Compendium 2.2.2 Self-employment co-operatives

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EQUAL COMPENDIUM ON INCLUSIVE ENTREPRENEURSHIP

big>2.2.2. Hybrid solutions for business support (self-employment co-operatives)</big>

Contents

The challenge

Recent approaches to incubation have started to apply innovative techniques to supporting enterprise in disadvantaged areas, self-employment and social enterprise. Incubation can provide a supportive environment in which enterprise flourishes.

Traditional methods of business support including business incubation often fail to reach members of key target groups that either face disadvantage or are under represented in enterprise. This can lead to low activity rates and social exclusion within these communities. Many potential entrepreneurs find that some of the administration involved in setting up a business is too daunting. They want to start trading in a more controlled environment where they can focus on key aspects of their business such as production and marketing and leave finance to someone else.

EQUAL solutions

EQUAL has tested a range of approaches to supporting early stage businesses. One long-standing approach in high-tech business has been business incubation. Business incubation used to be defined as workspace combined with support:

"A business incubator is usually a property with small workspace units that provides an instructive and supportive environment to entrepreneurs at start-up and during the early stages of the business." [UK Business Incubation]

New approaches recognise that, although all enterprises need to operate from somewhere, it is the other aspects of incubation that can be more important. Incubators provide three main ingredients for growing successful businesses:

  • an entrepreneurial and learning environment
  • ready access to mentors and investors
  • visibility in the marketplace

Increasingly policy-makers are looking to incubation as a technique for supporting particular groups of entrepreneurs that they wish to promote. There is an emerging shift from physical incubation focused on workspace to incubation as a series of activities. The emergence of virtual, remote and flexible working supports this trend.

Business and employment co-operatives

The Egenanställning (Self-Employment) EQUAL project [1] in Uppsala launched its first business and employment co-operative (BEC) in Sweden three years ago, and there are now 10, spread from the north to the south of the country. They have proved a very effective route to integration for immigrants and ex-offenders. In certain cases offenders may pay back their debt to society from their business income. They see their role as simplifying self-employment by providing a range of services that enable the entrepreneur to concentrate on selling to their market. The network gives them a way to set common standards – they use a standard contract of employment – and generate trust in their endeavour. The Swedish approach offers a number of key services:

  • a legal platform for the business
  • liability insurance
  • administration and book-keeping services (such as dealing with invoicing, payroll, VAT, taxes and various kinds of fees)
  • an advantageous network
  • training and supervision in the enterprise
  • the chance to try out business ideas
  • the chance to try and start running a business at one’s own pace, or even part-time.

The oldest BEC in Sweden has been going for seven years. BolagsBolaget [2] is a social enterprise whose name literally means ‘BusinessBusiness’. It has overcome the problem that there was no half-way house between employment and self-employment in Sweden by offering an administrative platform for people who want to run a business, without starting a formal company of their own. Instead they become employees of BolagsBolaget, but operate separate businesses under its umbrella. User-employees effectively rent their employer, and can cancel the arrangement at any time. BolagsBolaget helps to reduce the financial risk facing people starting a new business, and may increase their chances of success by handing administrative and financial matters on their behalf. Such an approach can grow rapidly, and be sustainable. By the end of 2007 there were 250 enterprise employees trading under the BolagsBolaget umbrella. Each company pays 15% of its invoiced revenues as an overhead to BB. They receive the remaining 85% as salary when their client pays the bill. This means that BB has no cash flow problems.

In France, BECs date from 1996, and now number 70, operating in over 100 locations. They have even crossed the border into Belgium. By 2005 the principal federation, Coopérer pour Entreprendre, which was supported by EQUAL, represented some 4,000 people – 2,618 supported entrepreneurs plus 1,138 salaried entrepreneurs (including 60 member entrepreneurs), with a combined annual turnover of €16.5 million. Two-thirds of entrepreneurs start off as unemployed, two-thirds are aged between 30 and 50 and 53% are women.

The largest BEC is Paris-based Coopaname [3], which was set up in 2004 and looks after 300 entrepreneurs with a collective turnover of €1.6m. The example shows how BECs can spin off new branches which stay under the same umbrella. Its headquarters are at the Paris-Est CAE, but it also operates four other branches in different parts of the Ile de France: Paris-Sud, Nanterre/Hauts-de-Seine, Plaine Commune/Seine Saint-Denis and Val-de-Marne. It operates an incubator for collective projects, Estère, and is closely linked with two sector-specific CAEs: Coopératifs! in personal services and Alter-Bâtir in construction. It is also closely inked to Vecteur Activités in Grenoble.

