Susanna recently divorced her husband and is living with her two kids, Sean (9), and Justin (12). They live in a rented apartment in the city. Susanna is not happy with her situation and wants to start a new life. She not only wants to better her life, but she also thinks that she needs to get out of her routine and become more independent. She is a certified nurse but has a lot of hobbies including cooking, baking, photography and running. Her now ex-husband left her with a lot debt which she has to pay off herself and he pays little in the way of child support. Susanna is in a desperate position to find a side job and turn things around.
Why is entrepreneurship becoming a popular job alternative?
Gone are the days of jobs for life. After seeing manufacturing and industrial hubs decimated, jobs in car manufacturing, steel, coal mining and other sectors that used to provide jobs for multiple generations now provide scant opportunities. Instead, the UK has become more services focused. Lower-skilled jobs have been off-shored. People can rely less on industry forging partnerships with local populaces. This is particularly evident when considering the quality of jobs on offer for the lower-skilled.
A few years ago, media outlets reported the Bank of England suggested benefits cuts increased the number of self-employed. At that point, the number of self-employed had jumped to a record 4.5 million after a particularly bad recession. In 2015, the Centre for Entrepreneurs reported over 600,000 businesses were started in the UK, another new record.
It is arguable why people are more likely to want to start a new business now than in the past. There may be greater risk appetite, the jobs on offer are not good enough, job security from paid employment is not as strong as in the past, people believe their labour deserves a bigger portion of the profits generated and are prepared to back that premise with their own money, or simply people love Dragon’s Den and want to give it a go. Whatever the reason, it seems that entrepreneurship is in vogue.
Susanna did not know much about entrepreneurship or small businesses. Therefore, she started to read a lot of books and follow the latest trends on social media. She did a lot of research to understand what people like and what they want to know more about. She was able to find many online websites that helped her understand what she needed to know and do to become an entrepreneur. Susanna was lucky enough to find a website that helped her connect to other like-minded individuals that were also entrepreneurs, some more experienced than others. She decided to start her own online business, selling baked good. She thought that it would be a good idea since it does not require a lot of money.
Who normally becomes an entrepreneur and who should?
According to Global Entrepreneurship Monitor (GEM) “the typical UK early-stage entrepreneur is male, aged 39, has a university degree, and is from a middle to higher income household. He is likely to be motivated by opportunity, rather than necessity, and is more likely to be working in a consumer-oriented business.” This pretty much paints a picture of a middle-aged person from a middle class background starting a business. Whilst this is true, there are opportunities for others.
Austrian economist Joseph Schumpeter coined the phrase “creative destruction” to explain the disruptive nature of an entrepreneur’s innovation. While replicative entrepreneurs may set up businesses to copy other businesses, innovate entrepreneurs come up with new ideas. Both are needed in an economy, but the rarer innovate entrepreneur will invariably create more value, though her idea may be more risky.
It can’t be that only middle-aged men from a middle class background are the only ones with ideas. The obvious antithesis to this is women, and localised entrepreneurs that see opportunities in their own area. Women should produce just as many innovative entrepreneurs as men, and localised entrepreneurs may be more replicative, but where scale is not important may provide superior service.
Susanna created a few social media accounts such as Facebook, LinkedIn and Instagram where she could display her creations. At first, Susanna was very disappointed because she would not receive as many likes as she thought she would get. There was a lot of competition. Therefore, she decided to do things differently and be more creative with her baking. She also involved her kids on YouTube and talked about motherhood. The views started to increase and Susanna received a lot of orders. Her videos engaged the target audience and due to her natural appearance a lot of people started to ‘like’ her pictures, follow her sites and order her goods.
What issues do entrepreneurs face?
The UK has a lot going for it: flexible labour laws, access to support and mentoring programmes, accessible office space, and good IT and broadband infrastructure. The key challenges for entrepreneurs is financing and getting people with the right skills. The government is helping somewhat with programmes such as StartUp Britain, but more venture capitalists are required. Understandably, banks are less likely to take a risk on start-ups, and debt financing is not usually the right form of financing for a new start-up.
The government could help entrepreneurs by reducing taxes, providing incentives and support in deprived areas and reducing red tape. The UK has done a lot to help on this front. For instance, starting a company in the UK is simple enough through Companies House, which then informs Inland Revenue so you can start corporate tax registration. However, there are some further improvements that could be made. For instance, registering for VAT could be linked more effectively to the registration for corporate taxes.
After one year, Susanna was making enough money to rent out a little space in the suburbs. She hired two part-time students that would help her out. Susanna was hesitant at first; however, realising how little she had to loose she managed to get over her fears and grow her business. Many people, including friends, underestimated her and thought that it all was due to luck. Yet, Susanna put in a lot of effort to reach to this point and it was the hard work that made her successful. She bettered her life, her kid’s lives, and was able to employ two people.
We have just started Chanzez in the UK. Having started various new ventures in a number of countries, we see the value of Britain’s more straight-forward and rapid processes. We also appreciate the transparency of services, which eliminates corruption. We only hope that we can see the same level of services shortly in some of the developing nations we attempt to work within.
About the Author
Sukhdev is a British Indian, who has lived and worked in a number of cities including London, New York, Boston, Vilnius, Bogota and Dubai, where he resides with his wife. He currently works to help start-up companies that have a social impact. His latest venture is Chanzez, which will produce (not source) clothing ethically and use profits generated in the production countries solely to fund social impact projects such as school scholarships. Sukhdev is a CFA charter holder with an MBA with top honours from Columbia Business School in New York, an MSc from The London School of Economics and a BSc (Hons) from Aston University in Birmingham, England.