Entrepreneurial Controls: Financial and Operational Standards for Emerging Businesses

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See the page in this guide on cash flow and financial management. At the same time, every business needs to be alert to new opportunities. There are obvious risks to relying solely on existing customers. Diversifying your customer base spreads those risks.

Jack Trent

Following the same business model, but bigger, is not the only route to growth. There are other strategic options such as outsourcing or franchising that might provide better growth opportunities. It's important not to assume that your current success means that you will automatically be able to take advantage of these opportunities. Every major move needs planning in the same way as a new business launch. Watch out for being too opportunistic - ask yourself whether new ideas suit your strengths and your overall vision of where the business is going.

Bear in mind that every new development brings with it changing risks. It's worth regularly reviewing the risks you face and developing contingency plans. Good cash flow control is important for any business. For a growing business, it's crucial - cash constraints can be the biggest factor limiting growth and overtrading can be fatal.

Making the best use of your finances should be a key element in business planning and assessing new opportunities. With limited resources, you may need to pass up promising opportunities if pursuing them would mean starving your core business of essential funding. Every element of working capital should be carefully controlled to maximise your free cash flow. Effective credit management and tight control of overdue debts are essential. You may also want to consider raising financing against trade debts.

Good stock control and effective supplier management tend to become increasingly important as businesses grow.

Holdings of obsolete stock may become a problem that needs periodic clearing up. You may want to work with suppliers to reduce delivery cycles, or switch to suppliers and systems that can handle just-in-time delivery. Planning ahead helps you anticipate your financing needs and arrange suitable funding. For many growing businesses, a key decision is whether to bring in outside investors to provide the equity needed to underpin further expansion. New businesses often run in perpetual crisis mode. Every day brings new challenges that urgently need resolving and management spends most of their time troubleshooting.

As your business grows, this approach simply doesn't work. While a short-term crisis is always urgent, it may not matter nearly as much as other things you could be doing. Spending your time soothing an irritated customer might help protect that one relationship - but focusing instead on recruiting the right salesperson could lay the foundations of substantial new sales for years to come.

For example, your business might be increasingly at risk unless you take steps to ensure your intellectual property is properly protected. If you are focusing on individual marketing campaigns, you might need to devote more resources to developing your brand. A disciplined approach to management focuses on leading employees, developing your management team and building your business strategy. Instead of treating each problem as a one-off, you develop systems and structures that make it easier to handle in the future. All businesses produce and rely on large volumes of information - financial records, interactions with customers and other business contacts, employee details, regulatory requirements and so on.

It's too much to keep track of - let alone use effectively - without the right systems. Responsibilities and tasks can be delegated as your business grows, but without solid management information systems you cannot manage effectively. The larger your business grows, the harder it is to ensure that information is shared and different functions work together effectively. Putting the right infrastructure in place is an essential part of helping your business to grow. Documentation, policies and procedures also become increasingly important. The informality that might work with one or two employees and a handful of customers simply isn't practical in a growing business.

You need proper contracts, clear terms and conditions, effective employment procedures and so on. Many growing businesses find using established management standards one of the most effective ways of introducing best practice. Quality control systems can be an important part of driving improvements and convincing larger customers that you can be relied on. Investing in the right systems is an investment that will pay off both short and long term. You benefit every day from more effective operations. If you ever decide to sell the business, demonstrating that you have well-run, efficient systems will be an important part of proving its value.

Entrepreneurs are the driving force behind creating and growing new businesses.

All too often, they are also the people holding them back. The abilities that can help you launch a business are not the same as those you need to help it grow. It's vital not to fool yourself into valuing your own abilities too highly. The chances are that you'll need training to learn the skills and attitudes required by someone who is leading growth. To grow your business, you need to learn to delegate properly, trusting your management team and giving up day-to-day control of every detail.

It's all too easy to stifle creativity and motivation with excessive interference. As the business becomes more complex, you also need to develop your time management skills and learn to focus on what's really important. As your business grows, you may need to bring in outsiders to help.

You'll want to delegate responsibility for particular areas to different specialists, or appoint a non-executive director or two to strengthen your board. As you start tackling a new opportunity, someone who has experience of that activity can be vital. For many successful entrepreneurs, learning to listen to - and take - advice is one of the hardest challenges they face.

