Hiscox international DNA of an Entrepreneur Report 2014
This year’s Hiscox international DNA of an Entrepreneur Report sheds new light on a small business sector that often lacks a voice and can be ill-defined. Now in its sixth year, the report provides evidence of an emerging new breed of start-up entrepreneurs.
It also shows that the business environment has generally improved but that life is still tough for the very smallest firms. And it offers a new and somewhat surprising insight into what motivates small business owners.
New breed of entrepreneur
One of the report’s most striking findings is the emergence of a distinctive new breed of start-up entrepreneurs who have set up their business since the onset of the recession in 2007/8. The data suggest they not only have a recipe for growth but they are tougher in outlook. One in eight was unemployed before setting up their new business and nearly half are one-person firms.
They are also more likely to be run by a woman. Some 56% of these recession start-ups were started by women. That compares with 44% for pre-recession start-ups. The owners of these recession start-ups are more innovative and much more prepared to turn to unconventional sources of finance, such as crowd-sourcing.
Renewed optimism, but it’s still tough for the smallest
The report contains a strong thread of optimism. Many of the 3,500 small business owners contacted are seeing light at the end of the tunnel. Nearly half are upbeat about the coming year, a significant improvement on the 2013 reading when only around one in three respondents was optimistic. Only the French still lag on the optimism index: just 27% of small business owners there think the year ahead offers promise.
Intriguingly, levels of optimism increase with the size of the business. Those with a turnover of £1 million or more are much more likely to be upbeat. Where they have recently launched a new product or service they are much more likely to have found funding for it.
By contrast, more than half of firms with a turnover of under £1 million have been unable to find funding for expansion and one in three of those with a turnover of less than £100,000 fears not having the funding to keep going in the coming year. This underlines the need for renewed efforts to get banks lending again to their smaller business customers.
It’s not about getting rich quick
It is often assumed that the majority of entrepreneurs are motivated by the prospect of a life-changing sum when they sell out. Not so. For the first time, the survey probed small business owners on how they viewed their business. Nine out of ten saw it as a source of income to fund a good lifestyle rather than a capital asset they would cash in some time in the future.
This may surprise – but it shouldn’t. More than two-fifths of the business owners contacted for the survey operate as one-person businesses. In Europe, at least, there is a long tradition of self-employment, especially in the Mediterranean countries. Even in Germany and France, the self-employed now top 10% of the workforce. In Britain, the figure is 14% after a sharp jump in the past year. The Internet has facilitated this shift.
The survey also found that only 40% of respondents considered themselves ‘entrepreneurs’. This is consistent with the preference for income over capital. It appears that, for every Bill Gates or Richard Branson who is driven to make it big, there are dozens of small business people just looking to do well.