The Hiscox DNA of an entrepreneur report 2017 The Hiscox DNA of an entrepreneur report 2017

The Hiscox DNA of an entrepreneur report 2017

An air of confidence

Riding the upswing

There is a vibrant feel to this, our ninth annual DNA of an entrepreneur report. That vibrancy is apparent in the record numbers reporting growth in revenues and customer numbers. It is reflected in the rising level of optimism in most of the six countries surveyed. And it is there for all to see in the numbers who say their personal financial situation has improved in the past year.

But one of the most encouraging findings in the report is the evident progress of so many ‘millennials’ – those in their 20s and 30s. These are the movers and shakers on whom we will depend for much of our economic growth in the coming years. They are the new blood in the business world, and the report shows that most are not only prospering but are confident about what the future will bring.

The important role played by small businesses has been chronicled many times on both sides of the Atlantic. In the US, small businesses have generated nearly two-thirds of net new jobs over the past two decades. In the UK, they account for 60% of all private sector employment. They drive growth and innovation, and they have a big impact on the prosperity of their local community.

Their numbers have been swelling in recent years in line with a rising trend in start-ups. This is hugely positive. But it is often forgotten that these are risk-takers – people who are often prepared to stake house and home, work long hours and forego income in order to turn an idea into reality. As the report shows, many rely on outside income to help fund the early stages of their business. It also shows how dependent many are on one large customer. A recurrent complaint is that governments are not doing enough to support them. This is no bed of roses.

At Hiscox, we have a long track record of helping entrepreneurs manage their risks, insuring around 480,000 small businesses worldwide. Together they have a turnover in excess of £70bn. It is vital for us, and important for them, if we can understand the pressures they face and anticipate their requirements going forward so that we can refine our products and services accordingly. But it does more. By opening a window into the world of the entrepreneur, it offers rare insights into the attitudes and behaviour of those shaping the business world of tomorrow. As such, it should be essential reading for policymakers and others that have an interest in supporting or promoting the wellbeing of the small business community.

Bronek Masojada

Chief Executive Officer, Hiscox

DNA of an entrepreneur Report 2017 Download the report

Executive summary

  • Two-thirds (67%) of firms report growth in revenue. The figures are highest in the US (72%), where both investment spending and export activity have surged, and Spain (71%). More Dutch and French firms (67% and 62% respectively) also report growth in sales, underlining the recovery in the eurozone. By contrast, there are signs the UK is coming off the boil slightly: 61% of firms here report revenue growth, although the number reporting higher profits is up.

  • Seven out of ten firms (71%) report growth in new customers, and optimism is still on the rise in the US, France, Spain and The Netherlands. The UK, however, is once again an outlier. Here optimists are down from 60% to 55% of respondents. Worsening exchange rates and the fear of having to pass on cost increases are having a dampening effect on UK small businesses.

  • The proportion of UK and US respondents saying political instability is having an impact on their business has jumped from 22% to 31% and from 31% to 36% respectively. The numbers are significantly higher in France and Spain but are moving in the opposite direction – down from 54% to 43% in France and from 64% to 57% in Spain. At the same time, there has been a drop in those who see Brexit as a negative for their business.

  • In the US, the numbers saying credit has got easier now outweigh those that say it has got more difficult (14% versus 13%). This is a turnaround on a year ago. Across Europe, the numbers reporting easier credit conditions have generally risen in the past year. The biggest firms in particular are finding it easier to borrow. However, more small business owners are by-passing the banks. There has been a sharp rise in the numbers turning to crowd-sourcing, venture capital, re-mortgaging their house or raising money from family and friends. One in ten US firms now raises money from non-bank lenders such as debt funds.

  • One in six small businesses (16%) relies on its biggest customer for half or more of its revenue. The average figure is around a quarter of revenue (25.5%). However, that masks wide variations. Business concentration is most acute in the transport and business services sectors (where the average firm relies on one customer for 34% and 32% of its business respectively).

  • Younger entrepreneurs are doing particularly well. Half of under-30s (50%) and 46% of those aged 30 to 39 say they are better off than a year ago. That contrasts with a third or less of older respondents. In some countries, notably Spain, the gulf between the generations is wider still. Not surprisingly given the age factor, businesses set up since the 2008 financial crisis are more likely to say they feel better off than older ones (43% to 32%).

  • Nearly a third (31%) of small business owners and managers have had a personal mentor. The practice appears most widespread in the US and Spain, where 45% and 35% of respondents say they have been mentored, and among the under-30s (where 55% have been mentored versus 24% of over-60s). Nearly all those who have used mentors (94%) say the experience was either ‘very useful’ or ‘quite useful’.

