Compendium 2.4.1 Post start-up

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EQUAL COMPENDIUM ON INCLUSIVE ENTREPRENEURSHIP

Post start-up support

Contents

The challenge

Business support systems often run the risk of being too specialised or too general, with people struggling to access a chain of appropriate support to take them from the start-up to the consolidation and growth of a new enterprise. EQUAL partnerships have tested innovative ways of linking or ‘braiding’ support services from different providers to provide full and coherent business support itineraries to vulnerable groups.

Small businesses across Europe complain that business support services are too disjointed to respond to their real needs. In particular, services are often inappropriate and unhelpful for disadvantaged groups.

Disadvantaged groups and areas tend to rely on a circuit made up of different public and semi-public agencies working at the boundaries between social security, employment and enterprise policy. Here, one often finds overlapping and confusing sources of business support for small enterprises. People starting or developing small businesses typically find themselves going from one office to another, filling out similar forms and answering similar questions to access support.

Furthermore, business support staff is seldom trained in how to help disadvantaged groups specifically. This has led to the emergence of a large number of specific support services for groups such as migrants and women. These separated agencies have often been the most innovative in supporting enterprise in disadvantaged areas or amongst disadvantaged groups. However, they can struggle to deliver good spatial and temporal coverage; many projects are linked to specific funding streams that only cover parts of a sub-region or expire after a few years.

These problems contribute to lower rates of self-employment and business creation among disadvantaged groups and areas and particular risks of business failure when enterprises are started. Broadly speaking, the main challenge is how to offer services that are adapted to the needs of specific groups, whilst offering expert business advice in a coherent package capable of effectively accompanying disadvantaged groups along an itinerary towards independent and sustainable income generating activities.

How EQUAL has approached the issue – examples

Defining support itineraries

One of the most important messages from the experiences of business support initiatives in many European countries over recent years has been that supporting business start-ups is not the same thing as supporting successful businesses. Too many initiatives have helped create business, only for those businesses to fail within the first three years.

A first reason for failure may simply be that a business idea is unsustainable. However, an inadequate business support infrastructure is behind many business failures. Business support services are often targeted at one or other aspect of business development, such as designing a business plan, obtaining start-up funding or training. These services can be essential. However, once people have benefited from them they can emerge on the other side facing high risks of failure because there is no one waiting to continue the support.

The development of business support itineraries recognises that there are various stages to the development of a successful, sustainable business and that support is needed at each of them. The German Start-up Association developed a four-stage business development model based on experiences from EQUAL projects like Verbund Enterprise. The four stages are: profiling; planning; start-up; and consolidation.

Each stage has a fixed duration (from 4 weeks to 5 years) and different services are provided at each relevant stage – including counselling, training, mentoring and support in accessing micro-credit – to help the entrepreneur acquire the personal competences, skills and resources necessary for success.

‘Profiling’ is a practice which seeks to provide an initial assessment of areas of weakness and the overall chances of success of a potential start-up. It is used to avoid creating more business failures. However, some people feel that profiling is counter-productive to the development of innovative businesses that ‘break the mould’ and the more disadvantaged enterprises.

One-stop shops

Support itineraries are a vital theoretical tool. However, their implementation is not always self-evident. One of the major problems is that a multitude of business support providers may be competing for the attention of entrepreneurs. This can generate confusion for the entrepreneur, duplication of efforts and also lead to entrepreneurs ‘falling into gaps’ between different service providers.

A well-known method for improving the coherence of business support service delivery is the one-stop shop. It is designed to avoid the problem of people being sent round different offices to access different types of support, with repetitive and confusing processes that hamper successful business development. One-stop shops offer a single entry point to access all the information and services required.

The EXZEPT partnership established a one-stop shop in Offenbach, Germany. Such models have proved successful at reducing the burden on entrepreneurs to identify and access the services they need. However, they have also proved very expensive to run and have revealed certain limitations. In particular, it has proved difficult if not impossible to provide the full wealth and diversity of business support services from one location and one-stop shops are not so useful for people who feel a long way from such mainstream services.

The EXZEPT project looked to overcome these difficulties by developing a linked network of support providers each of which specialises in what it does best. The idea is to build “acceptance” of and cater for the specific needs of disadvantaged groups, particularly in terms of finance and business support. To cover the different needs, it has developed active co-operation with the German Microfinance Institute (DMI) and the German quality circle for business support.

Facilitating the entry of disadvantaged groups into mainstream support services

The term ‘braided’ support services has recently been used to describe a model blending specialised and mainstream services. In this model, specialised services concentrate on the initial phases of business development with vulnerable and disadvantaged groups. This includes key work on building confidence and trust so that new businesses can develop the capacity to access mainstream services successfully.

Based on a predefined division of labour, both specialist and mainstream providers, such as banks, provide different parts of the support package at each stage of the business development itinerary. Systems are needed to record the progress made by the entrepreneurs along their itinerary in a way that is recognised by banks and other agencies. This can significantly improve the survival rates of new businesses and reduce the business support costs at the same time.