But it may also be essential if you are going to make the most of your opportunities. Some entrepreneurs, recognising their own limitations, even appoint someone else to act as managing director or chairman. Complacency can be a major threat to a growing business. In eastern and central European countries business transfers and successions are associated with privatisation during the transition period, as in Bulgaria. In Estonia, this entrepreneurial form has also been affected by a discussion about the implementation of the EU Council Directive on safeguarding employees in the case of business transfers.

In Romania, the discussion focuses on reducing illegal business and tax evasion and on encouraging more transparent business deals. New legislation and industrial support schemes offering financial support or consultancy services to entrepreneurs have been put into effect as a result of the ongoing debate about entrepreneurship. Several different initiatives have been set up to support one-person enterprises and self-employment, in particular to encourage job creation, but also to attract specific target groups to entrepreneurship such as young persons, female entrepreneurs and people with disabilities and people with a higher education.

However, as one-person enterprises and self-employment are often seen as a first stage of developing an enterprise, the initiatives are not solely or explicitly designed for this particular form of entrepreneurship but are aimed at entrepreneurs in general. Nevertheless, as these initiatives are relevant for one-person enterprises and self-employment, they are presented below.

Among the main barriers to establishing new enterprises are the lack of access to capital, unhelpful tax regimes and fiscal schemes or complex labour market regulations. Several countries have initiated different kinds of economic incentives to mitigate these difficulties. Many countries have changed business legislation and administrative procedures and have set up simpler regulations for establishing and running a business.

Beyond consultancy and entrepreneurial training, other education initiatives have been introduced. Basic business studies have been included in the curriculum in upper secondary education in the Czech Republic, and training schemes for self-employed entrepreneurs to improve their business skills and competences and strengthen an entrepreneurial culture have been introduced in Estonia, Greece, Lithuania, Luxembourg, Malta, Portugal and Romania.

The entrepreneurship debate has increased policy awareness of part-time entrepreneurs in Bulgaria. In several countries it has also resulted in changed labour market or social security regulations and a more favourable tax regime for this group. In Denmark, discussions about this category of entrepreneurs have led to simplified administrative regulations, easier access to capital, and a change in public attitudes towards this kind of entrepreneurship. A network of business angels has been established in Bulgaria with the intention of providing a support structure for serial entrepreneurs.

The network not only provides access to capital but also to managerial and entrepreneurial skills, since business angels have typically been involved in several business start ups of their own. In Denmark and the United Kingdom, the debate has resulted in more efficient bankruptcy regulations, making it easier to re-enter business after a bankruptcy.

In Denmark this also includes simplified administrative rules and easier access to capital. Sweden has launched a business promotion scheme that targets serial entrepreneurship. It is part of an innovation, commercialisation and technology transfer scheme and it offers better access to capital.

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This scheme is aimed at a more efficient commercialisation of research results through the transfer of research ideas to business. It may include that transfer of ownership of the business idea, but researchers and entrepreneurs may also go on to develop new research based business. The available statistics cover many different sources of information, and the methods for gathering data vary considerably from country to country. The sources include data from public registers such as business, trade or commercial registers, tax and social security registers, censuses of enterprises or of the population, and surveys.

Typically, business statistics are based on register data while demographic statistics about entrepreneurs are survey-based, using the Labour Force Survey methodology. In most countries, the main source of entrepreneurial statistics is the national statistical office. However, these statistics are typically produced by using register data such as business registers, social security data, tax data or censuses and surveys focusing on different aspects of entrepreneurship, and this makes the statistics less comparable.

Denmark and Sweden appear to be the only countries where the same organisation gathers statistical figures for all indicators based on register data, and where there are extensive possibilities for crosstabulating data and even combining business and demographic figures. The Netherlands is planning to establish a similar service. Other data sources are public and private registers, such as lists of members available from chambers of commerce. The statistical data is typically available free of charge in most countries, but a fee must be paid to make advanced use of the data.

