual o?ice spaces (which include
secretarial services and other facilities) to
provide professional customer service and
a corporate image.
These resources can provide particular
bene?ts to new and growing ?rms. For
example, young entrepreneurs receiving
funding from Start-Up Loans are also
given access to workspace, meeting
rooms and business services delivered by
Regus as one of the fund’s global partners.
Growing Your Business | 44
These services enable ?rms to outsource
important functions without having
to invest in-house, covering functions
like mail and call-handling, providing a
business address and logistical services
such as packaging, shipping and order
systems.
Incubation – Incubation and acceleration
facilities are often used by start-up
companies but are equally important for
small growing businesses. These can be
delivered through the public, private or
third sectors, including local authorities
and higher education campuses. Typically
these will o?er coaching and advice,
alongside space and facilities, and will
attract businesses from speci?c sectors
and business clusters, which enables peer-
learning and networking. A good example
is the £10 million Social Incubator Fund,
funded by the Cabinet O?ice to support
the development of social incubators –
providing space, mentoring, networks and
?nance to early-stage social ventures.
Growing Your Business | 45
Cockpit Arts is an award-winning
social enterprise and the UK’s only
creative-business incubator for
designer-makers. Established in 1986
it has helped thousands of talented
craftspeople to grow their businesses,
many of whom have gone on to achieve
global success …
What are the things that arts and
crafts entrepreneurs don’t do well?
Craft designers mainly set up either as
sole traders or small partnerships. The
majority are graduates and self-taught or
have undertaken some further education.
Mostly they struggle to think more broadly
about their business – to look beyond their
creativity and skill – and ?nd it di?icult to
build strong, growing enterprises.
Many fail to develop their ?rm beyond
being a “lifestyle business”, often supported
by other sources of income.
How does Cockpit Arts help?
Cockpit o?ers incubation as a series of
interventions to help these designers to
build on their creativity and skill, and
overcome some of the key weaknesses that
are common to this sector such as low
levels of pro?tability, ?nancial literacy and
strategic planning skills.
This includes studio space for designer-
makers unable to a?ord commercial
space; one-to-one business development
coaching, workshops and events; Open
Studios (to test and sell products);
promotional opportunities (in key locations
including international trade art fairs, and
introductions to trade buyers and press);
and resource centres and o?ice facilities.
The clustering e?ect of having two large
buildings, each housing 50 to 100 like-
minded businesses, pays huge dividends;
a lot of knowledge, skills and ideas can be
shared. The community provides a support
network, and encourages entrepreneurship
(and peer competition!) as well as positive
role models for growth.
You target ?nance help – how?
Through a Growth Loan Fund – a
combination of a low-interest loans and
dedicated one-to-one support. This helps
makers identify where the primary value
of their business lies and makes them
“investment ready”. Loans can also be
used to boost sales or identify new routes
to market. Bene?ciaries receive on-going
coaching for the duration of the loan (up
to three years).
Tell us about some of your successes
The Cockpit model has helped to nurture
over 500 talents, many going on to
national and international success. Textile
designer Clarissa Hulse sells to over 100
outlets worldwide, including bestselling
ranges of bed linen for House of Fraser
and John Lewis, and Scottish knitwear
designer Jo Gordon has grown into an
internationally-renowned label selling in 19
di?erent countries.
www.cockpitarts.com
CASE STUDY:
COCKPIT ARTS | Vanessa Swann, CEO
Growing Your Business | 46
Online brands onto high streets
– the rise of pop-ups
Another development that I am interested
in is the growing prominence of pop-up
shops. The challenges facing many of
Britain’s high streets – and their ever-
increasing numbers of empty shops – has
created opportunities for start-up and
growing ?rms to experience a temporary
retail presence.
The model is simple: pop-ups are short-
term shops located in vacant commercial
properties, providing temporary relief
for landlords of the liabilities associated
with holding redundant shops and o?ices.
Businesses occupy these premises on
temporary lease terms, on a shared basis
through co-working or co-funding. For
online businesses, a pop-up o?ers them
retail experience to raise their brand
pro?le, test products and prices and have
direct contact with customers, all with
minimum ?nancial commitment.
The pop-up model remains experimental
but there is already an abundance of
experience out there and some excellent
examples across England that can be
learned from. I was pleased to be at
the launch of PopUp Britain’s ?agship
store in Richmond in July 2012 and to
meet its new business occupants. And I
want to congratulate the Department for
Communities (DCLG) for the strong signal
of support it has shown for this model
by asking PopUp Britain to open the ?rst
ever Government o?ice pop-up store in its
department building. I hope this can act as
a blueprint to town teams and other public
sector bodies to show how pop-ups can be
run out of other public spaces.
Online silk scarf retailer, Nanukk, was
one of the ?rst six businesses to share
DCLG’s pop-up shop for two weeks. After
selling out of stock in the ?rst week,
owner Sarah McLeod had to go home
and organise some more. Not only did
she cover her costs of rent and travel by
more than £1,000, Sarah pointed out the
other bene?ts. ‘When you work alone and
online, you never get the feedback – it
was wonderful to hear that what I was
doing on my own wasn’t crazy and that
people actually liked my product and were
prepared to buy it.’
As well as PopUp Britain, national
coverage is growing through providers
like We are Pop Up and Popupspace. I
want learning from these early pioneers
to help to improve the model and enhance
the experience for others. This is coming
from tools like PopUp Britain’s Kit for
Town Teams and consultancy o?ered
by Popupspace to local authorities.
The other interesting development is
engagement with private and professional
sector providers who are recognising
opportunities to promote their products
and services through helping pop-up
shops; for example, by providing easy and
inexpensive ways to accept card payments
or a?ordable short term insurance cover
for pop-up tenants.
Growing Your Business | 47
Summary of Help for
Growing Small Businesses
Information and guidance
•
GOV.UK | www.gov.uk/browse/business
•
Business in You | www.businessinyou.bis.gov.uk
•
The Association of Business Schools | www.associationofbusinessschools.org
•
StartUp Britain | www.startupbritain.co
•
Enterprise Nation | www.enterprisenation.com
•
Doing business with government: a guide for SMEs (including Mystery Shopper) | www.
gov.uk/doing-business-with-government-a-guide-for-smes
•
Contracts Finder | www.gov.uk/contracts-?nder
•
Growing Business | www.growingbusiness.co.uk
Capability and skills
•
Growing your business | www.gov.uk/growing-your-business
•
Mentoring | mentorsme.co.uk, www.getmentoring.org
•
Digital Youth Academy | www.digitalyouthacademy.com
•
Advanced Institute of Management practice | www.aimpractice.com
•
Social enterprise Investment and Contract Readiness Programme | www.
beinvestmentready.org.uk
•
Mutuals Support Programme | mutuals.cabineto?ice.gov.uk/what-support-available
Growing Your Business | 48
Finance
•
Start-Up Loans | www.startuploans.co.uk
•
Business ?nance support ?nder | www.gov.uk/business-?nance-support-?nder
•
Community Development Finance Institution Finding Finance tool | www.
?nding?nance.org.uk
•
ICAEW Business Advice Service | ?nd.icaew.com/pages/bas
•
ICAEW Best-Practice Guideline – SME Finance | www.icaew.com/c?sme?nance
•
Angel CoFund | www.angelcofund.co.uk
•
UK BusinessAngels Association | www.ukbusinessangelsassociation.org.uk
•
Seed Enterprise Investment Scheme | www.seiswindow.org.uk
Recruiting and managing sta?
•
GOV.UK - Employing sta? for the ?rst time | www.gov.uk/employing-sta?
•
Business in You – employment | www.businessinyou.bis.gov.uk/advice/employment
•
Institute of Recruiters, Your First Employee – the essential 10 step guide | www.theior.
org.uk/your-?rst-employee-essential-guide
•
Advisory, Conciliation and Arbitration Service (Acas) | www.acas.org.uk
•
Graduate Talent Pool | graduatetalentpool.direct.gov.uk
•
Enternships | www.enternships.com
•
Apprenticeships | www.apprenticeships.org.uk
•
National Consortium of University Entrepreneurs | www.nacue.com
Exports
•
Open to export | opentoexport.com
•
UK Trade & Investment (including Passport to Export and Export Vouchers) | www.ukti.
gov.uk
•
UK Export Finance | www.ukexport?nance.gov.uk
High Growth and Innovation
•
GrowthAccelerator | www.growthaccelerator.com
•
Research and Development (R&D) Tax Credits | www.hmrc.gov.uk/randd
•
Technology Strategy Board (including Knowledge Transfer Partnerships; Smart;
Innovation Vouchers; Small Business Research Initiative (SBRI); _connect) | www.
innovateuk.org
Growing Your Business | 49
•
Design Council’s Design Leadership Programme | www.designcouncil.org.uk/our-work/
leadership
•
Intellectual Property O?ice | www.ipo.gov.uk
•
British Library’s Business & IP Centre | www.bl.uk/bipc/index.html
•
Manufacturing Advisory Service | www.mymas.org
•
Goldman Sachs 10,000 Small Businesses | www.goldmansachs.com/citizenship/10000-
small-businesses/UK/index.html
•
Nesta | www.nesta.org.uk
Locations
•
Popupspace | www.popupspace.com
•
We Are Pop Up | www.wearepopup.com
•
PopUp Britain | www.popupbritain.com
•
PopUp Britain’s Kit for Town Teams | popupbritain.com/guidance-for-town-teams
Membership and support organisations
•
British Chambers of Commerce | www.britishchambers.org.uk
•
National Enterprise Network | www.nationalenterprisenetwork.org
•
The Confederation of British Industry | www.cbi.org.uk
•
Federation of Small Businesses | www.fsb.org.uk
•
EEF, The manufacturers’ organisation | www.eef.org.uk
•
Forum of Private Business | www.fpb.org
•
The Chartered Institute of Marketing | www.cim.co.uk
•
The LEP Network | www.lepnetwork.org.uk
•
Capital Enterprise | www.capitalenterprise.org
•
Social Enterprise UK (SEUK) | www.socialenterprise.org.uk
•
The Prince’s Initiative for Mature Entrepreneurs (prime) | www.prime.org.uk
Growing Your Business | 50
Acknowledgements
I would like to acknowledge the enthusiastic help that I have received from the many people
and organisations listed in this report: and the even greater help and advice from those
with whom I worked and whom convention dictates that I cannot name. Needless to say the
mistakes are mine alone and although I would like to take personal credit for any good idea
contained in the report it is a collective e?ort of many contributors.
Growing Your Business | 51
Meetings and
Engagements
1. 100%Open
2. Alago
3. Alibaba.com
4. The Association of Business Schools,
Innovation taskforce
5. Association of Consulting Actuaries
(ACA)
6. British Bankers’ Association (BBA)
7. British Chambers of Commerce
8. British Library, Business & IP Centre
9. Business Growth Fund
10. BusinessZone
11. Capital Enterprise
12. Cockpit Arts
13. Community Development Finance
Association (CDFA)
14. Confederation of British Industry (CBI)
15. The Corporate Finance Network
16. Council for Industry and Higher
Education (CIHE)
17. Crimson
18. Crown Representative for SMEs
19. Crux Product Design
20. eBay
21. EEF: Manufacturers Organisation for UK
Manufacturing
22. EEFC (European Economics and
Financial Centre)
23. Enternships
24. Enterprise Nation
25. Ernst & Young Entrepreneur of the Year
26. Etsy
27. Export Credits Guarantee Department
(ECGD)
28. Federation of Small Businesses
29. Forum of Private Business
30. Funding Circle
31. The Gazelle Colleges Group
32. Grant Thornton
33. GrowthAccelerator
Growing Your Business | 52
34. Gust: Angel Investors and Startup
Funding
35. The Institute of Chartered Accountants
in England and Wales (ICAEW)
36. KindredHQ
37. Institute of Credit Management (ICM)
38. Institute of Directors (IoD)
39. Institute of Recruiters (IOR)
40. Intuit
41. London Stock Exchange
42. MADE: The Entrepreneur Festival
43. MarketInvoice
44. The National Enterprise Network
45. Nesta
46. New Entrepreneurs Foundation
47. O?ice for National Statistics (ONS)
48. O?ice of Tax Simpli?cation
49. PayPal
50. Piccalilly
51. Platform Black
52. Premier League Enterprise Challenge
53. Rockstar Youth
54. School for Startups
55. Seven Hills
56. Shared Impact
57. The Small Business Consultancy (CIC)
58. Social Enterprise UK
59. StartUp Britain
60. Start-Up Loans Company
61. Technology Strategy Board
62. Telford Enterprise Hub
63. Telos
64. Tomorrow’s Company
65. UK Business Angels Association
66. University of Buckingham
67. Upshift London
68. Venture Capitol Ltd
69. The Work Foundation
70. Young Enterprise
As well as the above organisations, Lord Young met with Government ministers, executive
agencies and policy o?icials across Government departments as well as MPs and business
owners.
Growing Your Business | 53
Notes
1. BIS Business Population Estimates for the UK and regions 2012.
2. Labour Market Statistics, March 2013.
3. Bolton J.E. (Chairman), Small Firms: Report of the Committee of Inquiry on Small Firms, (1971).
4. Scarpetta, S. et al. (2002), “The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from
Micro and Industry Data”, OECD Economics Department Working Papers, No. 329, OECD Publishing.http://dx.doi.
org/10.1787/547061627526
5. SMEs generate the majority of new job creation. For a recent assessment see Wright, Peter W. et al. (2010), “Job Creation,
Job Destruction and the Role of Small Firms: Firm-Level Evidence for the UK”, Oxford Bulletin of Economics and Statistics, 72,
5, Blackwell Publishing Ltd and the Department of Economics, University of Oxford.
