The results are in for this year’s Hiscox DNA of an Entrepreneur Report, reflecting the views and experiences of 4,000 small business owners and managers in Europe and the US. It’s the innovators and exporters who are leading the recovery with a surge in product development.
- Optimism levels reach three-year high. Three out of five (62%) firms are positive about the year ahead. US respondents (69%) are the most optimistic, while in the UK that figure is 64% and in France optimists are in the minority (43%).
- Innovation is the self-help solution. Just over half (51%) of respondents plan to launch a new product or service in the coming year, and innovation is strongest among firms that export.
- Good news for school leavers. While there is no sign of a hiring spree yet, more than one in five firms (22%) plan to recruit in the coming year, with the majority taking on juniors, apprentices and interns – good news for those entering the jobs market.
Hiscox’s seventh annual DNA of an Entrepreneur Report reveals a new sense of buoyancy among small businesses, along with a dramatic increase in the rate of innovation, as small businesses turn to new products and services as well as exports to accelerate expansion.
The study, which is based on responses from more than 4,000 small business owners and senior executives in six countries, provides a unique insight into the mood and financial wellbeing of the small business sector. There were 1,000 responses in both the UK and the US and 500 each from France, Germany, the Netherlands and Spain.
Bronek Masojada, CEO at Hiscox, commented: “The report implies a new air of confidence among small businesses as they build on the nascent recovery to drive expansion and capture the upswing. We see this first-hand through the more than 268,000 small businesses we work with worldwide, who collectively have increased turnover by 18% since this time last year. The acceleration in the rate of new product launches is especially bullish. Small businesses play a disproportionately large role in global innovation and this bodes well for future growth.”
Pulses are beating faster
The pick-up in sentiment in last year’s survey has flowered into outright optimism in five of the six countries surveyed. Overall optimism levels are at a three-year high, with 62% of respondents saying they feel positive about the year ahead compared with 57% a year ago and 52% two years ago. Only in France are the optimists in the minority (43%), with no movement in optimism levels there in three years.
The US looks the most buoyant, with 69% of respondents optimistic. The Netherlands and, remarkably, Spain are close behind at 65% each. In both cases the current reading marks a dramatic turnaround from the picture two years ago.
Owners and managers of businesses set up since the downturn in 2008 are significantly more upbeat on their prospects than those in charge of older businesses (70% for post-recession businesses compared to 59% at older firms).
Revenue growth is one reason that sentiment is on the rise. Around two-thirds of firms (65%) have experienced revenue growth in the past year. A quarter (25%) report double-digit growth in revenue (up from 16% a year ago) and the proportion seeing double-digit growth in their order book has risen from 15% to 24%. Growth in profits, however, is generally more muted and one in three firms still report no increase. In France the figure rises to 43%. However, globally, the numbers experiencing double-digit profit growth have gone up in the past year from 15% to 22%.
Targeting growth through innovation
Encouragingly, a growing number of firms are engaged in launching a new product or service. A year ago, just 36% of respondents had introduced a new product in the previous 12 months. This year the equivalent figure is 41%. In the year ahead, more than half (51%) plan to introduce a new product.
The innovation bug is particularly strong among firms that export. Nearly three-quarters (72%) of these firms say they plan to introduce a new product or service in the year ahead. At a time when funding remains scarce, this demonstrates a determination among small firms to take matters into their own hands and innovate to grow.
Targeting growth could be one reason that more than one in five firms (22%) say they will be hiring new staff in the year ahead, with 10% looking for juniors and 9% taking on apprentices or interns. This is encouraging news for school-leavers and those entering the jobs market. Spanish firms are most likely to be hiring, with 27% anticipating headcount growth, though a similar proportion of German, UK and US firms say they are likely to hire new staff – 23%, 22% and 22% respectively. In contrast, only 15% of Dutch firms plan to add to employee numbers.
Access to credit remains a key challenge. Nearly a fifth of respondents (19%) think that bank finance has become harder to access in the past year, while just 7% say it has become easier. Most concerning though, is that 15% of respondents have used their credit card to help fund their business in the past year – and a further 8% are thinking of doing so. Only 3% have raised money through crowd funding or peer-to-peer lending.
Late payment is another problem in parts of Europe. In France and Spain nearly half of respondents (47%) say their customers are paying later than they were, and for UK firms just over a quarter (27%) say late payment is a problem – despite repeated government efforts to tackle the issue.
Tax and bureaucracy also continue to be key bugbears, with nearly nine out of ten Spanish and French respondents complaining about tax and their own government’s red tape. In the UK, the focus is on issues with the education system. When asked whether they believed their government’s policies were supportive of entrepreneurs, only 30% of respondents said ‘yes’ or ‘in most cases yes’. The British are the most content with 45% believing their government’s policies support entrepreneurship.
So…who’s the most entrepreneurial?
Asked to rank the six nations participating in the survey in terms of their ‘entrepreneurial spirit’, most respondents put the US top followed by the UK and then Germany. Only the Dutch failed to put the Americans in top spot, choosing instead … the Dutch. Spain was ranked bottom by everyone including Spanish respondents (despite the fact that they lead the table of innovators).
To view the full report visit the Hiscox DNA of an Entrepreneur Report website