The availability of standardised statistical data on the five emerging forms of entrepreneurship has been analysed based on statistical variables within business statistics see Table 4 and demographic statistics of the entrepreneur see Table 5. Observations can be made concerning the availability of statistical data about the five emerging forms of entrepreneurship:.

If business and demographic data are available, it is typically not possible to combine the two sets of data except where the data are based on the same survey, e. In the Netherlands, the Central Statistical Office is planning to establish a similar statistical system so that it becomes possible to crosstabulate the business and demographic statistics of the entrepreneur. There is considerable variation across Europe in how often statistical data are updated, in the time series they cover, and in sectoral and regional breakdown.

The accessible data for one-person enterprises and self-employment are used to illustrate these differences, since this form of emerging entrepreneurship has the best statistical coverage. For 17 countries, the statistical data is available on an annual basis, and half of those countries report that some of the statistical variables are also accessible on a monthly or quarterly basis. In Cyprus, some of the data are based on a census of enterprises carried out every five years, and in Slovakia the statistics have only been compiled once.

The data source typically determines its time series since administrative data are updated continuously, for instance, monthly or quarterly, while register data are updated once a year, and censuses and surveys are often carried out once a year or even less frequently. The length of time series has changed over the last 50 years, but in the s and s the production of statistical data about entrepreneurship became more common, and by the s entrepreneurial data was being gathered in almost all countries.

The authors have investigated the sectoral and regional breakdown for one-person enterprises and self-employment. As seen in the table in Annex E, the level of breakdown of data available is seen to be particularly heterogeneous when taking into account:. To summarise, then, the widely differing variables within national statistics and differences in data collection methods give only very limited possibilities for analysis between the full range of countries examined by this survey, and then only for the main category of one-person enterprises and self-employment.

The authors have identified national studies and research for each of the five emerging forms of entrepreneurship for all the countries by searching the following sources:. The overall focus of research generally follows national discussions. Twenty-one countries report research focusing on one-person enterprises and self-employment. Only five countries have indentified research publications focusing on part-time entrepreneurs, while four countries have identified research on parallel entrepreneurs, seven countries on serial entrepreneurs and eight countries on business transfer and successions.

Most of the identified research has been conducted within the last five years. Many studies have been carried out particularly in France and Italy over the last few years, while few have addressed the subject in the United Kingdom in the last five years. The methodology used for gathering new data typically consists of surveys and other forms of interviews although a few studies are based on register statistics or administrative databases.

Research projects typically study the motivation, characteristics, behaviour, development and performance of the entrepreneurs as well as the challenges they face. Studies of one-person enterprises and self-employment can be categorised either as having a general entrepreneurial focus or addressing specific issues for one-person-enterprises and self-employment. The first type of study refers to, for example, barriers and enablers to establishing and running a one-person enterprise, as in Cyprus and Poland, or the potential for development of self-employment, as in Slovakia.

Other studies look into the reasons for becoming self-employed, and these findings are mapped against the performance of the enterprise such as survival rate, income and turnover, and the need for support measures.

This is the case for Austria, Bulgaria, the Netherlands and Norway. Access to capital and the impact of financial support are the focus of research into the development of one-person enterprises and self-employment in Greece and Germany, as is the impact of the economic crisis on entrepreneurs for Italy. Other studies analyse more specific aspects of one-person enterprises and the self-employed, addressing their position in relation to labour legislation on issues such as contributions to social security or questions of health insurance, as seen in the Czech Republic, France, Lithuania, the Netherlands and Spain.

The few studies that address part-time entrepreneurship analyse the benefits of being defined in this way, as seen in Austrian and German studies. In Sweden, part-time entrepreneurs are analaysed from the perspective of being in transition between self-employment and employment, and the focus is on the motivation and challenges associated with this form of entrepreneurship.

Parallel entrepreneurs are only mentioned in studies discussing attitudes to entrepreneurship and examining entrepreneurial success factors, as in Estonia and Germany. Serial entrepreneurs are discussed in studies on growth, where the background and business experiences of serial entrepreneurs is examined to assess whether they are more experienced and growth-oriented than other entrepreneurs, as in some French studies.