6. Stangler, D. (2009), “The Economic Future Just Happened”, Ewing Marion Kau?man Foundation.
7. TEA is the proportion of the working age population involved in starting or running a business under 42 months old.
8. Hart, M. et al. (2011), “Job Creation and Destruction in the UK: 1998–2010”, Department for Business Innovation & Skills,
Economics & Strategy Group Aston Business School.
9. BIS Business Population Estimates for the UK and Regions, 2012.
10. Small Business Survey 2012
11. “Business Growth Ambitions Amongst SMEs”, BIS, August 2012.
12. Micro?nance is de?ned as loans under €25,000. This is tailored for micro-enterprises employing fewer than 10 people.
13. Government Accounts.
14. Releasing APIs (Application Programme Interfaces) will provide people with the reference they need to interrogate data
that Government holds.
15. BIS, Centre for Enterprise and Economic Development (CEEDR) and BMG Research (2011), “Research to understand the
barriers to take up and use of business support”.
Growing Your Business | 54
16. Small Business Survey 2012.
17. Rosenthal, E. et al. (2012), “ ‘This Is for Everyone’ The Case for Universal Digitisation”, booz&co. and Go On UK.
18. Lloyds Banking Group Research.
19. Pélissié du Rausas, M. et al. (2011), “Internet matters: The Net’s sweeping impact on growth, jobs and prosperity”, McKinsey
Global Institute.
20. Communication From The Commission To The European Parliament, The Council, The European Economic And Social
Committee And The Committee Of The Regions on Cross-Border Business to Consumer e-Commerce in the EU, Brussels,
22.10.2009 COM(2009) 557 ?nal and Kalapesi, C. et al. (2010), “The Connected Kingdom”, Boston Consulting Group,
commissioned by Google.
21. Figures provided by Intuit (2013) suggest that ?rms in Canada are ?ve times more likely to feel con?dent about their
?nances if they are using software to keep track of their business as opposed to spreadsheets or pen and paper.
22. From the Independent External Reviewer of the main banks Appeals Process for SMEs.
23. www.paypal-business.co.uk/cash-advance/index.htm
24. Small Business Survey 2012.
25. Small Business Survey 2012.
26. BIS, SFEDI and Newcastle University Business School (2012) “Graduate Recruitment to SMEs”.
27. Ibid.
28. Jamieson, D. et al. (2012), “Large Businesses and SMEs: Exploring how SMEs interact with large businesses”, ORC
International.
29. 2nd and 3rd Global Coworking Surveys (2011, 2012), deskmag.
doc_220630744.pdf
Better marketing of Government initiatives to support new and developing businesses.
GROWING
A REPORT ON GROWING MICRO BUSINESSES
Lord Young, May 2013
Y
O
U
R
BUSINESS
THE SECOND PART OF THE REPORT ON SMALL FIRMS
Copyright notice
© Crown copyright 2013
You may re-use this information (not including logos) free of charge in any format or
medium, under the terms of the Open Government Licence. Visit www.nationalarchives.
gov.uk/doc/open-government-licence, write to the Information Policy Team, The National
Archives, Kew, London TW9 4DU, or email: [email protected].
URN BIS/13/729 - Growing Your Business
Lord Young’s ?rst report as the Prime Minister’s adviser on enterprise and SMEs was Make
Business Your Business, 2012.
Growing Your Business | iii
Contents
Foreword by Lord Young 1
Executive Summary 3
A new package of support for growing small businesses 4
The Vital 95% 6
The Growing Importance of Small and Micro Businesses 6
Factors In?uencing Growth 12
A Focus on Micro Enterprises 12
Using What We
Have in Better Ways 17
Business Schools as “Anchor Institutions” 17
Universities and Colleges 18
The Customer to Grow: Public Sector Procurement 19
Programmes and Schemes to Help Businesses Grow 24
Finance to Grow 30
Employment and Attracting Specialist Skills 36
Relationships with Big Businesses 40
Locations 43
Summary of Help for Growing Small Businesses 47
Acknowledgements 50
Meetings and Engagements 51
Notes 53
Growing Your Business | 1
Foreword by
Lord Young
M
y ?rst report on small ?rms,
Make Business Your Business,
was published last year and
dealt with start-ups and the development
of small business. The second instalment
published today, Growing Your Business,
deals in the main with micro-businesses
and small ?rms employing fewer than 25
people. This is an area of some strength
in our economy for we have one of the
best environments in the world for the
creation of new ?rms. What this report
endeavours to do is to help and encourage
all those new ?rms to grow and become an
important part of our economy.
Today we have some 4.8 million ?rms in
existence, a sixfold increase on the number
of ?rms at the time of the Bolton Report in
the early seventies, but of all these ?rms
no fewer than 3.6 million are sole traders
without employees. Programmes like Start-
Up Loans are creating many thousands
more and the purpose of this report is to
help the sole trader take on his or her ?rst
employee, and the micro ?rms to expand
and grow their business.
The UK is one of the few countries in the
EU which has seen the number of people
in employment grow since the 2009
recession. Despite a considerable reduction
in public sector employment over 2010–12,
the private sector has expanded to more
than make up the di?erence. But we are by
no means at the end of this road. Estimates
by the Department for Business Innovation
and Skills (BIS) suggest that if we were
as entrepreneurial as the United States we
would have nearly a million more ?rms.
“
If we were as entrepreneurial
as the United States we would
have nearly a million more ?rms.
Even without that, if we could just help
the million micro ?rms that employ
between one and nine people to employ
on average one more employee we would
transform the economy. If we helped even
a small portion of sole traders to become
employers it would further improve the
unemployment ?gures and our prospects
for the future.
Growing Your Business | 2
Is this possible? Yes, I believe it is. In the
last recession in the early nineties, small
?rms were in debt for over four years. This
time small ?rms have had money in the
bank throughout. Figures from the O?ice
for National Statistics (ONS) indicate
that large corporates are sitting on over
£720 billion. When ?rms large and small
are sitting on cash and not investing, the
missing ingredient for growth is simply
con?dence. Indeed con?dence, or rather
the lack of it, is the origin of many a
recession. If merely £10 billion of this cash
was injected into our economy – in addition
to current levels of business investment
– the UK would see business investment
return to pre-crisis levels.
No report, no matter how well intentioned,
can provide that missing con?dence. What
it can do, and what I hope this report does,
is to highlight the help and assistance that
already exists – or will soon exist – to give
businessmen and women the ability to
grow their businesses. Here are the tools;
now it is up to you.
Lord Young, 2013
Lord Young of Gra?ham
The Rt Hon the Lord Young of Gra?ham PC DL graduated from University College
London before becoming a solicitor. He spent a year in the profession before moving on
to establish a number of successful businesses. He became Chairman of the Manpower
Services Commission in 1982, entered the Cabinet in 1984, became Secretary of State
for Employment in 1985 and in 1987 became Secretary of State for Trade and Industry
and President of the Board of Trade. He was Executive Chairman of Cable and Wireless
plc from 1990 to 1995 and thereafter Chairman of Young Associates Ltd, which invests
in new technologies.
Lord Young is an adviser to the Prime Minister on small business and enterprise. He
published a report on start-ups, Make Business Your Business, in May 2012.
Growing Your Business | 3
Executive
Summary
Prime Minister,
R
ecord numbers of people are starting a business each year, as part
of a burgeoning population of over 4.8 million ?rms in the UK
today.
1
Although three quarters of these ?rms are sole traders there
are nearly a million micro ?rms (with one to nine employees), many with
opportunities for growth.
The purpose of this report is to highlight the abundance of opportunity and support
available for small and medium-sized enterprises (SMEs) and is aimed at policy makers
and all those who advise and champion small businesses.
I want to highlight three areas that I believe create the right conditions for businesses to
ful?l their growth potential:
1.
Con?dence – not only in the economy and overall prospects for growth, but also in
their conviction to make it happen.
2.
Capability – by improving a ?rm’s skills and performance. The evidence is
unequivocal: businesses that seek and engage external help are more likely to grow.
But much more needs to be done to encourage ?rms to invest in their capability.
3.
Coherence – businesses need support that is designed and marketed in a way that
they understand, trust and can ?nd.
Growing Your Business | 4
Capability and skills
•
A greater role for business schools
in the local economy with the
establishment of a new national
“Supporting Small Business Charter”
and accompanying award scheme to
incentivise business schools to help
SMEs grow. This will include advising
small ?rms and increasing the ?ow of
highly quali?ed students and graduates
into SMEs. Business schools will also
become a key part of the referral
process and provision of Start-Up Loans
and Growth Vouchers.
•
A £30 million Growth Vouchers
programme to ?nd innovative
approaches to help SMEs overcome
behavioural barriers to increasing
growth. Funded by Government, this will
aim to unlock growth potential among
small businesses who are holding back
on investing in growth and encourage
them to seek external advice.
Finance
•
In response to high demand, Start-Up
Loans will be boosted by a further £30
million to provide important funding
and mentoring to help young people get
their business ideas o? the ground. The
age limit for entrepreneurial candidates
has been increased from 18-24 up to 30,
and I recommend removing the age cap
altogether.
• SME Growth Loans, to be piloted from
the summer of 2013 and as part of the
Enterprise Finance Guarantee (EFG)
scheme. These will facilitate loans of up
to £25,000 targeting SMEs in their third
year seeking access to growth capital.
This accompanies a new EFG Trade
Credit pilot which uses a Government
guarantee to facilitate additional Trade
Credit provided by suppliers to boost
liquidity for SMEs.
•
£100 million of new funding to SMEs
from the Business Finance Partnership
which promotes new sources of ?nance
to businesses, including peer-to-peer
and crowdfunding.
Public sector procurement
•
A new “single market” commitment
to ensure a simple and consistent
approach is taken across public sector
procurement. Government will consult
public sector bodies and will make this
a legal requirement.
•
The pilot of a proactive function for
Government’s Mystery Shopper to
hold contractors to account in their
relationships with SMEs.
A NEW PACKAGE OF SUPPORT FOR
GROWING SMALL BUSINESSES
In my review of start-up businesses in 2012, I asked the Government to put in place a ?rst
important building block for young entrepreneurs through the creation of Start-Up Loans.
This programme has begun well and should make a considerable di?erence in years to
come.
This review on growing small ?rms accompanies a number of new developments.
Growing Your Business | 5
•
A ?rst national competition to ?nd the
best Councils to engage small suppliers
in local government procurement.
Marketing of Government
schemes
•
Better marketing of Government
initiatives to support new and
developing businesses. I am proposing
a commitment for up to 5% of future
initiatives to be spent on marketing
and advertising, and with a view to
sustaining a commitment over time
where marketing is showing bene?ts.
•
This report will also highlight the range
of existing and new help targeted
at growing SMEs. This includes the
development of a new digital capability
programme for SMEs to make more
e?ective use of the internet and
technology as well as help to export,
take on a ?rst employee and innovate. A
summary of these starts on page 47.
Much of the analysis and support for
business described in this report is
applicable to all parts of the UK. However,
my review and its conclusions focus on
the position in England, accepting that
other arrangements apply in the devolved
administrations.
Growing Your Business | 6
The Vital 95%
THE GROWING IMPORTANCE OF
SMALL AND MICRO BUSINESSES
O
ver recent decades there has been
a remarkable transformation in the
fortunes of the UK economy. In the
early 1980s fewer than 24 million people
were in employment. Today that ?gure
is close to 30 million.
2
It has never been
higher.
Likewise there has been an inexorable
rise in the number of businesses in the
economy. The Bolton Report identi?ed
around 820,000 small ?rms in the UK in
1971.
3
By the turn of the century, according
to o?icial Government estimates of the
business population, this ?gure had
increased to 3.5 million.
Evidently, this rise in the number of
enterprises is part of a long-term trend.
Even more encouraging is the rise in the
number of businesses in recent years. In
2008 there were 4.26 million businesses.
By 2012 this had increased to 4.8 million
– a rise of around half a million from the
onset of the recession.
A number of factors contributed to this
growth. One key factor is the impact of
the internet. It has never been easier to set
up a business, with the internet enabling
greater access to markets, advice and
guidance, marketing opportunities and cost
savings than previously feasible.
The UK also has one of the most e?icient
labour markets in the EU – such ?exibility
and light regulation provides tangible
bene?ts to us all. Economic growth and
employment raises income and improves
living standards. Our employment rate is
well above the EU average and exceeds
that of the United States too.
Growing Your Business | 7
Number of people in employment aged 16 and over, 1983 to 2012 and Number of private sector
businesses in the UK, start of 2000 to start of 2012
The contribution of micro ?rms to the economy is huge
At the start of 2012, 95.5% (4.6 million) of private sector businesses in the UK were micro
?rms (0–9 employees). Micro businesses together accounted for 32% of private sector
employment (7.8 million) and 20% of private sector turnover.
Share of private sector businesses, employment and turnover by employment size-band, 2012
Growing Your Business | 8
This contribution has been increasing over recent years
The contribution of micro businesses to the economy has been increasing in recent
years. The growth in the business population has been driven by micro ?rms which have
increased by 40% since 2000.
Change in the number of UK private sector micro businesses by size band, 2000–2012 (indexed)
But growth has come from ?rms with few employees
Within the micro business population itself growth has been driven predominantly by
businesses without employees. Another interesting trend has been the fall in the number of
businesses with just one employee, particularly since the onset of the recession in 2008.
Change in the number of UK private sector businesses by size band, 2000–2012 (indexed)
Growing Your Business | 9
Coupled with their contribution in other areas, this justi?es a strong focus on helping
micro ?rms to move forward. New and growing small businesses drive economic growth by
stimulating innovation, by creating a competitive spur to existing businesses to increase
their productivity,
4
and by making a disproportionate contribution to job creation.
5
An excellent time to start a business
The rise in the number of businesses in recent years shows that a recession can be an
excellent time to start a business.
