As a small business owner, I read with much interest Matthew Taylor's call for a good work pledge in the recent RSA journal, and Benedict Dellot's “Entrepreneurial Audit” and the proposals made there. I believe however, that there might be a way forward for effective self-employment which is more to do with education and support than policy. As we have recently seen with the National Insurance nonsense, good policies can be thwarted by unfortunate politics.
Perhaps a start could be made by stripping out the “not really self-employed” from the equation. Most people in practice are, and will remain, employees, and are happy to remain so. However their ranks should include the zero-hours workers (Pimlico plumbers, Uber, Deliveroo, etc) who need and deserve the benefits associated with employment like paid holidays, SMP, SSP, etc. The idea that the criteria for actual employment is to do with exclusive control is probably a good a start point as any. This is a task for policy/regulations, but it would seem that these are changes for which the time has come, which is encouraging.
A second step may be to get rid of the conceit that having lots of self-employed/micro-businesses will do wonders for the economy or the country, and that all people involved are risk-taking entrepreneurs. The Federation of Small Businesses's stand against the NI increase was based on a risk-taking argument which doesn't bear much scrutiny. There are some genuine entrepreneurs who start with an idea and develop a sizeable business (or a sustainable one at any rate).To use “6 tribes” terminology, these are the “Visionaries” and the “Classicals”, together comprising perhaps a third of the total. That minority doesn't get ill, worry about pensions, take holidays, or actually need much by way of support. They will venture (successfully or otherwise) despite rather than because of the support environment.
In my view, the bigger issue to address is the needs of those who are currently self-employed for reasons other than growth – perhaps independence, creativity, a pasttime, or a way of scraping a living. For them, the criteria of success is more likely to be survival than growth. The current support environment – benefits and education – is inadequate for this group at present. These inadequacies will increasingly show up as more people look to self-employment because:
- the population is ageing;
- working lives are extended (as pension start dates are postponed, particularly for women);
- the nature of work changes with implementation of various technologies.
To start with the support environment, it is my experience of government/public sector/HE/FE-type enterprise agencies that they are almost irrelevant to small businesses because they are typically peopled by a mixture of:
- retired big business people who have little idea what it is like running a small business (having worked in both, I can assure you it is a very different environment);
- public sector officials who have even less idea of the commercial world (I made that transition as well);
- representatives of professional organisations who naturally have a focused view on what an owner-manager should look at in their organisation and are often unsympathetic to non-economic objectives.
The corporate types bring big-business thought processes to the table where decisions are typically based on consensus and/or superior approval and/or a requirement to preserve career prospects. In an owner-managed organisation with 1-5 individuals involved, there is limited scope for consensus, no superior, and certainly no career. For example, I was once advised to do market research to check out an idea, and given a budget figure for that research. For less than half the figure, I had tooled up, made samples, gone to visit customers with samples, and taken orders. In a similar vein, legal fees, which may be necessary and affordable in a corporate environment, may be out of the question in a small organisation where one may have simply to wing it.
The public sector types tend to be hamstrung by public-sector style checks and balance rules that are irrelevant to a person spending their own money. For example, grants may be offered for a part of the purchase price of new equipment, when in practice such equipment can be bought nearly new for less and without the strings attached. Another example is given by training courses, which often take place during working hours when the target audience is trying to earn a living.
As for professionals, it is my experience that unless used carefully (and specifically) they destroy more value than they create for a small business. For example, I recently sold a part of my business to someone I have known, dealt with, and trusted for decades. During that process, the solicitor's bill reflected an inability to believe that anyone can ever be trusted, the other sides' accountant insisted on some personnel issues which caused many more problems than they solved, and website developers took so long that I ended up lending the new venture files and systems for 10 months. Unlike artisans and tradesmen, professionals are happy to present the bill irrespective of the outcome (for example, the fees billed for the aborted FTSE/Deutsche Borse merger).
In short, my experience of business support agencies is that their skills are often not relevant or appropriate to the self-employed, their advice often skewed to a particular aspect of business, and their procedures unresponsive. Far too often you see a new small business open up and wonder who on earth it was who told the person involved that their idea was workable. Sometimes it was of course the "three fs" (family, friends, and fools), but sometimes it is people who should know better.
In this context, then, the idea that a super-agency is established (EA recommendations 11 and 13) to look after the existing agencies in anything like their existing format fills me with horror. The idea that accountants may improve the situation (EA #12) is perhaps even more off-putting. You can't drive a car by looking in the rear-view mirror and extrapolating from there. Roads are too twisty and crowded for that. And so is life for the self-employed.
So I’d like to suggest a different approach. I was, for a number of years, involved in teaching on an MBA ourse where the staffing model was one full time coordinator from the relevant FE establishment and a large number (about 12-14) of part-time lecturers, all of whom had day jobs relevant to the subjects they were teaching. Being a part-time course, lectures were held in the evenings and at weekends. While the original organisational structure lasted, it proved to be invigorating and challenging for both students and lecturers. For example, I was teaching Business Development at the same time as running a small business and could go in to the lecture with “Well, how would you react to this happening?” to spice up the proceedings. Not surprisingly, the structure mutated fairly quickly to a few full-time FE employees as the institution found it all too difficult to manage, and in fairness, it may have been hard to maintain academic rigour with this arrangement. But it was intensely practical and useful, and I still occasionally bump into students who say how much they got from the course.
But it might work as a model for support for the majority of self-employed people by providing practical tools for survival. Key features could be:
- one regional/local co-ordinator - probably a public sector employee - to manage
- part-timers with day jobs, ideally owner managers who deliver:
- sessions out of working hours on:
- practical topics (eg planning, pricing, social media for oldies, using professionals).
What would the measure of effectiveness be of such an agency? Improved business survival rates. For the majority of small businesses, that might be just as relevant as growth and/or employment
What other measures might be taken to improve the satisfactoriness of self-employment?
In practical terms, a number of people are hesitant to go it alone because they wouldn't like to be on their own all the time at home or in a workshop. While EA#19 recommends an easing on home-working restrictions and this may well apply to many (eg parents and carers), I think there is also scope for encouragement and/or creation of co-working spaces for the self-employed to avoid issues of isolation.
The Entrepreneurial Audit does point up a number of areas (NI, Pensions, corporation tax, H&S) where there is clearly a case for change in contributions, which in turn should bring benefits (sick & paternity pay) for the self-employed. I don't need to re-state the wellmade arguments in these areas, and can only hope that such changes aren't all thwarted by self-interest groups.