In some cases, the link between innovation and entrepreneurship is analysed, as in Germany. Studies on business transfers and successions often focus on family businesses, on attitudes towards the process of business transfer, and the potential for growth and development after a transfer of ownership. Some studies also look at the risk of failure and present some policy recommendations, as in Austria, Belgium, France, Germany, Italy, and Sweden.

National correspondents have reported limited evidence of discussion of serial entrepreneurs and parallel entrepreneurs. Additional desk research finds that parallel entrepreneurs are not a key research topic; however, the focus does fall on serial entrepreneurs when considered in relation to business transfers and successions. The research on serial entrepreneurs in relation to business transfers and successions tends to focuses on the personal characteristics of the serial entrepreneur.

A study Westhead, P et al, compared an inexperienced novice entrepreneur and an experienced serial entrepreneur. It found that serial entrepreneurs were more likely to demonstrate entrepreneurial behaviour, be more cautious and respond more quickly and appropriately to changing market demands. Studies have also observed differences among serial entrepreneurs.

Two studies find that one out of four business closures was followed by the start up of a new business, and that young entrepreneurs who worked full time in their last business are more likely to restart Schutjens, V et al. International discussions take place in parallel to the national discussions in the European Commission EC , in the OECD, and in various research environments. A point of departure for the European discussion is a comparative study between Europe and the USA carried out by Flash Eurobarometer that concludes that Europeans would rather be employees than self-employed.

Furthermore, a EC report and the Flash Eurobarometer in shows that one out of every two one-person enterprises did not want to hire staff due to the limited market reach of the company. One out of four reported that they preferred to work alone and that delegation of work to employees is difficult due to their lack of specialist knowledge or because they could not find suitably qualified employees.

A third of the enterprises studied stressed that increasing labour costs were a barrier to employing people, as was the administrative burden of recruitment and employment. The EC reported in that for years, European policies have supported self-employment and small and mediumsized enterprises SME in labour market issues. It was noted by the EC in that an EU-wide discussion, similar to many national discussions, had addressed the promotion of entrepreneurship, and start-up and administrative procedures. This report pointed to a number of potential improvements that would support entrepreneurs and small businesses, including emerging forms of entrepreneurship.

The international discussion implicitly — and sometimes more explicitly — addresses the category of one-person enterprises and self-employment. The June Directive on self-employed workers and assisted self-employed workers introduces better social protection, such as giving them the right to state-supported maternity leave for the first time.

The Europe strategy also encourages entrepreneurship by, for instance, removing measures that discourage self-employment. Another issue discussed at European level is the transfer of businesses and business successions. In , the EC estimated that about six million small business owners would retire in the next decade, with the associated risk of businesses closing and jobs being lost. To meet this challenge, the discussion has focused on, for instance, a more favourable tax regime that will not hamper business transfers or damage their finances, particularly when they are passed to other members of the same family.

An expert group formed by the EC in stressed the need for more efficient business transfer processes. It identified success factors and gave recommendations for developing special market places for business transfers such as databases and trading platforms. In the European debate it is often emphasised that new enterprises and SMEs have a potential for growth, job creation and innovation, but that monitoring new enterprise development is a challenge.

A reason for the lack of readily available data is that there is little information at the micro-level that would offer personal information about the owners of the enterprises and would therefore help to identify part-time, parallel and serial entrepreneurship, and business transfers and successions.

Studies that do gather this kind of information are commonly based on unique datasets gathered either through special enterprise surveys, such as the Flash Eurobarometer, or through complex business register analysis. The aim is to establish an international and European database of harmonised statistical figures based on standard definitions and concepts. European business demography statistics draw on national registers to establish annual start-up, growth and survival rates, up to five years after start-up, for micro-enterprise size businesses, defined in accordance with the joint OECD-Eurostat Entrepreneurship Indicators Programme.

More information about this programme is available at www. This effort focuses on entrepreneurship in general, and identifies factors such as the number of employees, business size and growth, but without paying special attention to which of the emerging forms of entrepreneurship they belong to. However, the category covering one-person enterprises and self-employment is regularly identified in European business data, typically defined as either enterprises without any registered employees or those set up with the legal identity of a sole proprietorship.