The following chart shows that despite tough economic conditions the number of new
businesses has remained remarkably resilient and at historically high levels. Business
closures have remained stable and lower than pre-recession levels.
Estimated business population, start-ups and closures (truncated scale)
One factor that has contributed to the relatively small number of business closures across
2008–12 when compared to previous recessions is the improved ?nancial position of SMEs.
The next chart shows that, in the early nineties, lending to SMEs outstripped their deposits
and so SMEs were net borrowers. In 2007 this position had reversed and SMEs were net
depositors. This meant that SMEs were better able to weather the economic storms that hit
from 2008.
Growing Your Business | 10
Net ?nancial position of SME sector, total lending minus total deposits (SMEs with less than £1
million turnover)
It has always been the case that a recession can be a good time to grow a business. This is
true for a number of reasons. Competitors who fall by the wayside enable well-run ?rms to
expand and increase market share. Factors of production such as premises and labour can
be cheaper and higher quality, meaning that return on investment can be greater.
Research shows that well over half of the companies on the 2009 Fortune 500 list (a yearly
ranking of America’s largest businesses) began during a recession.
6
World renowned ?rms
such as GE, Microsoft and Disney all started during a recession.
Opportunity rather than necessity
Most people in the UK who start up a business do so because they view it as an
opportunity rather than a necessity (motives for growing that business are di?erent, as
we shall see later). The Global Entrepreneurship Monitor (GEM) measures Total early-
stage Entrepreneurial Activity (TEA).
7
The following chart shows that, in the UK, most
entrepreneurial activity is opportunity-driven with less than a ?fth driven by necessity.
Growing Your Business | 11
Total and Necessity entrepreneurship in participating G7 countries, 2012
The next chart shows just how the enterprise activity has strengthened in recent years.
Between 2002 and 2009 the TEA rate stood at around 6%. Since then it has increased year-
on-year reaching 9.8% in 2013. This has seen us pull away from Germany and France and
begin to chase down the US.
Total Early Stage Entrepreneurship in select G7 countries, 2002–2012
Small ?rms and economic growth
Economic growth raises income levels and improves living standards. One of the main ways
this occurs is through job creation; and new and growing small businesses fuel job growth.
A recent study found that of the jobs created each year between 1998 and 2010, small ?rms
and start-ups created around two-thirds.
8
Growing Your Business | 12
Factors In?uencing
Growth
F
or the past 12 to 18 months, I have seen many small businesses grow, often keeping a
low number of employees despite rapid growth in pro?t and turnover.
This is being achieved through:
•
increasing adoption of technology to innovate, raise ?nance and ?nd new customers
•
increasing use of shared services and outsourcing specialist functions, enabling business
owners to keep costs down, stay nimble and respond rapidly to new opportunities.
Growth needs to be measured not just by job creation but also by the economic activity
these ?rms are generating through the ?exible use of people, technology and services.
A FOCUS ON MICRO ENTERPRISES
We know that SMEs dominate the stock of
businesses and the majority of these will
start and remain small – nearly 95% of
all ?rms are micro enterprises employing
fewer than ten people; 75% have no
employees.
9
Government is right to focus much
of its attention on SMEs with high
growth potential and I welcome the
development of GrowthAccelerator
(www.growthaccelerator.com) and other
programmes to support these businesses.
But I know from experience that it is not
easy to spot the high-?yers at an early
stage or to make predictions about their
long-term success. That is why I am keen
that Government keeps up its e?orts to
build the capacity of the wider population
of SMEs, including those that start very
small and have a strong desire to grow.
Growing Your Business | 13
This report concentrates on the
early stages of growth for new micro
businesses – from a sole trader and its
?rst employee, up to ten and beyond.
These will be businesses across a range of
sectors, trading for a couple of years and
establishing themselves, and now thinking
about growth opportunities. But these
lessons could also apply to established
?rms looking to make a step-change in
their performance.
My report emphasises a number of
important factors in?uencing small
business growth:
1. Con?dence remains key
This report will demonstrate how small
businesses, unlike in previous recessions,
have for the most part remained strong
with good growth prospects since 2008.
I meet many small ?rms who ?t this
pro?le – strong viable businesses with very
good growth prospects. But for many of
these ?rms there is no current inclination
or preparation to expand. Over a third
of SMEs in recent research cited the
economic climate as the main obstacle to
the success of the business. 56% of SMEs
that express a need for ?nance say they
do not apply because they do not want
to take on additional risk; and fewer SME
employers aim to grow in 2012 compared
with 2010, particularly among micro
?rms.
10
Challenging economic periods can be a
prime time to strike for growth – markets
that appear to be at their lowest point can
o?er gaps and openings as customers
seek new solutions and alternatives to
the way things were before, and suppliers
become more competitive to win your
business. This is how successful brands
like Screw?x, The Body Shop and Hackett
saw it when they were starting out. These
businesses started very small and faced
many of the challenges small ?rms face
today. When others were pulling back or
just holding on, these businesses were
spotting new market openings and making
the most of opportunities to grow and
expand.
A little later in this report we shall meet
Crux Product Design. This business started
in 2003 as a two-man product design team
and made the decision to expand in 2008.
Crux have now become synonymous with
Great Britain’s London Olympic success as
the designers and makers of the Team GB
cycling helmets. For Crux and many others,
a decision to expand was as much about
a survival strategy as it was about growth
success. Not investing now can make it
much harder to make the most of the
opportunities for growth when economic
prospects start to improve.
2. Strength of ambition matters
Ambitious SMEs are more likely to grow
in terms of turnover and employment.
11
However, while the majority of SMEs
assert that they want to grow, relatively
few achieve this in practice. Fewer than a
quarter of SMEs have what is described
as ‘a substantive ambition to grow’ – in
other words, a desire to grow met with
determination, opportunity and a strong
level of leadership and management to
make it happen.
There will always be “lifestyle” ?rms with
little or no growth ambition, but there will
also be many other ?rms that do not grow
but are well placed to do so. These could
be SMEs that have downsized due to the
recession with a strong desire to grow back
to previous levels. There are others like
the ‘ambitious but unprepared’ that have
a strong aspiration but little awareness
of the opportunity and help available to
them. And then there are social enterprises
Growing Your Business | 14
looking to develop their business model
and extend their help to the people they
employ and the communities they serve.
3. Perceptions a?ect ambition
I am also struck by how much perceived
obstacles can stunt not just a ?rm’s ability
to grow, but also the owner’s desire to
grow. These can be di?iculties navigating
regulations, hiring sta? or exporting. These
psychological barriers sti?e ambition and
discourage people from taking growth
plans forward. I am therefore keen that
one of the results of this review will be to
demystify the misperceptions out there
about growing a business.
4. Small ?rms are using
technology like never before
We are seeing the increasing adoption
of technology amongst small ?rms to
innovate, raise ?nance and ?nd new
customers. These ?rms are realising that
the internet and digital technology is no
longer an optional extra, but a key driver
to growth. An example of this is rising
customer demand for 4G (high-speed
mobile internet) which will both increase
commercial opportunities for SMEs and
test their ability to remain competitive.
5. Small businesses that use
external help are more likely
to grow
Outside assistance has a strong and
positive impact on the growth of a small
business. However, much more needs to be
done to encourage ?rms to invest in their
own performance. As well as an overall
mood of con?dence in the economy, ?rms
need to build con?dence in their own skills.
Intrinsic to this is the strength of a ?rm’s
leadership and management.
This makes it imperative that we
encourage ?rms to improve in the key
areas which can make a sustainable
di?erence to their business. This is why I
have asked Government to put in place a
Growth Voucher programme available for
small and micro ?rms seeking support to
tackle their key growth challenges.
6. SMEs need to broaden their
awareness of sources of
?nance
Small businesses continue to complain
that they are unable to access bank
?nance. But this should not prevent small
?rms from accessing the ?nance they
need – whether from micro ?nance
12
or
alternative sources of ?nance provided by
crowdfunding platforms.
7. There is more Government
itself can do to facilitate new
and growing enterprises
I want new and existing business support
schemes to belong to a coherent package
of help for growing small businesses. This
should include:
•
Better use of existing assets, for
example by helping business schools to
play a central role in the development
of local businesses through better
engagement with their students and
facilities, or by unlocking the huge
growth potential for SMEs through
government procurement.
Growing Your Business | 15
•
Greater emphasis on marketing
Government initiatives. There is an
abundance of support available to
growing businesses, but it is not always
marketed to the small ?rms that need it
most. When I think back to my time as
the Secretary of State for Employment
in the 1980s, I am reminded that the
popularity of the Enterprise Allowance
Scheme (EAS) was due to strong and
well-resourced coverage and a simple
and clear message to unemployed
people looking to set up their own
business. Some of the companies set up
with the assistance of the EAS are even
listed today in the FTSE 100.
I have put forward a proposal to
Government which would enable
departments to use all relevant marketing
channels at our disposal to ensure that
schemes like Start-Up Loans, Growth
Vouchers and the Seed Enterprise
Investment Scheme (SEIS) are e?ectively
targeted at entrepreneurs and potential
investors in enterprises. If we can do this,
I am con?dent that we can repeat the
success of businesses like Superdry and
Warehouse, which were started with the
help of programmes like EAS, and produce
a new generation of successful businesses.
You may not have heard of Crux
Product Design, but you’ve probably
seen the cycling helmets they
developed for Team GB at the 2012
Olympics and Paralympics…
Crux started in 2003 as a two-man
team and you’re now a global brand,
famous for the Team GB cycle helmets.
How did that happen?
When the recession hit, growth was a
necessity rather than a luxury – we were
overly exposed to a small number of
client accounts, so we quickly went about
expanding our client base. It was essential
that we had the con?dence and conviction
to continue with our plans whilst managing
risk. The biggest risk was doing nothing
at all – if we’d battened down the hatches
we’d be out of business.
We also found that being in a recession
meant we could negotiate good deals on
premises and new sta?, as many other
businesses were cutting back.
What key steps were critical to your
growth?
Two key changes have driven our growth:
new premises and new people. Taking on
new sta? was not about increasing our
headcount – it was about investing in a
skillset that could give us that competitive
edge.
Recruiting a
person with
sales and
marketing
expertise
immediately
boosted
Crux sales
and has
CASE STUDY
CRUX PRODUCT DESIGN | James West, Director
Growing Your Business | 16
given us a strong strategic direction to
expand into new markets and develop the
Crux brand.
Moving from a small o?ice to a fully
functioning design studio and rapid
prototyping workshop was also key – it
gave us the room and facilities to expand
and underlined our drive to develop from a
surviving micro ?rm to an ambitious and
sustainable business.
What has been your biggest mistake?
Not understanding the value of marketing
and PR early enough.
What does social media mean to your
business?
Social media is a great way of gathering
market intelligence. We monitor the
interests and trends of prospective
clients, thinking about how we might
o?er solutions to their needs. A key part
of winning the Team GB cycling helmet
contract was the approach we made to UK
Sport via LinkedIn.
What would be your top tip for other
micro businesses?
Keep a close eye on costs: only make
business expenditure on items that you
really need. Start a cash ?ow forecast
from day one and keep it up-to-date.
Maintaining a positive cash balance gives
you speed and ?exibility to capitalise on
business opportunities that may come
your way. And use universities. They’re
an important resource for your business.
Academia and the corporate world
are merging ever closer. Setting and
supporting university projects, for example,
can yield excellent results for both parties
at low cost.
www.cruxproductdesign.com
Growing Your Business | 17
Using What We
Have in Better Ways
T
here is often a call for the Government to come up with new schemes and
programmes to help businesses, yet right under our noses we have assets which can
be developed to o?er further bene?ts to SMEs. I want to use this chapter to highlight
some of these, including business schools and the wider education sector, and government
procurement.
BUSINESS SCHOOLS AS “ANCHOR
INSTITUTIONS”
There are no fewer than 130 business
schools across the country, the majority
attached to universities. These business
schools are seen as one of the big success
stories of UK higher education, producing
large numbers of talented students
of business, management and related
disciplines. Many of their students will go
on to ?nd placements and careers in large
corporate and mid-cap ?rms here and
abroad.
However, in the main, these business
schools play a variable role in the local
economy – graduates generally do not
have ambitions to take up employment
opportunities in small ?rms and small
businesses do not see business schools as
a useful source of help in the local area.
Without direct contact with the small
business sector, I believe business schools
are underselling themselves in terms of
their expertise. Nor do they provide the
breadth of skills and experience students
need to enter the wider world of business,
entrepreneurship and commerce.
I want this to change. I have found that
I am pushing on an open door with
the Association of Business Schools
(ABS). The ABS is equally committed to
increasing direct contact between local
SMEs and business schools, and ensuring
that the latter become a force in their
Growing Your Business | 18
local community. The ABS has agreed to
lead a national programme to recognise
and encourage good practice in the
relationship between business schools,
their faculty and students, and small
businesses. The imperative is to extend
such activities more widely across the
business school community and develop
the capacity of business schools to act as
anchor institutions, supporting economic
development on a sustainable basis.
Incentives and rewards for
business schools
I have asked the ABS to develop a
“Supporting Small Business Charter” and
an associated award scheme to incentivise
business schools to help small ?rms to
grow. This will include the provision of
small ?rm growth programmes, advice
clinics, improving the ?ow of highly
quali?ed graduates into small businesses,
and increasing export potential through
engagement with international students.
As an indication of the high regard to
be associated with this charter, I intend
that business schools in receipt of the
‘Supporting Small Business’ awards should
bene?t by gaining a role in the delivery
and referral for Start-Up Loans, Growth
Vouchers and other elements of the SME
support identi?ed elsewhere in this report.
I will explore this by hosting a summit
at Number 10 in the summer of 2013
which will bring together deans and
other relevant representatives of business
schools, business organisations and other
key players in the local enterprise agenda.
