In the last few years many people have taken the brave step to become self-employed. At the last count the numbers had soared to their highest point in the last 40 years. Is this the ‘Dragon’s Den effect’ I wonder, or the result of something more fundamental?
The reality is that the financial crisis rocked employment levels and convinced people to strike out on their own. But this new generation of sole traders and small businesses face a tough time translating their core ideas into a commercial success.
As The Royal Society’s The Second Age of Small report recently pointed out, the Conservative party’s manifesto committed to creating 600,000 new businesses every year. But what value is this promise when so many small businesses fail within the first couple of years?
The journey to starting a business could be eased through improvements in education. Many entrepreneurs plough straight into business and succeed with no training but many more simply fail quickly.
I often wonder how much less failure and heartache there would be – and how much more successful those that survive would be – if would be entrepreneurs were taught about pricing, cashflow management, VAT and directors’ duties earlier on in their lives.
Key areas of support
For those who are resource weak and time poor, the administrative burdens alone can be overwhelming. Sole traders in particular are faced with handling their own administration, finance and HR on top of delivering their products and services.
Small businesses need long-term guidance and support. It’s up to the private sector and the Government to provide effective services and policies that ease their burden and smooth their path to growth. Some of the most burdensome administrative tasks are:
- Managing cashflow. This is a particularly perennial issue among the smallest businesses who find themselves dependent upon credit or, as our research suggested earlier in the year, funding from friends and family. When business becomes this personal, the pressures can be immense.
- This is another area that can cause considerable headaches. If you’re a sole trader you need to not only pay yourself but also pay your own tax and national insurance contributions. You are also required to enrol yourself and any staff (even if you only have one other) on a workplace pension scheme.
Some organisations that focus on the self-employed, like The Association for Independent Professionals and the Self Employed (IPSE) share objectives with the small businesses we speak to on a regular basis.
In IPSE’s manifesto they called for a strengthening of the Prompt Payment Code, setting up a small business conciliation service and, as a last resort, the introduction of strong statutory sanctions for late payers.
Whilst I believe that statutory sanctions may be somewhat draconian, we all share the desire to see policymakers continue to level the playing field for small businesses and to create the optimum conditions for them to thrive.
The private sector has to play an essential role in this as it can’t be left to the Government alone. Private business can play a bigger part by providing funding and a range of services that will help small businesses overcome any initial struggles and allow them to compete in their weight class.