Even though part-time entrepreneurs are not explicitly discussed, data such as turnover or added value could be interpreted to show whether or not businesses were generating the equivalent of a full time income for their proprietors. Those that do not provide a full time income could then be assumed to be part-time entrepreneurships.

One consistent source of information that directly addresses occurrences of serial entrepreneurship and part-time entrepreneurship is the Global Entrepreneurship Monitor GEM. Each year its research programme assesses national levels of entrepreneurial activity in 56 countries. At the time of writing, data from the programme for the period — are in the public domain, covering 18 European countries in GEM surveys report on enterprises that have no employees, part-time entrepreneurs and serial entrepreneurs, but GEM definitions are quite different from those used elsewhere.

This limits the possibilities of comparison with other official statistics. As this report is about emerging forms of entrepreneurship, it could have been of more value if more research focused on the trends in society and in business that call for new forms of entrepreneurship, and if the research actually studied these forms of entrepreneurship. Only a few do. Differing collection methods and no common agreement on which variables should be monitored make it impossible to compare European national statistics except in a very limited way.

A first step to improve this situation could be initiate some kind of statistical development project in selected countries, with the specific intention of examining current developments in emerging forms of entrepreneurship in, for instance, Denmark or Sweden. This kind of highly focused research and development of statistical rigour could have a dramatic effect on public and policy discussions, highlighting the way in which emerging forms of entrepreneurship have enormous economic potential.

Such business-incubating forms of entrepreneurship could add another dimension to the labour market and job creation policies. As the emerging forms of entrepreneurship increasingly have an impact on both industrial and labour market policies, they may be a challenge for developing relevant policy initiatives. Entrepreneurship in Missouri, Definition of entrepreneur. European Commission, Eurostat, definitions page at http: European Commission, Market business transfers, Fostering Transparent marketplaces for the transfer of business in Europe , Report from an expert group, Enterprise and industry Directorate-General, European Commission, The financing of biopharmaceutical product development in Europe , Enterprise and Industry Directorate-General, Definitions Supporting Frameworks for Data Collection.

Entrepreneurial intentions and realizations subsequent to business closure , Group Entrepreneurship, Growth and Public Policy, Jena, Germany, Welter, Frederike, Policy delivery: Lessons from Local Approaches, Journal of small business management, In the case there is statistical data for the other emerging categories of entrepreneurship, the data will typically represent the same level of statistical breakdown on branches and regional level.

Eurofound is an agency of the European Union. Skip to main content. This report consists of six sections: Presenting working definitions for the emerging forms of entrepreneurship analysed. An overview of public and policy discussions about the five emerging forms of entrepreneurship. An in-depth analysis of the content of the public debate and associated policies.

A summary of findings, in the context of the availability and access to statistical data. A summary of the content of national research and studies, and the highlighting of key issues in the EU debate. A bibliography and annexes that summarise individual answers from all the national correspondents surveyed. Transfer from parents to a son or daughter, a traditional generational change. After passing the entrepreneurial stage of business development, a company will typically face new strategic options and managerial challenges that are likely to demand a fresh injection of skills.

At this stage, it is common to introduce new management skills and perhaps to transfer ownership to a professional board. Transfer of ownership, or part of it, through a management buyout or the private sale of the business or shares.

Emerging forms of entrepreneurship

This entrepreneurial form is seen as playing an important role in combating unemployment by creating new jobs, at least by keeping the entrepreneurs themselves out of the unemployment statistics and later, if the business is successful, leading to the recruitment of others. In this sense entrepreneurship and job creation are closely intertwined since the goal is to increase the number of enterprises. Social security and the private economy of the entrepreneur: A frequently mentioned barrier to becoming self-employed is the economic risk associated with it where less favourable — if any — social security, such as unemployment benefit, is offered.

It is also a concern that if a company is established as a sole proprietorship, the private assets of the entrepreneur are often mixed with the assets of the enterprise. This can have far-reaching consequences. In Belgium there are ongoing discussions on measures which could protect private assets should the entrepreneur go bankrupt, for instance, by establishing a separate legal entity for such enterprises.