I would like to see a charter and award
scheme in place for the next academic
year.
This charter and award scheme would
underpin a coherent package of help
on o?er from business schools to small
businesses, making the schools easily
identi?ed as places where students and
sta? are keen and able to work with
small ?rms on the specialist areas that
drive their growth. I believe in future such
schools should also encompass resources
such as incubators where small ?rms
and entrepreneurs can interact with the
facilities and students in business schools.
And there should be initiatives to support
high quality academic research into key
issues facing the SME community, such
as crowdfunding and the value of SMEs in
public sector procurement.
UNIVERSITIES AND COLLEGES
As well as business schools, I am
constantly reminded of the expert advice,
collaboration, student placements and
technical support that universities and
colleges provide to local businesses and
?rms operating in specialist areas.
There are many good examples of higher
and further education institutions working
in their local communities to support small
business. Many colleges have dedicated
business development centres open to
businesses for sta? development and
technology improvement. New College
Nottingham, for instance, worked directly
with 1,346 companies in 2011–12, of which
80% were SMEs.
I would like to see universities at the
heart of clusters of innovative businesses.
Knowledge transfer between local
businesses, universities and the research
Growing Your Business | 19
councils will be a key driver for growth.
One way this is already happening
is through the Technology Strategy
Board (TSB) and Knowledge Transfer
Partnerships (KTPs). These support UK
businesses wanting to improve their
competitiveness by bringing a recently
quali?ed graduate into their businesses for
up to three years.
As well as KTPs, I am a ?rm believer
in the value of students undertaking
internships and placements in small
businesses. Students can provide fresh
thinking, opportunities and new talent. In
this report’s chapter on Employment and
Outsourcing I will look more closely at the
issues of graduate recruitment in SMEs. I
also want to ensure that students from all
education institutions (not just business
schools) are given the con?dence and
support to start their own businesses – not
just to be employed in them.
THE CUSTOMER TO GROW: PUBLIC
SECTOR PROCUREMENT
Government procurement has the potential
to create signi?cant business and growth
opportunities for SMEs – £230 billion
per year is spent on goods and services
across the whole public sector.
13
For
small suppliers, winning a share of this
market could be transformational for their
business. This can include procurement
supply chains which can o?er businesses
the opportunity to build capacity and
know-how in what is a huge marketplace.
In this report I want to draw closer
attention to the innovative solutions SMEs
are bringing to the public sector. I also
want to put the spotlight on the approach
taken by local authorities and NHS trusts
to open up opportunities for SMEs in
their procurement, including the way
small suppliers are treated in the contract
process. I am recommending that all parts
of the public sector agree a set of “single
market” principles which all suppliers
can expect when doing business with the
public sector.
A stocktake on progress
There are signs of steady progress in
central government opening up the
procurement process to small suppliers,
marked by a decision to remove Pre
Quali?cation Questionnaires (PQQs) for
contracts under £100,000 in value. This
has demonstrated that procurers can
manage procurement e?iciently without
adding additional burden on themselves
and suppliers.
But the fact is, central government will
need to almost redouble its spend with
small ?rms if it is to achieve its target of a
25% SME market share in procurements by
the end of this parliament (2015).
Moreover, Whitehall procurement only
accounts for about 20% of overall public
sector business won by small ?rms. It is
local government and the NHS which
present the biggest opportunities for
these suppliers – some 70% of small ?rms
supplying the public sector sell to these
two markets alone. However, Government’s
Mystery Shopper (www.gov.uk/doing-
business-with-government-a-guide-
for-smes) shows that Councils and NHS
Growing Your Business | 20
trusts in particular continue to be the most
complained about authorities for their PQQ
practices.
My own conversations with SMEs back
this up. Findings from my review point to
signi?cant constraints in the procurement
process and discouragement across the
wider population of SMEs that public
procurement is impenetrable to new
entrants. The fact that so many small
?rms do not consider government work
an option is a measure of the scale of the
turnaround required.
What can be done about this? I have
identi?ed three areas where I believe
change could make a big di?erence to
SMEs’ ability to win public sector contracts.
1. A greater focus on what
SMEs can o?er
First and foremost SME engagement with
the public sector is about delivering better
value in procurement. I continue to ?nd
examples of small suppliers producing
spectacular gains and at a lower cost than
larger (and often incumbent) government
contractors.
Despite the extraordinary savings small
suppliers like these are o?ering, I am not
convinced that the value of SMEs is being
fully exploited across the whole public
sector.
What I want is a more direct route for
innovative SMEs into procurement. This
should include programmes like the
Small Business Research Initiative (SBRI)
which are speci?cally aimed at helping
businesses provide new technical solutions
and products to solve speci?c problems
identi?ed by Government departments.
I am pleased that ministers across
Government have committed to promoting
greater use of SBRI in their departments.
And I welcome the increase in pre-
dialogue and the publication of medium-
term procurement plans through sector
speci?c “pipelines” in Government, which
give SMEs the opportunity to help shape
procurements before the start of the formal
procurement stage.
An SME, Redfern Travel Limited, was
awarded a four-year contract in 2011
to deliver national travel services
to Government. This recognised the
e?iciencies to be gained by aggregating
spend from 17 central Government
departments all with similar travel
requirements, into a single national and
international contract. Redfern was able to
deliver a high quality service signi?cantly
cheaper than the next best bidder, with an
estimated saving of £20 million (a saving
of over 70% versus existing costs).
SMEs are also delivering extraordinary
value in Government IT contracts. For
instance, a recent Home O?ice hosting
and server procurement has seen a 90%
reduction in cost from £73,000 to £7,000
by awarding the contract to a small
provider.
The launch of the innovative Government
Procurement Service (GPS) G-Cloud
framework – where more than 70% of
the 470 suppliers are SMEs – has given
Government departments an easy route
to ful?l cloud-based ICT requirements
and allowed small, innovative suppliers
to compete against the traditional large
ICT providers. Departments are quoting
savings on bids from incumbent and large
suppliers from 30% to 90% by using the
G-Cloud to open up the market to a more
diverse and innovative range of suppliers.
Growing Your Business | 21
Small suppliers (particularly in the area
of IT) are put at a disadvantage when
contracting authorities stipulate existing
security clearance as a prerequisite for
recruiting a contractor. Large companies
are often able to keep their sta? security
clearances up to date which is not always
possible for new and very small ?rms. I am
pleased that new guidance has been issued
to all departments that makes it clear that
pre-security clearance should not be made
a condition of a procurement unless there
are exceptional circumstances.
I also welcome the Cabinet O?ice Digital
Procurement Framework which will open
up digital services to SMEs to the bene?t
of both. I particularly welcome the fact that
this will create a regional digital market as
well as a national one.
2. A “single market” for all
parts of the public sector
Chief amongst the criticisms from SMEs
about public sector procurement is the
complexity, cost and inconsistency when
trying to sell to more than one authority.
An obvious example is the disparity
between central government’s removal of
PQQs for small value procurements and
their continued use by the wider public
sector, usually with di?erent thresholds
and often requiring burdensome details
and the “gold plating” of training, health
and safety policies and wider objectives
of the contracting authority. SMEs want
procedures in place to make contracts
quicker to award, and more certainty about
the likely success of a tender.
A key recommendation in this report is
the creation of “single market” principles
to provide a simple and consistent
approach to procurement across all public
sector agencies, where SMEs can gain
better and more direct access to contract
opportunities. This would apply ?ve
common principles:
1. Access
The public sector removes all PQQ
requirements for contracts below the EU
Threshold (€200,000).
Above this, all public authorities use a
single standard PQQ: this would allow
public authorities to assess a supplier’s
suitability to bid based on considerations
about technical skills and capacity, but
would avoid gold plating with a plethora of
di?erent locally-determined objectives.
The public sector adopts a “single-
passport” system to allow companies to
enter pre-quali?cation data once on the
standard form, to be approved by one
public body and then counted as the PQQ
for all their bids across any other authority.
2. Visibility
To locate all contract opportunities in a
single place using the existing Contracts
Finder platform (www.gov.uk/contracts-
?nder). This would not preclude additional
advertising through an authority’s own
local and sector led communication
channels.
3. Completion bonds
There is some evidence that the demand
for completion bonds from the public
sector unfairly tilts the playing ?eld
against small and medium-sized ?rms.
Large ?rms that have substantial assets
do not ?nd any di?iculty in providing
suitable bonds but the small ?rm will often
?nd that the only way they can provide
such bank bonds is at the expense of
their overdraft facilities which e?ectively
prevents them bidding. I recommend that
the Business Bank investigate whether they
Growing Your Business | 22
can, by way of joint-venture with a ?nance
provider, introduce an insurance scheme to
replace the necessity for completion bonds.
4. Payment
All authorities’ payment terms are made
standard for all procurements.
5. Accountability
For all authorities to monitor and collect
data on public sector spend with SMEs,
and for Government to report it in one
place.
How can we make this work?
It is clear from my discussions with
Government departments that there is
strong willingness to support a single
market approach.
The Department of Health is working
closely with the NHS to embed these
principles in new guidance it will issue
to trusts in summer 2013. This will
include clear advice that trusts should
not apply PQQs for contracts below the
EU threshold; and training and closer
engagement with non-executive members
of hospital boards to ensure they have
the ability to challenge the way in which
SMEs are being considered in procurement
decisions.
The Department for Communities
and Local Government and the Local
Government Association are also clear that
local councils need to be more active and
visible to create a competitive environment
for SMEs in their procurement. I was
pleased to join the Secretary of State for
Communities in January 2013, to launch
the ?rst national “Best councils to do
business with” competition.
This competition has produced a good
response from councils. We will be
looking to the best of these for examples
of councils that recognise the bene?ts
of doing business with small ?rms
and are actively removing the barriers
which impede their ability to compete
successfully for contracts. I am proposing
that the winners of the competition
become the early adopters of single market
principles. The winners will be announced
in May 2013.
I want this positive response from
departments to extend to all parts of
the public sector. To make it happen I
have asked the Government to lead a
consultation with public bodies to consider
their appetite to adopt these single market
principles and then embed these principles
into procurement practice through a legal
requirement. This should take account
of good procurement practice across the
whole of the public sector and the ability
of public bodies to respond ?exibly to local
or sector-based needs. But above all, I
want the simpli?cation of PQQs and other
procurement practice to be recognised
as a deregulatory measure that increases
business and growth opportunities for
small ?rms in local areas and the sectors
in which they do business.
I believe that the combination of the
abolition of PQQs together with the
replacement of completion bonds by an
insurance scheme would transform the
opportunities for small ?rms and result
in a stronger SME sector and at the same
time save the taxpayer considerable
expenditure.
Growing Your Business | 23
3. Enforcement and
accountability – an enhanced
Mystery Shopper
SME suppliers not only report problems
in their direct relationship with public
procurers but also in their engagement
through public procurement supply chains.
Central government commits to pay
invoices in ?ve working days. However,
a prime contractor can often take
several months before they pay their
subcontractors. The introduction of Project
Bank Accounts is a welcome development
and allows a procurement authority to put
in place a mechanism for timely payments
to all contractors in a supply chain, not
just the prime contractor. This has begun
in construction procurement and I would
like to see this rolled out across all main
areas of government procurement where
possible.
My review has also unearthed a practice
where large companies partner a small
?rm to use their specialist skills to secure a
contract as equal partners, and then lean on
the small ?rm to reduce the junior partner’s
contractually agreed share of the work.
The Government’s Mystery Shopper
scheme can hold public bodies and
supply chain managers to account when
malpractice is reported. But this approach
is reactive and reliant on the supplier
coming forward – often reluctantly when
they are in the midst of a commercially
sensitive contract relationship. I have
asked the Cabinet O?ice to review how
Mystery Shopper can strengthen its hand
by becoming proactive, and to embed a
stronger inspectorate function to ensure
that procurement contract agreements are
better enforced.
From March 2013 a new approach
to Mystery Shopper has been piloted
to enable spot checks on advertised
procurements to ensure good procurement
practice, as well as checks on supply chain
payments and terms of business between
a prime contractor and its partners and
subcontractors. If a department is not
satis?ed, it may cancel contracts as
well as exclude contractors from future
government work. Where slow payment
is discovered, contractors will be named
through the reports of Mystery Shopper
cases published online.
I have also asked the Cabinet O?ice
to increase awareness of the published
Mystery Shopper results. This will enable
business representatives, local councillors,
hospital board members and all others
involved with small ?rms and the delivery
of public services to increase pressure on
public bodies in their areas, when abuses
in procurement practice are committed by
procurers or the prime contractors they do
businesses with.
Growing Your Business | 24
Programmes and
Schemes to Help
Businesses Grow
I
now want to consider programmes
and schemes that the Government
supports which are speci?cally aimed
at improving the internal capabilities of
SMEs.
We need to get from a position where too
few SMEs access external help, to where
they routinely identify the support they
need to improve and know where they can
?nd it. I see the task as twofold:
1. to stimulate demand amongst SMEs by
raising awareness of the bene?ts and
trustworthiness of the advice on o?er
2. to target the areas of help businesses
need most.
This is why I have asked the Government
to put in place a Growth Vouchers
programme for small and micro businesses
seeking support to tackle key growth
challenges. This would focus on the
key areas that we know can make a
sustainable di?erence.
Online advice and guidance
Entrepreneurs and small ?rms are
increasingly turning to the internet,
including social media platforms like
LinkedIn and Twitter, to seek guidance
and encouragement. The internet also
o?ers Government the opportunity to
deliver practical and relevant advice to a
large number of SMEs in an e?icient and
targeted way.