  • Just over a quarter (26%) of respondents currently operate more than one small business. The highest figure for these serial entrepreneurs is in Spain (35%). They are a dynamic bunch: they make up more than a third (35%) of those planning to introduce a new product in the year ahead and nearly half (48%) of exporters. They are mainly to be found among the under-40s and those running the larger companies in our survey.

  • One in eight firms (13%) has suffered a cyber attack, up from 11% the previous year. In the US and Germany, it is around one in six (16% and 15% respectively). Among those who have suffered a cyber attack, the proportion saying it resulted in a serious loss has nearly doubled this year – from 26% to 48%.

  • Small business owners and managers are working shorter hours than a year ago (less than 41 hours a week on average versus 42 the previous year). This is true in all six countries surveyed. The biggest fall is in the US, where an average week’s work has fallen from over 40 hours to just under 38. It is the younger respondents that have trimmed their working week the most. Under-30s now say they work just over 35 hours a week. That compares with nearly 41 hours the previous year.

  • A very good year for most

    Two-thirds (67%) of firms report growth in revenue. The figures are highest in the US (72%), where both investment spending and export activity have surged, and Spain (71%). More Dutch and French firms (67% and 62% respectively) also report growth in sales, underlining the recovery in the eurozone. By contrast, there are signs the UK is coming off the boil slightly: 61% of firms here report revenue growth, although the number reporting higher profits is up.

  • Outlook positive

    Seven out of ten firms (71%) report growth in new customers, and optimism is still on the rise in the US, France, Spain and The Netherlands. The UK, however, is once again an outlier. Here optimists are down from 60% to 55% of respondents. Worsening exchange rates and the fear of having to pass on cost increases are having a dampening effect on UK small businesses.

  • The political factor

    The proportion of UK and US respondents saying political instability is having an impact on their business has jumped from 22% to 31% and from 31% to 36% respectively. The numbers are significantly higher in France and Spain but are moving in the opposite direction – down from 54% to 43% in France and from 64% to 57% in Spain (pxx). At the same time, there has been a drop in those who see Brexit as a negative for their business.

  • Easier credit but alternative funding on the rise

    In the US, the numbers saying credit has got easier now outweigh those that say it has got more difficult (14% versus 13%). This is a turnaround on a year ago. Across Europe, the numbers reporting easier credit conditions have generally risen in the past year. The biggest firms in particular are finding it easier to borrow. However, more small business owners are by-passing the banks. There has been a sharp rise in the numbers turning to crowd-sourcing, venture capital, re-mortgaging their house or raising money from family and friends. One in ten US firms now raises money from non-bank lenders such as debt funds.

  • High level of business concentration a concern

    One in six small businesses (16%) relies on its biggest customer for half or more of its revenue. The average figure is around a quarter of revenue (25.5%). However, that masks wide variations. Business concentration is most acute in the transport and business services sectors (where the average firm relies on one customer for 34% and 32% of its business respectively).

  • Millennials head feel-good table

    Younger entrepreneurs are doing particularly well. Half of under-30s (50%) and 46% of those aged 30 to 39 say they are better off than a year ago. That contrasts with a third or less of older respondents. In some countries, notably Spain, the gulf between the generations is wider still. Not surprisingly given the age factor, businesses set up since the 2008 financial crisis are more likely to say they feel better off than older ones (43% to 32%).

  • Widespread use of mentors

    Nearly a third (31%) of small business owners and managers have had a personal mentor. The practice appears most widespread in the US and Spain, where 45% and 35% of respondents say they have been mentored, and among the under-30s (where 55% have been mentored versus 24% of over-60s). Nearly all those who have used mentors (94%) say the experience was either ‘very useful’ or ‘quite useful’.

  • Livewire core of serial entrepreneurs

    Just over a quarter (26%) of respondents currently operate more than one small business. The highest figure for these serial entrepreneurs is in Spain (35%). They are a dynamic bunch: they make up more than a third (35%) of those planning to introduce a new product in the year ahead and nearly half (48%) of exporters. They are mainly to be found among the under-40s and those running the larger companies in our survey.

  • Mounting threat of cyber attack

    One in eight firms (13%) has suffered a cyber attack, up from 11% the previous year. In the US and Germany, it is around one in six (16% and 15% respectively). Among those who have suffered a cyber attack, the proportion saying it resulted in a serious loss has nearly doubled this year – from 26% to 48%.

  • Shorter hours

    Small business owners and managers are working shorter hours than a year ago (less than 41 hours a week on average versus 42 the previous year). This is true in all six countries surveyed. The biggest fall is in the US, where an average week’s work has fallen from over 40 hours to just under 38. It is the younger respondents that have trimmed their working week the most. Under-30s now say they work just over 35 hours a week. That compares with nearly 41 hours the previous year.