Professor of Enterprise and Director of the Leeds Enterprise Centre
at the University of Leeds.

Learning from 30 years of small business research

January 13th, 2015

As the Open University Business School publishes the 30th Anniversary Edition of  Quarterly Survey of Small Business in Britain we can reflect on three decades of research into small firms. What have we learnt?

  1. Personal motivations and business goals: In 1990, more than 50% of business owners stated the desire for independence was their main reason for running their own business with 19% selecting making money, 8% were motivated by a desire for security, 6% felt they had no alternative but self-employment and 5% were doing so out of family tradition. By 2014, At 50% ‘being your own boss’ remained as the main advantage of running your own business, followed by 39% ‘more flexible working hours’, 29% ‘can be more creative and/or innovative, 29% ‘avoids negative aspects of working for a larger organisation’ and 27% stated ‘opportunity to obtain greater personal wealth and/or earnings’. So its independence, independence, independence … some things never change.
  2. Communications technologies and the Internet: Between 1985 and 1991 businesses with one or more computers had increased from 36% to 68%. Interestingly, more than twice as many UK small firms had computers compared to those in Japan. By 1996, 81% had one or more computers but by 2003 only few had advanced to e-commerce. In 2011, more entrepreneurial firms were taking the lead in social networking, smartphones and cloud computing with firms who rated themselves as most entrepreneurial being three times more likely to use social networking. By 2013, more than 20% were using cloud-based services. Perhaps in a decade’s time most small businesses will have their ‘head in the clouds’!
  3. Business information and advice services: In 1993, one-third of small firms did not have ‘easy and timely’ access to the information that they needed to run their business. In 1988, nearly two-thirds of those who had a problem said that this was because they were too busy to absorb the available information. In 2002, Government regulations were still the area where the greatest proportion of Britain’s small firms had trouble finding advice and information. At 50% accountants were most cited as a source of helpful advice or information followed by ‘customers, suppliers and other business people’ at 37% and banks at 31%. By contrast, only 17% identified ‘Government-funded services’ as a helpful source. Will the Small Business Charter have an impact on this?
  4. Retirement and succession planning: In 1995, one-third of business owners expected ultimately to sell their business and one-sixth to pass it on to a family member. In 2008, in the immediate aftermath of the credit crunch, the average small business owner expected to retire at age 67 but only 18% expected to have a comfortable pension on retirement. In 2012, almost half of owners were still expecting to retire by the age of 65 but the majority of owners expected to receive an adequate or comfortable pension. More than a third of business owners planned ultimately to sell their business and a quarter to pass their business on to a family member. So, small business owners are just as likely to sell but more likely to pass it on to the next generation … just as many Alan Sugars but more Morrisons and Sainsburys of the future!

The enterprise nation looks mainly about gaining independence, using ICT, trusting accountants and selling or passing it on. I wonder if the game is basically the same but its really only the information revolution that has changed the pitch.

Professor Nigel Lockett
Professor of Enterprise at Leeds University Business School

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Top tips for Starting a Business (5 & Good luck!)

June 22nd, 2014

Top tip Five: Don’t be a busy fool!

It’s all too easy to think the difference between the price the customer pays and the cost is the profit. Of course, it is true that if the sales price is greater than the cost price, you are making a gross profit on each sale. But what about the cost of being in business? All the overheads, operating costs, wages, fees, interest on loans and something for you to live off! How many items to you need to sell to produce enough gross profit to cover these? (The turnover less cost of sales = gross profit). And what is left after this is the net profit. What is the point of working really hard on your business only to make little or no net profit? Or in other words being a busy fool!

So, it’s really important to charge the right price. But how do you determine this and quickly? You could look at competitors or ask customers. There is a thought that you should test the market at an early stage and learn quickly from this.

I remember meeting a serial entrepreneur whose first business was selling large foam hands at football matches. He and two friends stood outside different gates selling at different prices. They called each other to see at what price point the hands stopped selling than all sold just below this price. That was his first of many businesses.

Once you have got your price right and the cash is coming in, you will need to start collecting information and thinking about scaling your business operation. This is all sounding rather complicated! Don’t worry help is at hand. Week two the Starting a Business free online course is all about designing a scaleable business, understanding accounts and getting the money you need.

So, the five ways to build a successful business?

  1. How does information flow around your business?
  2. What are your key financial indicators for your business?
  3. Turnover is vanity, profit is sanity!
  4. Who you know that good help you?
  5. Cash is king or queen!

And Finally: Good luck!

I hope you enjoy the Starting a Business free online course and meeting our team of enterprise educators, student entrepreneurs and experienced business advisors. Through the enterprise opportunities at the University of Leeds you could become a business leader of the future. Our dedicated courses and discovery modules, competitions and scholarships will help you to turn your business ideas into a reality. Find our more on Enterprise at Leeds website.

Professor Nigel Lockett
Professor of Enterprise at Leeds University Business School

Starting 30th June Starting a Business free online course

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