The transformation of Government
business support services has resulted in
a new digital o?ering – GOV.UK (www.
gov.uk). This is designed as a simpler
and faster means for all ?rms to access
business information, and I anticipate
many businesses using it to ?nd answers
about compliance and regulation. However,
that only works when people know what
they are looking for; and there remains a
problem when looking for advice including
support and encoragement: it is not o?ered.
The migration of some but not all
BusinessLink business advice content
to GOV.UK (along with material from
Directgov) has opened up a gap in the
Growing Your Business | 25
online provision of this advice to small
?rms. This poses a danger that we undo a
great deal of the good work Government
and its partners have done to help people
make a business idea happen. That is why
I want to encourage the private sector to
step forward with proposals to provide
advice and inspiration to help people start
and develop their businesses. Much of this
can arise out of exploiting the treasure
trove of data held by Government, and
GOV.UK are shortly going to release the
APIs to enable access to this.
14
I hope
that this will enable many organisations
to create web sites of their own o?ering
relevant and e?ective advice.
I would expect this external provision
of advice to sit alongside existing
programmes like the British Library’s
Business & IP Centre (www.bl.uk/
bipc), which will soon be part of a
national network in partnership with
many city libraries. I hope that they will
be joined by business schools, Local
Enterprise Partnerships (LEPs), business
organisations and private companies
o?ering web sites based upon the GOV.
UK data that will greatly assist new and
growing companies.
Mentors
Alongside online advice, I see a strong role
for face-to-face and interactive specialist
help for businesses. Mentoring has proven
to be popular as a way to build businesses’
con?dence and know-how, and is often the
?rst step towards use of external advice
and support. It also meets a common
preference for learning to be informal,
delivered by peers and tailored to the
needs of a business. Mentors are not there
to run someone’s business, but to make
themselves available to help with problems.
We need to get more business owners
recognising the bene?t of using this
type of support. It is as vital for growing
businesses as it is for start ups – as little
as 280,000 (6%) of all SMEs used a mentor
in the last 12 months. Many mentors are
available via the BBA’s Mentorsme.co.uk,
which provides a single point of access to
around 27,000 business mentors. So we
have the supply – the priority now needs to
be to encourage more businesses to make
use of this valuable source of help.
Intensive help and tailored
solutions
Once businesses have a better
understanding of their needs, they should
be looking for bespoke solutions to drive
growth. However, over 800,000 micro
and small ?rms in the UK have not taken
advice from the private sector in the last
three years, despite 100,000 recognising
a clear need for it.
15
This includes just 25%
of SME employers who rate themselves as
strong at accessing external ?nance and
fewer than half (42%) who feel they are
strong at introducing new products and
services.
16
Why don’t SMEs access external help?
The reasons can be varied. Most of all,
though, small ?rms’ awareness of the value
of advice to their businesses is low. This
makes them reluctant to pay for it. Matters
are not helped by the market for accessing
advice being fragmented and di?icult to
navigate.
Growth Vouchers
The proposal for Growth Vouchers began
with a British Chambers of Commerce
suggestion to jump start small businesses’
take up of specialist help by way of a
voucher scheme.
Growing Your Business | 26
I believe that if we can use a voucher
scheme that encourages small ?rms to
seek external help, we can make a real
impact on their performance. However,
what remains uncertain is how best
to structure and target this scheme to
encourage the appropriate use of advice.
The Government has agreed to commit
£30 million over two years to trial a variety
of innovative approaches to help small
?rms overcome the barriers that hold them
back. This will test the type of support
a scheme should o?er and the amount
provided. There are a number of problems
that almost all small and micro ?rms seem
to have in their early days. Taking on
their ?rst employee means they have to
master the delights of PAYE and National
Insurance. Few small ?rms understand
the importance of cash ?ow, particularly
when applying for a ?rst bank loan. And
I suspect that many ?rms could improve
their performance by increasing their
mastery of technology.
The scheme will also consider which ?rms
to target, and in what form to o?er support.
One thing I would like to ensure is that
businesses pay part of the cost, for I have
found over the years that free schemes
are valued by the recipient at cost. We
should also test whether this support is
best delivered by giving ?rms advice and
training or if their capability is increased
by buying in a particular service. And it
will be important to consider the most
appropriate delivery channel to ensure
?rms know where to ?nd this support and
can access it.
If we can get the model and the delivery
right, the potential prize to increasing the
growth capability of small ?rm will be
signi?cant.
More e?ective use of the
internet and digital technology
Today the business environment is going
through revolution rather than evolution
largely due to the use of the internet. The
web and associated technology is not an
optional extra, but a key driver to growth.
A report in late 2012 showed that digital
technology could help SMEs to unlock
£18 billion in revenue.
17
Over half of SMEs
using the internet across their businesses
see increased sales as a result of e?ective
online marketing and wider geographic
reach;
18
and SMEs with a strong web
presence grow more than twice as quickly
as those with minimal or no presence –
and create more than twice the number of
jobs.
19
As well as individual internet sites,
specialist portals like Trivago and trading
platforms like eBay and Etsy are providing
online shop windows for ?rms to get their
products and services known.
This technology also makes it perfectly
possible for micro ?rms to become
exporters. A common characteristic of
many internet businesses is that they don’t
see themselves as exporters even when
they are already selling goods and services
abroad. These are “inadvertent exporters”,
with little awareness of their export
activity until they require more postage to
dispatch their products abroad. Analysis
of online sales and internet search engine
activity shows that UK businesses, by and
large, o?er the most competitively priced
products and services across Europe.
20
PayPal reports that 25% of its payment
transaction activity in the UK is from
overseas trading. I see this as a rich source
of undetected business activity which
could usefully contribute to UK export and
domestic economy statistics.
Growing Your Business | 27
Despite these opportunities, many small
?rms’ use of technology still falls short.
82% of small businesses have not adopted
anything new in the last 12 months and
still spend an average of 11.4 hours per
week on administrative tasks which
could be more e?iciently managed using
technology.
21
By increasing their use
of technology they could signi?cantly
improve their productivity. This includes
the speed and e?iciency of payment. I am
pleased to see Government increasing its
use of e-invoicing in its procurement with
SMEs, and I hope this can be adopted
more widely in business-to-business
transactions, including supply chain
relationships.
I was pleased to be part of early dialogue
between Government departments and the
private sector to discuss the importance
of digital technology. This has resulted in
a major programme of work, expected to
be announced later in 2013, as part of the
Information Economy strategy and the
Government’s wider industrial strategy.
The programme will look at reaching
up to 250,000 SMEs over the next ?ve
years with practical help for exploiting
the web to achieve growth and exports. It
will also aim to drive take-up of superfast
broadband and other ICT supply services.
Access to fast, a?ordable and reliable
broadband is essential for new and
growing small businesses but for many
rural SMEs broadband is slow or non-
existent. That is why Government is
investing £530m through its rural
broadband programme to ensure
universal broadband. The target is for
at least 90% of premises to have access
to superfast broadband by 2015. And
the complementary Rural Community
Broadband Fund will provide grant funding
for superfast broadband projects which
would not otherwise receive it under the
main programme.
Innovation and high growth
While this review on small business has
focused primarily on very small and low-
technology ?rms, I want to complete the
growth picture so that ?rms with the
potential to grow quickly can understand
how they can access help.
Fast-growing technology companies
can require intensive help to realise
their potential. There are some
promising results with companies
helped by GrowthAccelerator (www.
growthaccelerator.com) and I look
forward to hearing about more successes
as this programme develops.
Innovative creative businesses can also
take advantage of programmes supported
by the Technology Strategy Board (www.
innovateuk.org), including Innovation
Vouchers, funding and knowledge transfer
partnerships with universities and colleges.
These are accompanied by guidance and
services o?ered by the Design Council
(www.designcouncil.org.uk) and the
Intellectual Property O?ice (www.ipo.gov.
uk) to enable companies to commercialise
and protect their ideas.
Growing Your Business | 28
The Government is backing high-growth
social enterprises with the Cabinet O?ice’s
Investment and Contract Readiness
Programme that provides grants to
ambitious social enterprises to improve
capacity to raise investment or to bid for
public service contracts.
Contacts for all of these initiatives are
available on pages 48–49.
The Goldman Sachs “10,000 Small
Businesses” programme, hosted by four
English universities, provides high-quality,
practical support to the owners and leaders
of established small businesses and social
enterprises as they seek to grow. For the
participants, the core of the program
is a practically-focused business and
management education, delivered over 12
sessions lasting a total of approximately
100 hours. During the course of the
programme every small business owner
develops a customised growth plan to
direct their organisation’s business strategy
and expansion.
CASE STUDY
SUGRU | Jane Ní Dhulchaointigh, Inventor and CEO
Jane Ní Dhulchaointigh came up with
the idea for sugru while studying
product design. She knew that a self-
setting rubber which could be formed
by hand and used to ?x and improve
things had commercial potential and
gathered together a team of scientists
and entrepreneurs to turn the idea into
a business. It took six years before
she was ready to launch, but now
the company employs 40 people and
exports worldwide …
Did you use advice or help to develop
your business?
Yes! Lots! I would say one of the most
important things that has allowed sugru to
be a success is that I have not been afraid
to ask people for help and advice.
NESTA had a grant scheme to fund
“Creative Pioneers” – creative people with
a genuinely groundbreaking business
idea. This was a three-week residential
business course speci?cally for 30 creative
graduates each year. They inspired us to
think big by inviting all kinds of incredibly
inspiring people to come talk to us, like
Lord Puttnam, who told us about his long
career in advertising, producing Hollywood
?lms and as UK President of UNICEF. I
was so inspired by all these people – they
showed me that it was possible to dream
big and do things your own way.
My co-founder Roger Ashby is a serial
entrepreneur with a background in science
and engineering, so he was able to give me
the con?dence to start building a team of
scientists to develop our technology with
me. Over the years, I have also bene?ted
from the Design Council’s advice through
Growing Your Business | 29
their Innovate programme. All of these
and many more were instrumental to our
success.
Your stock sold out six hours out after
launching – how did you adapt your
business to ensure you were able to
meet demand?
What a great problem to have! We
managed to get people excited about
sugru online by giving sugru to writers
and bloggers who wrote about the topics
we cared about – innovation, design and
the maker movement – and their readers’
reactions were beyond our wildest dreams.
Our ?rst batch of 3,000 sugru packs looked
like they were made in a factory, but we
actually made them in our lab. We didn’t
have the money to pay or build a factory.
But after the sell-out, that all changed.
Investors started approaching us, and we
raised enough money to start hiring a
small team, get bigger premises, and buy
machinery. We shut down for six months,
and then opened up for business again with
a scalable manufacturing set-up.
sugru sells in many stores around
the UK – how did you approach retail
sellers?
For the ?rst two years, we concentrated
almost entirely on selling online, and our
business has doubled each year to £1
million turnover in 2012. We now employ
almost 40 people and are continuing to
grow fast. Recently we secured our ?rst
order from a major UK retailer who will
launch sugru in their 360 stores around
the UK. Introductions really help. We’ve
found making genuine connections and
building good relationships the key to all
our best opportunities.
What tips would you give to other
micro businesses?
The best advice I have ever had came at
a turning point for my business. Back in
2008, the recession had hit and it was
impossible to raise funding to launch
sugru. After spending four years of my
life developing it, it was uncertain if sugru
would have a future. I had always been
dreaming big, and so my plans required
a lot of funding. Then a friend said to
me: ‘Start small and make it good.’ She
changed my perspective completely. I
decided to forget about shops for now
and to launch sugru online, and focus on
getting people excited about my mission to
help people ?x and create. So start small
and make it good – if it’s right, it’ll grow
from there.
www.sugru.com
Growing Your Business | 30
Finance to Grow
I
have learnt from many years of
investing in businesses that small
and well-targeted ?nance can make
a big di?erence in the early stages of a
company.
Start-Up Loans have begun well. Since
the scheme’s launch in September 2012,
3,520 new businesses have bene?ted,
drawing on £19.2 million of loan capital
and bene?ting from further business and
mentoring support of over £3.5 million. In
January 2013, the Prime Minister agreed
an additional £30 million over the next
three years, to meet high demand, as well
as to extend the age limit up to 30 years of
age.
This brings the total amount of funding
available for Start-Up Loans to over £117.5
million. I am now asking the Government
to go further and remove the age cap for
all entrepreneurs, to enable the board of
the Start-Up Loans Company to work
towards extending the bene?ts of the
scheme to all start-ups.
For other businesses, the Enterprise
Finance Guarantee (EFG) is in place and
I have asked the Government to use this
facility more ?exibly to create Growth
Loans and EFG Trade Credit for small
growing businesses.
It should not be forgotten that through
Start-Up Loans many thousands of new
businesses will be created. As the ambition
of these and other businesses grow, so
will the scale and nature of their funding
requirements. This may be to invest in new
products, premises and people, or to fund
marketing and new market opportunities.
Whereas a small ?rm may start with
very modest ?nance, often from personal
savings and credit, ?nance for growth can
require a more structured approach to
attract funding from external sources like
banks and business angels.
Making ?nance available
A criticism I hear from businesses is that
they don’t know where to ?nd ?nance
when they need it. These businesses not
only report the di?iculty of accessing
bank ?nance but also remain unsighted
about alternative ?nance options available
Growing Your Business | 31
Discouragement or an unsuccessful
application for ?nance from a bank does
not spell the end for a ?rm looking for
funds.
Credit and working capital
As well as Growth Loans, I have asked
Government to be more innovative in the
way it uses EFG to bring other ?nance
providers, not just banks, to the ?nance
market for small growing ?rms. An
excellent example of this is the EFG Trade
Credit pilot which is using the Government
guarantee to facilitate additional trade
credit provided by suppliers. Trade credit
is increasingly important for SMEs and is
often a simpler and more appropriate form
of credit than bank ?nance.