BECs offer a potential entrepreneur the chance to create their business within the sheltered environment of a larger social enterprise. In France they have the advantage that they can start out and keep their unemployed status until they have completed a test trading period and their business is ready for launch. In this phase any revenues to the business can be spent on projects for the business – for example marketing. In the second phase the entrepreneur becomes a salaried employee of the BEC which in return receives 10% of sales revenues. In this phase the ‘salaried entrepreneur’ benefits from training and administrative support. Once established the entrepreneur can either spin out or become a full voting member of the BEC and continue to pay a 10% administration charge.

There is another function that some BECs play. In some industries, regulations make it hard for individuals to trade on their own account. That’s why a growling number of BECs in France specialise in one sector of activity, such as care (where recognition entitles an enterprise to charge a lower rate of VAT), construction (where insurance is obligatory), personal services, or culture and art.

From a desk in the bedroom to hot-desking at the Hub

Until recently there had never been a social enterprise incubator. The Hub [4] has changed all that. The Hub’s business is social innovation. Its core product is flexible membership of inspirational and highly resourced habitats in the world’s major cities for social innovators to work, meet, learn, connect and realise progressive ideas. The Hub is a physical workspace on the fifth floor of a crumbling former industrial building in Islington North London. It runs as a social enterprise and its business model is simple. Flexible desk space is sold again and again and again. The 140 members share about 40 workstations. Each person is on their own use programme, and a rent of £3,000 (€3,800) per year entitles you to about one day a week of being there. Some tenants pay full-time and a few of the originals have a regular desk. Whatever your contract, you don’t have to check in or check out. It works on trust.

Each workstation is equipped with little more than a chair, recycled desk surface, electricity and wifi (wireless internet) access. Phones are available for rent but in this age of the mobile and Skype they are almost redundant. Apart from that there is a kettle, a kitchen and rentable meeting rooms. Heating is from a pellet-burning stove.

The Hub has succeeded in creating a thriving work community of people who might otherwise be trapped in their bedrooms sweating over their idea. Businesses range from the hydrogen car to the NAG – a social enterprise that nags you to use less carbon every month.

Apart from the revenue base of the Hub’s business model, its success derives from active animation. Each day a ‘host’ greets newcomers and regulars and a series of events are held from lunchtime seminars to picnics at weekends. Somehow the hub has succeeded in organising the informal so that emerging entrepreneurs can gain support from their peers. The Hub has succeeded in building a community of micro-enterprises with a social mission. The funky aspects all help – one meeting room is kitted out with a library and mattresses, every day you can bring a piece of fruit and swop it – is complemented by the amazing conversations that users have with each other. Of course you can meet fellow hubbers live or online. As the network grows you will be able to meet those starting up in other world cities as well as at the next desk.

Hubs are spreading. Already there are working hubs in Bristol, Johannesburg, Berlin, Cairo, Sao Paulo and Rotterdam. Hubs are being started in Amsterdam, Brussels, Halifax, Madrid, Mumbai and Tel Aviv/Jaffa. Up to 50 hub proposals are being considered and the concept is also being copied by imitators. A new London branch opens in early 2008 near to the Eurostar terminal at St Pancras.

The next generation of incubators is likely to take the Hub concept further and be heavily reliant on internet social networking tools as a means of providing peer support to emergent entrepreneurs.

Recommendations for mainstreaming policies

Humans are innovative as well as social animals, to paraphrase Aristotle. They innovate best when put in a stimulating environment with other innovators, off whom they can bounce their ideas. Till recently, support for such clustering activities has been focused primarily on high-tech firms with a supposedly high growth potential, and the result has been a generation of science parks. It is now evident that economic competitiveness and growth stems just as much from social as technological innovation, and that the creative industries in particular are of increasing importance.

Business and employment co-operatives, hubs and their ilk can provide a graduated route into self-employment – individual or collective – for the sort of people in society who do not fit easily into the conventional world of work. In particular, by taking care of the administrative side of being in business, they suit the segment of ‘cultural creatives’ – people who want to create their own activity but not necessarily their own enterprise. These are people who don’t want to have to give up everything and work 24 hours a day, but want to share ideas and do something together as a group. According to one American study, cultural creatives make up around 20% of the population. This makes these hybrid incubators the forerunners of a new social movement that is not yet conscious of its importance as a vessel of social change. Some local authorities already support business and employment co-operatives as part of their enterprise promotion effort, and more might consider this option.

Links to EQUAL case studies

Other useful links


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