Is the new coalition government going to be good for small business?

With all the talk of hung parliaments, national interest and stable government it is easy to forget that the ‘enterprise show’ must go on! Small businesses provide nearly 60% of private sector jobs and over 50% of UK turnover. Over half a million people start their own business each year. We are clearly an enterprising nation. So, what might the new Conservative – Lib Dem coalition mean for small businesses and entrepreneurship?

If we had to use one word to describe each party’s approach to enterprise what would it be?

• Conservative = the Markets. Tends towards supporting the City, reducing the national deficit quickly, reducing regulation for businesses and reducing NI and tax. Going greener.
• Lib Dem = the Individual. Tends towards local accountability, splitting banks and creating a Post Bank, reducing the national deficit, reducing regulation for businesses, supporting social enterprise and reversing NI increase. Gone green.

But, what do small businesses and entrepreneurs want?

Simply, anything that will free them to be more enterprising and create jobs. That means reduced regulation and bureaucracy, access to finance and fairer taxation. As well as, wider recognition of the role they have in innovating and creating the jobs and wealth that fund public services.

With George Osborne as Chancellor and Vince Cable in the Treasury with responsibility for business and banks, what are my ‘top ten’ predictions?

1. Banks: Legislation to split investment from retail banking. New bank levy. Formation of Post Bank delivered through the Post Office network;
2. Business rates: Automatic business rates relief for small businesses;
3. Business support: Reduced role for Regional Development Agencies. Business mentor networks;
4. Economy: Attempts to rapidly reduce national debt in order to increase financial stability;
5. Finance: Increased access to funds from state-owned banks and government schemes;
6. Green: New low-carbon schemes for small businesses;
7. Public procurement: Increase access to contracts for SMEs;
8. Red tape: Reduced regulation and bureaucracy;
9. Tax: Reduced NI and simplification of Corporation Tax. Review of IR35;
10. Training and higher education: Increased apprenticeships and work-based training. Increased university enterprise and collaboration with industry.

So, with George Osborne focusing on macro-economic and market issues and Vince Cable supporting businesses we can expect enterprise to matter. With politicians calling for responsibility, compromise and stability there is no doubt in my mind that, given the right environment, small businesses and entrepreneurs can deliver more than their fair share of new jobs and wealth generation.

Dr Nigel Lockett

Director of Centre for Entrepreneurship and Innovation Management
www.bradford.ac.uk/ceim
www.nigellockett.com

STOP PRESS

I have just reviewed the ‘coalition agreement’ to see how my ‘top ten’ fared. Still in the charts are:

1. Banks: New bank levy [Yes] and legislation to split investment from retail banking [Almost - independent commission to investigate];
2. Business rates: Automatic business rates relief for small businesses [Partly – cancelling some backdated demands];
3. Economy: Attempts to rapidly reduce national debt in order to increase financial stability [Yes – significantly accelerated reduction. £6 billion in 2010-11];
4. Finance: Increased access to funds from state-owned banks and government schemes [Yes – to viable SMEs. Major loan guarantee scheme and using nationalised banks];
5. Green: New low-carbon schemes for small businesses [Partly – creation of green investment bank];
6. Tax: Reduced NI [Yes];
7. Training and higher education: Increased apprenticeships and work-based training [Yes – work programmes].

Out of the charts [well at least no news yet] are:

1. Banks: Formation of Post Bank delivered through the Post Office network;
2. Business support:  Reduced role for Regional Development Agencies. Business mentor networks;
3. Public procurement: Increase access to contracts;
4. Tax: Simplification of Corporation Tax. Review of IR35;
5. Training and higher education: Increased university enterprise and collaboration with industry.

Now we just have to wait for the emergency budget in 50 days …

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A long way from home – from sheep to shop

The fashion industry is full of specialist retailers with each purporting to offer a unique range of clothes that will appeal to a unique group of customers. But how do such niches emerge in what seems like an already crowded market?

Just like the mainstream fashion industry, the active outdoor and sports clothing industry is highly competitive. Many small companies have emerged to meet the needs of customers in this increasing global niche sector. One such company is Howies, which was founded June 1995 by David and Clare Hieatt in the living room of their London flat. Initially, they designed just four T-shirts and launched them in a mountain biking magazine – the T-shirts cost £30.

Let us consider four critical stages of Howies story: the decision to start the company (opportunity recognition); the expansion and the move to Cardigan Bay, in Wales (growth);  the sale to Timberland (acquisition); and David and Clare Hieatt (founders).

Opportunity recognition: The identification of the outdoor enthusiasts sector was a key factor starting the company. The founders and early staff members were passionate about biking, snowboarding and skateboarding. They knew what their potential customers wanted – something unusual and something different. Initially, Howies sold through shops, with 45 selling their product by the end of 1999, but in 2000 they realised this business model wasn’t sustainable – the decision to move into mail-order, that is selling from a printed catalogue, was made and the first catalogue was produced.

Growth: Space is nearly always an issue for growing firms and Howies was no different. The company moved to commercial premises in Wales and secured a grant from the then Welsh Development Agency in 2003. The mail-order catalogue sales were increasing and were supported by e-commerce sales. By the end of 2005 sales were just over £2 million. Clothes were still promoted as ethically produced, both in terms of manufacturing and the textiles used, including hemp, bamboo, organic cotton and the Zque accredited Merino wool from New Zealand.

Acquisition: In early 2007 Howies was acquired by Timberland, the large US-based outdoor clothing company (www.timberland.com). The founders of Howies could see that in order for the company to grow to meet ever-increasing demand more working capital was required. The amount of money involved was beyond the reach of conventional funding, such as secured loans. This would either mean raising venture capital or finding a partner with similar values. David and Clare felt that for Howies to maintain its values there was only one option. At the time of the acquisition Jeffrey Swartz, President and CEO of Timberland, said: “We are excited and inspired by the brand potential we see in Howies and are pleased to welcome them to the Timberland family. We look to invest in like-minded brands that are focused on innovation, authenticity and integrity, and Howies encompasses all of these core values”.

Founders: And where are they now? What is David Hieatt doing?

And finally, ethical points: In addition to prompting environmental sustainable material such as Merino wool, hemp, bamboo and organic cotton, the company only uses 100% renewable electricity from Good Energy for its London store and in 2005 moved to ethical bank Triodos

Dr Nigel Lockett

Director of Centre for Entrepreneurship and Innovation Management (CEIM)
www.bradford.ac.uk/ceim
www.nigellockett.com

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