This pilot is providing support to the
building and construction sector, trail-
blazed by King?sher, with the Government
keen to extend the programme to other
trade credit providers across a range of
business sectors. And this joins other
private sector entrants into this market
such as PayPal and its Merchant Cash
Advance pilot aimed at supplying capital
to help small ?rms run and grow their
businesses.
23
to them. My focus is to ensure that micro
enterprises have the awareness and the
encouragement to approach these other
types of ?nance. I hope that the new
Government-backed Business Bank will
play a key role in the future provision of
funding for new and developing small
businesses – and this could include
funding for Start-Up Loans.
I also look forward to seeing proposals for
this bank and how it can deliver much-
needed simpli?cation of the support that
Government currently o?ers small ?rms by
making it easier for businesses to ?nd it.
Growth Loans
I have spoken at length with banks to
understand the circumstances in which
small ?rms can access loans for growth
capital. Thirty years or so ago when banks
started to remove the manager from their
branch network they inadvertently broke
many of their links with SMEs. This has
had a disastrous e?ect. Lending decisions
have become based on the personal credit
rating of an individual within a business
and not on that business’s performance
or viability. Evidence has identi?ed credit
scoring as the main reason for loan
declines, accounting for 39%, followed by
a?ordability at 26%.
22
I believe that Government interventions
such as EFG should be adapted to address
the credit scoring and a?ordability issues
behind the majority of loan declines.
Government has responded with SME
Growth Loans as part of the EFG. Initially
as a pilot, this will facilitate loans of up
to £25,000, targeting SMEs in their third
year seeking access to growth capital.
This will ?ex the EFG scheme to support
more marginal but still viable lending
applications that banks process through
credit-scoring systems and enable a lender
to take account of both ?nancial and
non-?nancial aspects of the business not
captured by the credit score. The pilot will
begin from the summer 2013.
GROWING WITHOUT A BANK
Growing Your Business | 32
Micro ?nance
I am aware of the increasing importance of
micro ?nance providers – often described
as Community Development Finance
Institutions (CDFIs) – and their lending to
businesses and individuals who are unable
to access ?nance from more traditional
sources, including the gap left behind by
the banks.
CDFIs have emerged as strong delivery
partners for Start-Up Loans and I want
to encourage more of these organisations
to come forward as demand rises for
the loans. Yet the value of CDFIs lies not
just in assisting start-up companies, but
in helping micro ?rms to develop their
businesses. This has been recognised by
£30 million of funding from the Regional
Growth Fund (RGF) which has been
matched with a further £30 million by the
Co-operative Bank and Unity Trust Bank
to drive investment in small, micro and
social enterprises.
Even with support from the RGF, it is clear
that there remains a signi?cant space for
the micro ?nance sector to ?ll if they are
to prove themselves as a viable alternative
to banks. This requires su?icient scale in
the sector to enable these lenders to access
cheaper capital to pass on to ambitious
SMEs. That requires community lenders
to be equally ambitious. I hope they step
forward.
Peer-to-peer lending and
crowdfunding
The di?iculties SMEs face accessing
bank credit has created a widening
?nance gap for SMEs which peer-to-
peer lending (directly connecting ?rms
in need of cash with investors) and
crowdfunding (where small amounts are
raised from a large number of funders) is
increasingly ?lling. These have the added
attraction of direct access to a diverse and
numerous pool of lenders and investors
who would not otherwise be in contact
with SMEs. Asset-based ?nance is also
becoming much more accessible and more
competitively priced with the advent of
invoice ?nance exchanges, facilitated by
crowdsource platforms like MarketInvoice
(marketinvoice.com) and Platform Black
(www.platformblack.com).
It is important that we continue to promote
these sources of alternative ?nance.
Small business survey data indicates
that awareness of peer-to-peer funding
amongst micro ?rms falls below that of
other SME companies (27% compared
to 35% and 45% for small and medium
sized SMEs respectively).
24
And micro
?rms are even less sighted when it comes
to knowing where to ?nd this type of
?nance – with 16% level of awareness
amongst micro ?rms compared with 24%
and 33% for small and medium sized ?rms
respectively.
Awareness of these types of funding not
only needs to be raised directly with
micro ?rms but also the intermediaries
and advisers that they rely on for
?nance advice. These include chartered
accountants; and I am pleased that the
ICAEW (www.icaew.com) is raising
awareness amongst its members of these
alternative types of ?nance.
There have been several important
developments in the last 12 months which
I believe will go further to strengthen the
credibility and awareness of this sector:
•
An announcement by HM Treasury
that the peer-to-peer lending sector
will have its lending and borrowing
activities overseen by the UK’s new
market regulator, the Financial Conduct
Authority, from April 2014. I see this
as a major step to bring credibility to
Growing Your Business | 33
this sector and provide the protection
lenders and borrowers seek if they are
to have con?dence in these lending
platforms.
•
The £100 million award of new funding
to SMEs from the Business Finance
Partnership (BFP), as part of the
Government’s drive to diversify sources
of ?nance to business. BFP provides
a welcome opportunity to promote
new entrants in the peer-to-peer and
crowdfunding market. This will instil
con?dence in investors when it comes to
putting their money into internet-based
?nance platforms and encourage small
?rms to see the opportunities of seeking
investment in this way.
•
The increasing application of these
?nance internet platforms at the local
level. An example of this is Lancashire
County Council which has committed to
lend £100,000 initially, with a possible
multi-million pound investment in time.
The Council will use these funds to
participate in loans through Funding
Circle to help suitable local businesses
secure important growth capital. For this
Council, investing through an existing
and established platform provides an
e?icient funding mechanism which is
highly visible to other local investors
and businesses.
•
The increase of reward-based
crowdfunding for small enterprises
looking to fundraise, develop and pre-
sell exciting new projects. This has been
marked by the merger of Peoplefund.it
(www.peoplefund.it) and Crowdfunder
(www.crowdfunder.co.uk) to become a
much bigger portal and the expansion
of US-based Kickstarter (www.
kickstarter.com) to the UK. As the
popularity of this sector increases, I see
many more opportunities for new and
growing businesses looking to fund and
test innovative new products.
BUSINESS FINANCE PARTNERSHIP:
SMALL BUSINESS TRANCHE
The £100m small business tranche
of the Business Finance Partnership
(BFP) aims to increase the supply of
capital through non-bank channels
to businesses with a turnover below
£75m. The lenders which have recently
been appointed are …
Funding Circle (www.fundingcircle.com)
is an online marketplace enabling savers
and investors to side-step banks and lend
directly to small businesses. Set up in
August 2010, Funding Circle has helped
businesses borrow over £60 million. Each
loan is comprised of small sums from
many di?erent people who compete to lend
to the business in question. This enables
businesses to borrow at a better rate. With
no bank in the middle, both investors and
borrowers achieve a much better deal, with
investors receiving an average 9.1% yield
on their money.
Growing Your Business | 34
Zopa (www.zopa.com) is the peer-to-peer
online platform that brings together people
who are good with their money, to reward
them with better rates on their borrowing
and saving. Responsible, creditworthy
borrowers get access to loans cheaper
than banks o?er, with no additional fees
for paying some or all the loan o? early.
By lending to these people, savers get
in?ation-beating returns far higher than
those paid by banks’ savings accounts.
Zopa has now arranged more than £250
million in peer-to-peer loans in the UK, all
at rates that borrowers and lenders have
e?ectively agreed between themselves.
Zopa now accounts for around 2% of all
personal loans issued in the UK each
month.
BOOST&Co (www.boostandco.com)
has been providing credit solutions to
growing and innovative small businesses
throughout Europe since 2011. It is
management-owned and funded by some
of Europe’s largest private equity investors
and family o?ices. It has o?ices in London,
Paris and Berlin. The Business Finance
Partnership funds will allow BOOST&Co to
provide loans to British small businesses at
scale.
Credit Asset Management Ltd (CAML)
(www.craml.co.uk) is a subsidiary of
City of London Group plc which uses a
traditional merchant banking model across
its business platforms to provide specialist
?nancing to the SME sector. Credit Asset
Management Limited provides leasing
and professions loans. CAML also enables
institutional investors to secure e?icient
exposure to the SME sector.
MarketInvoice (marketinvoice.com)
gives small businesses ?exible access to
advances on invoices from their blue-
chip corporate customers. Funds come
from a network of institutional investors
and high net-worth individuals, who
bid competitively to buy the invoices.
MarketInvoice launched in February 2011,
and now closes over 70 auctions each
month, with an average auction value of
£60,000 (range of £10,000–£500,000).
Since its launch, the platform has funded
over 800 auctions, representing close to
£50 million of invoices.
URICA (urica.biz) is launching a new
model of supply chain ?nance within
the UK SME market that provides SME
suppliers with the option to receive cash
from Urica 14 days from the invoice
issuance date in return for accepting a 2%
early settlement discount. The customer
will then pay Urica the full value of the
invoice on day 60. URICA is working in
partnership with one of the world’s largest
credit insurers to give direct access to a
proven credit assessment engine.
Beechbrook Capital LLP (www.
beechbrookcapital.com) was established
in May 2008 to provide long-term loan
capital to businesses in Northern Europe.
The new fund will deploy a diversi?ed
portfolio of mezzanine loans to SMEs in
the UK.
Growing Your Business | 35
Business angels
Business angels can be pivotal in the
early stages of a small ?rm trying to grow.
They o?er expert knowledge of a market
or sector and important contacts to help
a business to the next level which can be
just as important as the ?nance they invest
in these businesses.
In the last year, I have chaired a business
angel working group with an explicit
intention of increasing the number of
angels investing in early growth ?rms. This
has been helped by the success of the £50
million Business Angel Co Investment Fund
(CoFund) created with funds from the RGF.
Business angel investing became even
more attractive in 2012 with the launch
of the Seed Enterprise Investment
Scheme (SEIS). SEIS aims to encourage
investment in small and early stage
companies by o?ering a range of tax
reliefs to the investor. My support for
SEIS has been matched by a concern that
too few potential investors know about
this scheme or are encouraged to use it.
I welcome the SEIS regional road shows
led by Doug Richard, the entrepreneur
and business angel last autumn and the
development of a dedicated SEIS website
(www.seiswindow.org.uk). But this is an
area where Government should do more to
market the scheme to potential investors.
Growing Your Business | 36
Employment and
Attracting Specialist
Skills
T
he changing nature of employment
has had a signi?cant impact on
attitudes to business. Business
population statistics testify to an
increasing number of people choosing to
be their own boss. Some of these will be
freelancers or contractors, choosing who
they work for and when. But for many the
intention is to create a permanent living in
a full-time business venture.
The statistics provide the full scale of this
activity – 3.6 million sole traders in the
UK. But what is most interesting in recent
labour market statistics is the recruitment
trends amongst businesses. While the data
indicates a rising trend of ?rms with two or
more employees, the number of businesses
operating as sole traders is increasing
despite a clear business need to take on
more sta?.
My experience in the SME sector fully
supports the mounting evidence that not
taking on your ?rst employee is the most
important brake on growth ambitions.
Research by BIS found that just 9% of sole
traders expected to employ someone in a
year’s time.
25
Challenges of SME recruitment
I see these as the challenges facing SME
recruitment:
1. The process seems too complicated and
too fraught
Many sole traders are put o? by what
they see as the daunting and complex
regulatory burdens of recruitment. Part of
the solution is to provide businesses with
an accurate picture of the recruitment
process and how the relatively few
requirements on them can be met in a
manageable way. This could include the
use of Growth Vouchers to enable sole
traders to navigate the process using
expert help.
The launch of the “Taking on an Employee”
portal last year was a good start – and
helped to disentangle the myriad of
guidance about recruitment. Further work
has happened this year to streamline this
Growing Your Business | 37
advice further using GOV.UK. But I would
like this to go much further. The actual
employment process should be simpli?ed.
We need to ensure that employers can
complete the actions required of them
more seamlessly. Ultimately I would like
us to create a one-stop shop which can
service all of the tasks involved in taking
on an employee.
2. Recruiting with con?dence
Often, the decision not to take on a ?rst
employee is based on the fear of getting
the recruitment wrong. Businesses cite the
?nancial implications if the individual is
not right or concerns about being hit with
a tribunal claim.
I have engaged extensively with the
Institute of Recruiters (IoR) (www.theior.
org.uk) to understand how we can help
employers manage these risks e?ectively
and provide the con?dence they require
to recruit the right people with the right
skills. This has resulted in a new guide,
Your First Employee – the essential 10 step
guide which addresses the con?dence and
decision-making issues involved in hiring
and managing sta?.
In addition, BIS and ACAS (www.acas.
org.uk) have developed new online
guides to help small business employers
manage issues with sta? behaviour and
performance. This simple, step-by-step
guide will walk them through the relevant
processes and provide easy access to
information on common issues and
resolutions.
3. Attracting a?ordable specialist skills
Small ?rms can require very specialist
skills to enable them to move forward,
often in key areas like ?nance, legal
services, business administration and IT.
They will only recruit if they are con?dent
that the investment in sta? will deliver
?nancial bene?ts to the business. And
even then the question of a?ordability
may in?uence whether and how they bring
these skills into the business on a full-time,
part-time or contract basis.
Outsourcing
Some ?rms on limited resources are
outsourcing secretarial and more specialist
services to help them build scale and
growth into their business. This is being
achieved through a well-connected and
?exible use of people, technology and
services. Alago, pro?led later in this report,
outsource their design and manufacturing
needs to take an idea from concept to
market.
Firms like these make a rational
assessment that outside expertise can
perform a task better, faster or more cost-
e?ectively than an in-house option. By
acting accordingly, business owners are
focusing on what they do best. But Alago
has also built a core workforce. And like
them, for many businesses a time may
come when investment in sta? (as well
as, or instead of, outsourcing) delivers
sustainable and long-term commercial
advantages to the business.