The Reflex project in the UK provided business training and human resources support to a network of frontline ethnic minority community organisations to harness the talents and potential of people that lack opportunity and create a bridge between the communities they represent and mainstream business support, finance and training. The project trained 12 people from ethnic minority organisations to achieve professional qualifications as business advisers.

The Welsh Development Agency created a network of specialist outreach services to feed into mainstream business support. It developed a protocol of agreement which clearly defines the tasks of six specialist NGOs in providing first-stage business advice to hard-to-reach groups under its Potentia Programme. Beyond this first-stage support, the project carried out highly significant work in facilitating access to finance by developing an electronically supported tool for fast-track loan applications. Between 2001 and 2003, Potentia provided support to 2,300 people resulting in the creation of 700 new businesses and generating 1,400 new jobs.

Promoting specialist awareness amongst mainstream service providers

As well as helping disadvantage entrepreneurs to access mainstream services, certain EQUAL projects have worked to bring the mainstream services closer to the disadvantaged groups. Without seeking to replace the specific role of specialist organisations on the ground, projects have sought to ensure that there is not a gaping hole in between these specialist organisations building initial capacity and the mainstream services that can help take an enterprise to successful sustainability.

The Accelerating Women's Enterprise (AWE) partnership brings together a number of leading agencies operating in women's enterprise development in England. They have tested approaches to adapting and modernising mainstream business support to meet the needs of excluded groups of women. AWE has researched the major barriers facing women in accessing entrepreneurship and produced guidelines for mainstream services to overcome these. The partnership developed a set of 12 best practice standards for business advice to women and tested business support organisations against these criteria. On the basis of the results, ‘Flagship Member’ status was awarded to six out of 60 organisations to recognise their efforts and encourage those developing national policy and regional delivery partners to improve.

The Cyfenter partnership in Wales used research to provide the evidence base for diversity training and briefing sessions to around 150 people involved in the delivery of the Welsh Entrepreneurship Action Plan. This led to the Institute of Business Advisers approving a Diversity Training Programme comprising modules on: disability; race; language; lone parents and women; young people; and the over-50s. The training also helped to improve the division of labour between outreach and mainstream support services, defining protocols on where mainstream services should take over from specialist services on the ground.

Passports

The development of one-stop shops, support itineraries and braided support systems can make a big difference in providing access for vulnerable groups to appropriate support services. However, even where good programmes exist and different operators are signed up to the principle of improved coherence and complementarities of efforts, there is often continued duplication between support agencies. Entrepreneurs can still find themselves filling out similar forms and going through similar checks and procedures at different stages of the support process, from a local community organisation to a bank.

The Verbund Enterprise EQUAL project developed a particularly effective model of partnership. The various support actions were implemented by different ‘operational’ partners specialising in different aspects of enterprise support. However, one of the major problems of this approach remained to ensure quality and consistency along the entire pathway and between the different service providers to avoid duplication and inefficient efforts.

To meet this need, Verbund Enterprise designed a system of ‘enterprise passports’ which provide a clear and transparent road map of the progress made by the entrepreneur at each stage of the itinerary. Each partner accepts the passport as an authentic record of the work done and achievements made so far and therefore do not need to carry out a fresh examination every time. The Berlin Volksbank has accepted the enterprise passport as the central instrument to evaluate the performance of young business starters when they apply for a micro-loan.

Recommendations for mainstreaming policies

Many business support services are too disjointed or inappropriate to respond to the needs of disadvantaged groups. Overlapping and confusing business services can act as a barrier to successful support.

Often expert community workers lack business expertise and conversely business support workers lack awareness of the particular situation of disadvantaged groups.

Business support that limits itself to the start-up phase has been shown likely to generate businesses that have a high failure rate. The development of support itineraries aims to ensure business support along the whole pathway from conception to consolidation. EQUAL projects have broken business development down into stages with related support activities for each stage. One-stop shops have proved an interesting method for providing a single entry point for business support services. However, it is not generally possible to provide the wealth of possible business support services under one roof, and one-stop shops have not proved as dynamic and innovative in reaching vulnerable groups in disadvantaged locations.

‘Braided’ support systems can help to provide an appropriate mix of specialised and mainstream support services through to business consolidation:

  • Specialist organisations – such as community-based ethnic minority associations – can be trained in providing the best possible bridge to mainstream services, including banks;
  • Training can also be used to improve the awareness of mainstream services to the particular situation and potential of disadvantaged groups.

Some EQUAL projects have evaluated the approach of mainstream services to vulnerable groups to raise the profile of these issues and encourage improvements.

Passports are an innovative tool to ensure coherence of efforts to support entrepreneurs: they allow a person’s history to be recorded in a way that is recognisable to the range of service providers from local associations to private banks.

Links to EQUAL case studies


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