In the Czech Republic, growing unemployment due to the economic crisis has led to the creation of favourable schemes for the self-employed, including tax breaks and schemes to cover social security and health insurance benefits. However, since some employees are forced into self-employment while still working for their former employer, it can be the employer who benefits from this system while the former employee is burdened with extra administrative work and personal economic risk.

A similar debate is taking place in Estonia, Italy, Lithuania and Luxembourg. In Hungary, The Netherlands and Romania the debate is about undeclared work and measures that can be taken to regulate the so-called black market. General discussions along these lines are taking place in Greece and Hungary. In other countries the administrative discussion focuses on: General business conditions are also raised as a policy issue in Cyprus and Malta by highlighting unfair competition.

It is reported that in Cyprus regulations restricting where a business can be located or its opening hours can also be a challenge for new enterprises. In addition to promoting entrepreneurial spirit, this discussion also plays a part in discussions about better integration of specific groups into the labour market.

Other target groups are also part of the discussion. An example is Cyprus where self-employment for persons with disabilities has been introduced into the debate. Austria and Poland have discussed educational policies in connection with the fact that entrepreneurs often cannot afford to participate in further education and training in the context of lifelong learning. Consequently, their need for training to improve business skills and competences is not met.

In addition, funded training programmes typically target employees, not entrepreneurs. In other countries, there are debates about the introduction of business education and entrepreneurial training in education systems at different levels. In the Czech Republic, Denmark, Estonia, Greece, Ireland, Poland, Portugal and Sweden, the policy focus is on primary and lower secondary education to encourage entrepreneurial skills and culture in young people.

Some studies, such as the ones undertaken by the Danish Technological Institute, show that the impact of such measures tends to be poor. In other countries the primary focus is on counselling in combination with the education and training of the entrepreneurs themselves.

The aim is to encourage the establishment and survival of new enterprises, as in Denmark, Estonia, Ireland and Malta. Attempts have been made in several countries, such as Austria, Cyprus, Denmark, Ireland, Luxembourg and Norway, to link the entrepreneurial debate with innovation, as many innovative ideas originate with entrepreneurs and could contribute to a more competitive business environment.

However, in some countries innovation has been introduced into the debate with little success and has not become a part of public debate as, for instance, in Cyprus, or, as in Austria, where entrepreneurship has not been linked with innovation programmes. They are not subject to VAT and do not have to pay trade tax for three years.

If the employee has been employed for at least two years with the same employer, they have the right to ask for part-time working hours or leave of absence, and the employer is obliged to re-employ the employee after his or her leave. In most countries standardised statistics can be found for one-person enterprises and the self-employment. However, business statistics on background information are covered better than data on the economic performance and sustainability of the enterprise and demographic statistics of the entrepreneur except for gender.

For the other four entrepreneurial forms, the coverage of statistical data is poorer with part-time entrepreneurs having the best coverage. Only a few countries offer access to statistical variables concerning business transfer and successions, and in these countries only a limited range of indicators is available. Among the EU countries and Norway, only Denmark has statistical data on all the statistical variables for four of the emerging entrepreneurial forms considered in this survey.

Working hours are missing from three of them, and no data exist on business transfer and successions. A group of seven countries — Austria, France, Italy, Slovakia, Spain, Sweden and the United Kingdom — provides a reasonable coverage of statistical variables on one-person enterprises and self-employment. All other countries have a poorer coverage. The statistical coverage for part-time entrepreneurship is best in Denmark, Sweden and the United Kingdom. When it comes to parallel and serial entrepreneurship, only Denmark and the United Kingdom have a good statistical coverage.

Moreover, when it comes to business transfer and successions, only the United Kingdom and Hungary are able to present reasonable statistical data coverage on this form of entrepreneurship. NACE digit level where data are reported from digit level to countries where this information has not been identified.

However, in most countries there will be access to a breakdown at NACE digit 1 or 2 level, but for one out of two countries it is possible to have access to data at digit 4 level or at an even more detailed level. Regional breakdown covers information from the location of individual enterprises to the regional level overviews, but breakdown at regional level is the most common.

For instance in , as a part of the European Recovery Plan, a special credit facility supported by the European Investment Bank was offered to workers who had lost oror were at risk of losing their jobs, to help them start up their own businesses. Tell us what you think. Leave this field blank.

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