The graduate labour market
I believe a fertile ground for small ?rms
looking to bring high calibre people
into their businesses is o?ered by
graduates from universities and colleges.
I am also keen to promote the value of
apprenticeships where small businesses
can bene?t from the fresh talent and
a?ordable skills that apprentices bring
from their training. The earlier section on
universities and colleges highlighted the
value students can o?er as placements
and interns. But when I look into graduate-
recruitment trends amongst small ?rms,
the picture is less promising.
Growing Your Business | 38
The research points to a mutual lack of
understanding about the bene?ts to both
sides.
26
Small ?rms tend to undervalue the
contribution of graduates to the business,
based on concern about their experience
and the need for supervision. Graduates
can have negative perceptions about levels
of pay, career progression and working
conditions.
But studies also ?nd that the potential
bene?ts and opportunities of working
in small businesses exceed graduates’
expectations, particularly with regards to
levels of autonomy, ?exibility and input
into the business.
27
I believe this supports
the case for doing more to encourage
graduate employment in the SME
sector, and through some encouraging
initiatives this is beginning to work. For
instance, the National Association of
College and University Entrepreneurs
(NACUE) has piloted a BIS proposal
for SME Launchpads. The pilot (called
SME Milkround) brought SMEs and 20
university enterprise societies together to
facilitate student internship and graduate
job opportunities. NACUE will extend this
programme to a further 18 university
enterprise societies and 5,000 students. BIS
also continues to fund the Graduate Talent
Pool, where 87% of the 7,000 registered
employers are SMEs.
The idea for Alago heated sports and
leisure gloves began when Tony Curtis
watched his son playing rugby in
the freezing cold. Tony transformed
his kitchen into a laboratory to turn
his idea into a product but had very
little funds to employ people or buy
expensive equipment. Alago is now
an award-winning business selling to
customers in over ten countries …
How did you build your business on a
shoestring budget?
I think it’s fair to say I started with little
more than an idea – no scienti?c training,
no product development skills and not
much cash. But my kitchen table served
me well for developing initial ideas and a
business plan. I then outsourced through
experts and professionals to gain the
specialist help I needed in areas like
product design and developing prototypes.
As the business got o? the ground, I
also procured important functions like
manufacturing, accounts, warehousing,
packaging and PR. Outsourcing was
absolutely key at that early stage because I
simply could not a?ord the overhead costs
of doing these operations in-house.
How did you know who to ?nd and
what you needed?
I tried to use as many local services as
possible including my accountant and PR,
and other services were sourced from
further away, even other countries. I used
CASE STUDY
ALAGO | Tony Curtis, Founder
Growing Your Business | 39
the internet for most of the searching
and sites like Alibaba and Elance to ?nd
speci?c expertise. In fact I still use them
now for product development.
What drove your decision to take on
sta??
Recruitment for me was about investing to
improve the performance and capability
of my business. I was getting healthy
interest in my product but needed a better
way to target customers and generate
sales. Fundamental to this was getting my
website right and making it pro?cient and
widely recognised – not skills I had or had
time to learn.
My ?rst employee was a web designer.
This was followed by a communications
specialist. Both have had a dramatic
impact on the productivity and turnover
of Alago. We are now able to ?nd and
facilitate trade from overseas in key
markets like Argentina, Canada, Norway
and Sweden, and target our marketing
through social media and other
communication channels.
And how did you ?nd the experience of
taking on sta??
The prospect was terrifying – to be
responsible for paying wages and your
employee’s career development is pretty
scary. But the process was ?ne and
pretty straightforward. My lawyer drafted
employment contracts and my accountant
sorted out PAYE. That was it – I had my
team!
I had to change my mindset from being
a one-man band to being the boss and
my relationship to the business changed.
The bene?t of taking on these ?rst
appointments was not just about bringing
in skills; it was also about freeing up
my time and capacity to concentrate on
?nding new opportunities to take the
business forward. This took enormous
pressure o? my shoulders and provided me
with a team to bounce ideas o?.
My advice to a small ?rm in a similar
position would be to look at what jobs you
need doing. If they are small or one-o?s
then look at using a freelance specialist.
This will cut costs enormously whilst also
supporting people who are self-employed.
If the work needed is on-going, is essential
for growth and frees up your time then
seriously consider taking on a member of
sta?. Building even a small team will not
only support the growth of your business
but also support you as the leader.
Did a new team and an expanding
business result in new commercial
premises?
That seemed like the logical next step but
after a few months in a new commercial
outlet, I realised that this wasn’t cost-
e?ective and more importantly it really
wasn’t necessary.
The combination of outsourcing, the
availability of communications technology
and the provision of virtual o?ices and
?exible work spaces mean that I can
run a very lean operation and grow the
business without the associated increase
in costs and overheads. My team all work
from their homes and we use the Bristol
and Bath Science Park and its business
facilities when we need to meet up, or
engage clients. This provides us with the
professional image we need, but most of all
it gives us ?exibility and an e?icient way
to run a pro?table small business.
www.alago.co.uk
Growing Your Business | 40
Relationships with
Big Businesses
B
ig businesses have capital and
access to markets and customers.
Small businesses are often more
agile and innovative and can provide
niche products or services. By bringing
these elements together, big and small
businesses are well placed to work
together through commercial relationships
and collaboration.
Supply chain relationships
An SME’s strength in a supply chain
relationship is often its ability to provide
a specialist product or service that larger
businesses cannot provide themselves, or
cannot provide as cheaply. This positions
small ?rms as problem solvers and as
small but signi?cant players in terms of
their value to the prime contractor and the
client.
A key advantage for a small ?rm in
these relationships is access to markets.
Supply chains create a way in for small
businesses; they can use the opportunity
to build capacity and reputation in a
sector. Research also shows improvements
in productivity and performance in such
?rms when they work in supply chains.
They bene?t from the mentoring and
experience of the larger companies they
work with,
28
and the insistence on quality
standards by larger businesses often
improves quality in SMEs, enabling them to
win contracts with other companies.
Supply chain ?nance allows small ?rms to
secure funds to ease cash ?ow and invest
in other ventures. But small ?rms will
also expect to receive the share of work
agreed in accordance with the terms of the
contract; and, importantly, they will expect
to get paid on time. The earlier section
on “The Customer to Grow: Public Sector
Procurement” looked at this, including
how small ?rms can take advantage of a
partnership or sub-contract relationship
with a large company without being put at
a disadvantage.
Growing Your Business | 41
100%Open work in the ?eld of open
innovation – helping large companies
innovate by working with partners,
in particular with small businesses.
Originally part of Nesta, the co-
founders Roland and David spun out
100%Open in 2010, and it now works
with the likes of LEGO, P&G, E.ON,
Fujitsu, Interface, Ordnance Survey
and Oxfam …
How do small ?rms bene?t from
working with large ?rms?
The bene?t for small ?rms is the
opportunity to rapidly scale their
businesses, which in turn creates
opportunity to access new markets and
build their brands through association.
Often small companies have great
ideas and capabilities but lack the
channels, investment and infrastructure
to implement them at a global scale. In
addition, many growth-orientated small
companies become overly focused on
securing expensive equity investment. That
de?nitely has a role to play, but only in the
minority of cases. Much more frequently
the route to market for their products
and services is best delivered through
partnership with a larger organisation.
Small companies can of course go it alone
and become the big players of tomorrow.
However, the vast majority of small
company exits are through trade sales to
larger customers.
And what does the big ?rm get out of
it?
In many ways large companies need
small companies more than vice versa,
and it certainly wasn’t always that way.
Most large companies need to sustain
a minimum level of growth to satisfy
their shareholders, which becomes more
di?icult the bigger they become. This is
partly because operating at scale leads
to risk aversion; but also in?exibility and
homogeneity that inhibit innovation. And
so the innovation comes increasingly from
outside – from customers, from suppliers,
and from non-competing partners. If done
well this becomes a much better, faster
New collaborative relationships
– “open innovation”
As well as supply chains, many SMEs
and their networks are involved in R&D
partnerships or engage in joint ventures
with large ?rms.
An interesting development is an
increasing appetite among large
companies to drive innovation through
collaboration with SMEs. “Open innovation”
encourages organisations to look outside
to develop new products, services and
revenues, innovatively and often at lower
cost. It provides good opportunities for
the more specialised small ?rms with the
result that they can share risk and reward
with their corporate partner.
CASE STUDY
100%OPEN | Roland Harwood and David Simoes–Brown, Co-founders
Growing Your Business | 42
and cheaper way of innovating than
traditional methods. As well as revenue
and growth opportunities, working with
small companies can have tremendous
uplift on other aspects of the business
such as building a buzz around their brand,
and providing creative and entrepreneurial
opportunities for sta?.
What’s the key to successful
collaboration?
In our experience the key to successful
collaboration between large and small
companies comes down to having a clear
process, collaborative business model and
metrics that works for both sides. This
requires an open and collaborative mindset
that looks to create shared value, not
just maximise returns for one side or the
other. It also requires trust and empathy
to enable honest conversations to surface
and work towards a successful outcome
together.
What are the key challenges?
In our experience one of the key challenges
comes down to the risk aversion of the
large company, which puts too much risk
on the shoulders of the small company.
This is ampli?ed by the very di?erent
timescales and resources that large
and small companies are able to deploy.
Ultimately, collaboration can only happen
through equals so even with an obvious
buyer/seller situation, we work hard to
understand the motivations on both sides
and align incentives so everybody has
“skin in the game”. For large companies the
challenge can be that the sheer number
of potential relationships is so great that it
becomes too complex to manage them all,
exposing the organisation to risk and IP
contamination if not dealt with carefully.
What approach should a small ?rm
take if it’s thinking of working with a
big company?
Small companies should take time
to understand the needs of the big
organisation. These are often published
and publicly available, though di?icult
to ?nd. They should take care to tailor
their pitch. You only get one chance to
make a ?rst impression. And ?nally they
should start with “why” – namely why
customers would want what they are
o?ering, and what is the unmet need that
they can solve. It can require considerable
investment of time and energy but if
handled smartly, collaboration can lead to
much bigger opportunities than growing
organically.
www.100open.com
Growing Your Business | 43
Locations
M
any SMEs will start as home-
based businesses because of low
set-up costs and the ?exibility
it gives them to test the viability of their
business. When their business begins
to take o? or their ambition increases,
the ?rm will face a new set of growth
challenges to do with space and access to
customers.
A leap from the kitchen table to a
commercial lease and investment in
expensive equipment and services may
remain beyond the resources of the ?rm
at this stage. This is where access to
a?ordable spaces and shared facilitates
is becoming increasingly popular and is
helping businesses make the transition
from a micro enterprise to an expanding
business.
Locate to grow
Expanding outside the home can mean
anything from using access to WiFi in
a local café, to a fully serviced o?ice
providing secretarial services. Use of these
has greatly expanded over recent years.
Coworking spaces – A growing
phenomenon is the development of
coworking spaces (or “uno?ices”). There
are now more than 2,000 coworking
spaces worldwide.
29
Rather than
committing to a ?xed term o?ice rental,
freelancers and entrepreneurs can rent a
desk in a shared space with others and
gain access to meeting rooms to engage
clients and colleagues. These venues not
only o?er space but sometimes services
like childcare and the opportunity for
business networking and peer learning.
Virtual o?ices – Along with coworking
spaces many micro businesses are using
virtual o?ice spaces (which include
secretarial services and other facilities) to
provide professional customer service and
a corporate image.
These resources can provide particular
bene?ts to new and growing ?rms. For
example, young entrepreneurs receiving
funding from Start-Up Loans are also
given access to workspace, meeting
rooms and business services delivered by
Regus as one of the fund’s global partners.
Growing Your Business | 44
These services enable ?rms to outsource
important functions without having
to invest in-house, covering functions
like mail and call-handling, providing a
business address and logistical services
such as packaging, shipping and order
systems.
Incubation – Incubation and acceleration
facilities are often used by start-up
companies but are equally important for
small growing businesses. These can be
delivered through the public, private or
third sectors, including local authorities
and higher education campuses. Typically
these will o?er coaching and advice,
alongside space and facilities, and will
attract businesses from speci?c sectors
and business clusters, which enables peer-
learning and networking. A good example
is the £10 million Social Incubator Fund,
funded by the Cabinet O?ice to support
the development of social incubators –
providing space, mentoring, networks and
?nance to early-stage social ventures.
Growing Your Business | 45
Cockpit Arts is an award-winning
social enterprise and the UK’s only
creative-business incubator for
designer-makers. Established in 1986
it has helped thousands of talented
craftspeople to grow their businesses,
many of whom have gone on to achieve
global success …
What are the things that arts and
crafts entrepreneurs don’t do well?
Craft designers mainly set up either as
sole traders or small partnerships. The
majority are graduates and self-taught or
have undertaken some further education.
Mostly they struggle to think more broadly
about their business – to look beyond their
creativity and skill – and ?nd it di?icult to
build strong, growing enterprises.
Many fail to develop their ?rm beyond
being a “lifestyle business”, often supported
by other sources of income.
How does Cockpit Arts help?
Cockpit o?ers incubation as a series of
interventions to help these designers to
build on their creativity and skill, and
overcome some of the key weaknesses that
are common to this sector such as low
levels of pro?tability, ?nancial literacy and
strategic planning skills.
This includes studio space for designer-
makers unable to a?ord commercial
space; one-to-one business development
coaching, workshops and events; Open
Studios (to test and sell products);
promotional opportunities (in key locations
including international trade art fairs, and
introductions to trade buyers and press);
and resource centres and o?ice facilities.
The clustering e?ect of having two large
buildings, each housing 50 to 100 like-
minded businesses, pays huge dividends;
a lot of knowledge, skills and ideas can be
shared. The community provides a support
network, and encourages entrepreneurship
(and peer competition!) as well as positive
role models for growth.
You target ?nance help – how?
Through a Growth Loan Fund – a
combination of a low-interest loans and
dedicated one-to-one support. This helps
makers identify where the primary value
of their business lies and makes them
“investment ready”. Loans can also be
used to boost sales or identify new routes
to market. Bene?ciaries receive on-going
coaching for the duration of the loan (up
to three years).
Tell us about some of your successes
The Cockpit model has helped to nurture
over 500 talents, many going on to
national and international success. Textile
designer Clarissa Hulse sells to over 100
outlets worldwide, including bestselling
ranges of bed linen for House of Fraser
and John Lewis, and Scottish knitwear
designer Jo Gordon has grown into an
internationally-renowned label selling in 19
di?erent countries.
www.cockpitarts.com
CASE STUDY:
COCKPIT ARTS | Vanessa Swann, CEO
Growing Your Business | 46
Online brands onto high streets
– the rise of pop-ups
Another development that I am interested
in is the growing prominence of pop-up
shops. The challenges facing many of
Britain’s high streets – and their ever-
increasing numbers of empty shops – has
created opportunities for start-up and
growing ?rms to experience a temporary
retail presence.
The model is simple: pop-ups are short-
term shops located in vacant commercial
properties, providing temporary relief
for landlords of the liabilities associated
with holding redundant shops and o?ices.
Businesses occupy these premises on
temporary lease terms, on a shared basis
through co-working or co-funding. For
online businesses, a pop-up o?ers them
retail experience to raise their brand
pro?le, test products and prices and have
direct contact with customers, all with
minimum ?nancial commitment.
The pop-up model remains experimental
but there is already an abundance of
experience out there and some excellent
examples across England that can be
learned from. I was pleased to be at
the launch of PopUp Britain’s ?agship
store in Richmond in July 2012 and to
meet its new business occupants. And I
want to congratulate the Department for
Communities (DCLG) for the strong signal
of support it has shown for this model
by asking PopUp Britain to open the ?rst
ever Government o?ice pop-up store in its
department building. I hope this can act as
a blueprint to town teams and other public
sector bodies to show how pop-ups can be
run out of other public spaces.
Online silk scarf retailer, Nanukk, was
one of the ?rst six businesses to share
DCLG’s pop-up shop for two weeks. After
selling out of stock in the ?rst week,
owner Sarah McLeod had to go home
and organise some more. Not only did
she cover her costs of rent and travel by
more than £1,000, Sarah pointed out the
other bene?ts. ‘When you work alone and
online, you never get the feedback – it
was wonderful to hear that what I was
doing on my own wasn’t crazy and that
people actually liked my product and were
prepared to buy it.’
As well as PopUp Britain, national
coverage is growing through providers
like We are Pop Up and Popupspace. I
want learning from these early pioneers
to help to improve the model and enhance
the experience for others. This is coming
from tools like PopUp Britain’s Kit for
Town Teams and consultancy o?ered
by Popupspace to local authorities.
The other interesting development is
engagement with private and professional
sector providers who are recognising
opportunities to promote their products
and services through helping pop-up
shops; for example, by providing easy and
inexpensive ways to accept card payments
or a?ordable short term insurance cover
for pop-up tenants.
Growing Your Business | 47
Summary of Help for
Growing Small Businesses
Information and guidance
•
GOV.UK | www.gov.uk/browse/business
•
Business in You | www.businessinyou.bis.gov.uk
•
The Association of Business Schools | www.associationofbusinessschools.org
•
StartUp Britain | www.startupbritain.co
•
Enterprise Nation | www.enterprisenation.com
•
Doing business with government: a guide for SMEs (including Mystery Shopper) | www.
gov.uk/doing-business-with-government-a-guide-for-smes
•
Contracts Finder | www.gov.uk/contracts-?nder
•
Growing Business | www.growingbusiness.co.uk
Capability and skills
•
Growing your business | www.gov.uk/growing-your-business
•
Mentoring | mentorsme.co.uk, www.getmentoring.org
•
Digital Youth Academy | www.digitalyouthacademy.com
•
Advanced Institute of Management practice | www.aimpractice.com
•
Social enterprise Investment and Contract Readiness Programme | www.
beinvestmentready.org.uk
•
Mutuals Support Programme | mutuals.cabineto?ice.gov.uk/what-support-available
Growing Your Business | 48
Finance
•
Start-Up Loans | www.startuploans.co.uk
•
Business ?nance support ?nder | www.gov.uk/business-?nance-support-?nder
•
Community Development Finance Institution Finding Finance tool | www.
?nding?nance.org.uk
•
ICAEW Business Advice Service | ?nd.icaew.com/pages/bas
•
ICAEW Best-Practice Guideline – SME Finance | www.icaew.com/c?sme?nance
•
Angel CoFund | www.angelcofund.co.uk
•
UK BusinessAngels Association | www.ukbusinessangelsassociation.org.uk
•
Seed Enterprise Investment Scheme | www.seiswindow.org.uk
Recruiting and managing sta?
•
GOV.UK - Employing sta? for the ?rst time | www.gov.uk/employing-sta?
•
Business in You – employment | www.businessinyou.bis.gov.uk/advice/employment
•
Institute of Recruiters, Your First Employee – the essential 10 step guide | www.theior.
org.uk/your-?rst-employee-essential-guide
•
Advisory, Conciliation and Arbitration Service (Acas) | www.acas.org.uk
•
Graduate Talent Pool | graduatetalentpool.direct.gov.uk
•
Enternships | www.enternships.com
•
Apprenticeships | www.apprenticeships.org.uk
•
National Consortium of University Entrepreneurs | www.nacue.com
Exports
•
Open to export | opentoexport.com
•
UK Trade & Investment (including Passport to Export and Export Vouchers) | www.ukti.
gov.uk
•
UK Export Finance | www.ukexport?nance.gov.uk
High Growth and Innovation
•
GrowthAccelerator | www.growthaccelerator.com
•
Research and Development (R&D) Tax Credits | www.hmrc.gov.uk/randd
•
Technology Strategy Board (including Knowledge Transfer Partnerships; Smart;
Innovation Vouchers; Small Business Research Initiative (SBRI); _connect) | www.
innovateuk.org
Growing Your Business | 49
•
Design Council’s Design Leadership Programme | www.designcouncil.org.uk/our-work/
leadership
•
Intellectual Property O?ice | www.ipo.gov.uk
•
British Library’s Business & IP Centre | www.bl.uk/bipc/index.html
•
Manufacturing Advisory Service | www.mymas.org
•
Goldman Sachs 10,000 Small Businesses | www.goldmansachs.com/citizenship/10000-
small-businesses/UK/index.html
•
Nesta | www.nesta.org.uk
Locations
•
Popupspace | www.popupspace.com
•
We Are Pop Up | www.wearepopup.com
•
PopUp Britain | www.popupbritain.com
•
PopUp Britain’s Kit for Town Teams | popupbritain.com/guidance-for-town-teams
Membership and support organisations
•
British Chambers of Commerce | www.britishchambers.org.uk
•
National Enterprise Network | www.nationalenterprisenetwork.org
•
The Confederation of British Industry | www.cbi.org.uk
•
Federation of Small Businesses | www.fsb.org.uk
•
EEF, The manufacturers’ organisation | www.eef.org.uk
•
Forum of Private Business | www.fpb.org
•
The Chartered Institute of Marketing | www.cim.co.uk
•
The LEP Network | www.lepnetwork.org.uk
•
Capital Enterprise | www.capitalenterprise.org
•
Social Enterprise UK (SEUK) | www.socialenterprise.org.uk
•
The Prince’s Initiative for Mature Entrepreneurs (prime) | www.prime.org.uk
Growing Your Business | 50
Acknowledgements
I would like to acknowledge the enthusiastic help that I have received from the many people
and organisations listed in this report: and the even greater help and advice from those
with whom I worked and whom convention dictates that I cannot name. Needless to say the
mistakes are mine alone and although I would like to take personal credit for any good idea
contained in the report it is a collective e?ort of many contributors.
Growing Your Business | 51
Meetings and
Engagements
1. 100%Open
2. Alago
3. Alibaba.com
4. The Association of Business Schools,
Innovation taskforce
5. Association of Consulting Actuaries
(ACA)
6. British Bankers’ Association (BBA)
7. British Chambers of Commerce
8. British Library, Business & IP Centre
9. Business Growth Fund
10. BusinessZone
11. Capital Enterprise
12. Cockpit Arts
13. Community Development Finance
Association (CDFA)
14. Confederation of British Industry (CBI)
15. The Corporate Finance Network
16. Council for Industry and Higher
Education (CIHE)
17. Crimson
18. Crown Representative for SMEs
19. Crux Product Design
20. eBay
21. EEF: Manufacturers Organisation for UK
Manufacturing
22. EEFC (European Economics and
Financial Centre)
23. Enternships
24. Enterprise Nation
25. Ernst & Young Entrepreneur of the Year
26. Etsy
27. Export Credits Guarantee Department
(ECGD)
28. Federation of Small Businesses
29. Forum of Private Business
30. Funding Circle
31. The Gazelle Colleges Group
32. Grant Thornton
33. GrowthAccelerator
Growing Your Business | 52
34. Gust: Angel Investors and Startup
Funding
35. The Institute of Chartered Accountants
in England and Wales (ICAEW)
36. KindredHQ
37. Institute of Credit Management (ICM)
38. Institute of Directors (IoD)
39. Institute of Recruiters (IOR)
40. Intuit
41. London Stock Exchange
42. MADE: The Entrepreneur Festival
43. MarketInvoice
44. The National Enterprise Network
45. Nesta
46. New Entrepreneurs Foundation
47. O?ice for National Statistics (ONS)
48. O?ice of Tax Simpli?cation
49. PayPal
50. Piccalilly
51. Platform Black
52. Premier League Enterprise Challenge
53. Rockstar Youth
54. School for Startups
55. Seven Hills
56. Shared Impact
57. The Small Business Consultancy (CIC)
58. Social Enterprise UK
59. StartUp Britain
60. Start-Up Loans Company
61. Technology Strategy Board
62. Telford Enterprise Hub
63. Telos
64. Tomorrow’s Company
65. UK Business Angels Association
66. University of Buckingham
67. Upshift London
68. Venture Capitol Ltd
69. The Work Foundation
70. Young Enterprise
As well as the above organisations, Lord Young met with Government ministers, executive
agencies and policy o?icials across Government departments as well as MPs and business
owners.
Growing Your Business | 53
Notes
1. BIS Business Population Estimates for the UK and regions 2012.
2. Labour Market Statistics, March 2013.
3. Bolton J.E. (Chairman), Small Firms: Report of the Committee of Inquiry on Small Firms, (1971).
4. Scarpetta, S. et al. (2002), “The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from
Micro and Industry Data”, OECD Economics Department Working Papers, No. 329, OECD Publishing.http://dx.doi.
org/10.1787/547061627526
5. SMEs generate the majority of new job creation. For a recent assessment see Wright, Peter W. et al. (2010), “Job Creation,
Job Destruction and the Role of Small Firms: Firm-Level Evidence for the UK”, Oxford Bulletin of Economics and Statistics, 72,
5, Blackwell Publishing Ltd and the Department of Economics, University of Oxford.
6. Stangler, D. (2009), “The Economic Future Just Happened”, Ewing Marion Kau?man Foundation.
7. TEA is the proportion of the working age population involved in starting or running a business under 42 months old.
8. Hart, M. et al. (2011), “Job Creation and Destruction in the UK: 1998–2010”, Department for Business Innovation & Skills,
Economics & Strategy Group Aston Business School.
9. BIS Business Population Estimates for the UK and Regions, 2012.
10. Small Business Survey 2012
11. “Business Growth Ambitions Amongst SMEs”, BIS, August 2012.
12. Micro?nance is de?ned as loans under €25,000. This is tailored for micro-enterprises employing fewer than 10 people.
13. Government Accounts.
14. Releasing APIs (Application Programme Interfaces) will provide people with the reference they need to interrogate data
that Government holds.
15. BIS, Centre for Enterprise and Economic Development (CEEDR) and BMG Research (2011), “Research to understand the
barriers to take up and use of business support”.
Growing Your Business | 54
16. Small Business Survey 2012.
17. Rosenthal, E. et al. (2012), “ ‘This Is for Everyone’ The Case for Universal Digitisation”, booz&co. and Go On UK.
18. Lloyds Banking Group Research.
19. Pélissié du Rausas, M. et al. (2011), “Internet matters: The Net’s sweeping impact on growth, jobs and prosperity”, McKinsey
Global Institute.
20. Communication From The Commission To The European Parliament, The Council, The European Economic And Social
Committee And The Committee Of The Regions on Cross-Border Business to Consumer e-Commerce in the EU, Brussels,
22.10.2009 COM(2009) 557 ?nal and Kalapesi, C. et al. (2010), “The Connected Kingdom”, Boston Consulting Group,
commissioned by Google.
21. Figures provided by Intuit (2013) suggest that ?rms in Canada are ?ve times more likely to feel con?dent about their
?nances if they are using software to keep track of their business as opposed to spreadsheets or pen and paper.
22. From the Independent External Reviewer of the main banks Appeals Process for SMEs.
23. www.paypal-business.co.uk/cash-advance/index.htm
24. Small Business Survey 2012.
25. Small Business Survey 2012.
26. BIS, SFEDI and Newcastle University Business School (2012) “Graduate Recruitment to SMEs”.
27. Ibid.
28. Jamieson, D. et al. (2012), “Large Businesses and SMEs: Exploring how SMEs interact with large businesses”, ORC
International.
29. 2nd and 3rd Global Coworking Surveys (2011, 2012), deskmag.
doc_220630744.pdf