Small Business Survey 2012 Focus on New Businesses May 2013

Survey details Small Business Survey 2012 –5,723 CATI interviews with SME business owner/managers, June to September 2012 –Sampled and weighted to 2012 BPE –Main report is based on SME employers only Themed analyses –No employees (report/presentation) –Wales, Northern Ireland (reports) –Exporting (report) –Social enterprises (report) –Credit risk analysis (report) –Family businesses (report/presentation) –Business support (presentation) –Access to finance (presentation) –Growth (report/presentation) –New businesses (presentation) –Mentors (presentation) –Manufacturing (report) 2

Presentation outline Profile of new businesses Business performance Growth Business capability Access to finance Obstacles to business success Business support Working for the public sector 3

4 Profile of new businesses

5 Definition of a new business Based on one question: A6) How many years has this firm been trading? This includes under all ownerships and all legal statuses –If trading up to three years, they were classified as a new business 11% of SME employers were new businesses; 7% in SBS % were aged up to one year; as in SBS 2010

6 How did new businesses differ from established businesses in terms of profile? They were smaller businesses: –Micros (1-9): 94%; 82% established businesses –Small (10-49): 6%; 16% –Medium (50-249): 6%; 3% They were more likely to be single site organisations (90%; 87% of established businesses) They were more likely to be private limited companies (58%; 51%), to be sole proprietorships (31%; 26%) and less likely to be a partnership (4%; 13%) They were less likely to be family businesses (52%; 63%) They were less likely to have registered for VAT (69%; 79%) They were less likely to have made a profit or surplus in the last financial year (61%; 73%)

7 Sectors with the highest concentration of business start ups Base = all SME employers

8 Leadership New businesses were more likely to have just one partner/director (57%; 44% of established businesses) Although less likely to have any female partners/directors; they were more likely to be women-led (27%; 18%) They were more likely to be MEG-led (11%; 7%)

Starting a business: reasons/motivations 9 Unweighted base (where involved with decision to start up business) = 236 Main motives re: business opportunity: Greater independence/own boss (29%) Increase personal income/more money (29%) Passion/challenge (27%) Main reasons re: no better choices: Found no job suiting skills (27%) Took redundancy (15%) Poor working conditions in previous job (15%)

10 What would have made it easier to start the business? Unweighted base (where involved with decision to start up business) = 236

11 Business performance

Numbers employed compared to 12 months ago By size, new businesses were more likely to have increased their workforce than established businesses in each size band; –Micro (33%; 15% established) –Small (50%; 26%) –Medium (48%; 37%) 12 Base = all SME employers trading for at least one year (bases shown in brackets). B1/B2

Numbers expect to employ in 12 months time Micro new businesses were significantly more likely to expect to increase their workforce than micro established businesses; –Micro (39%; 16% established) Small and medium- sized new businesses were also more likely to expect workforce growth –Small (36%; 28%) –Medium (61%; 33%) 13 Base = all SME employers (bases shown in brackets). B5/B6

Turnover now compared to 12 months ago Micro new businesses were more likely to have increased their turnover than micro established businesses; –Micro (48%; 24% established) Also differences (but not statistically significant) amongst small and medium- sized businesses –Small (57%; 37%) –Medium (81%; 50%) 14 Base = all SME employers trading for at least one year (bases shown in brackets). P2

Expectations of turnover in 12 months’ time Again, micro new businesses were particularly more likely to expect to increase their turnover than micro established businesses; –Micro (68%; 30% established) Also more positive amongst new businesses that were small and medium (but, again, not statistically significant); –Small (65%; 43%) –Medium (81%; 54%) 15 Base = all SME employers (bases shown in brackets). P7

16 Growth

Whether aim to grow business over the next 3 years Sectors in which business start ups were particularly aiming for growth include: –Information/ communications (100%) –Manufacturing (98%) –Other services (97%) 17 Base = all SME employers (bases shown in brackets). F1

18 Planned activities that may lead to growth Base = all SME employers. F3

19 Business capability

20 Business strengths Base = all SME employers. F4

21 Innovation: Proportion that have introduced new or significantly improved products/services in the last 12 months Base = all SME employers [half sample only] (bases shown in brackets). J1/J2 Higher than average in the information/ communications sector (72%)

22 Innovation: Proportion that have introduced new or significantly improved processes in the last 12 months Base = all SME employers [half sample only] (bases shown in brackets). J1/J2 Again, higher than average in the information/ communications sector (59%)

23 Exporting Lower levels of exporting amongst new businesses: –15% sold goods or services or licensed products outside of the UK; 19% of established businesses Although: –Greater than average in information/communications (48%) and manufacturing (40%) 5% planned to export (3% of established businesses) –Main reason for not exporting was not having a product/service suitable (66% of non-exporters)

24 Training Similar levels of training amongst new businesses: –58% trained at all in the last 12 months; 60% of established businesses –Greater than average in administration services (78%) and other services (84%) 29% trained managers (32% of established businesses) –Main reason for not training managers was not considering it a priority (54% of those not training managers; 58% of established businesses)

25 Technology New businesses as likely as established businesses to have access to broadband –90% had access; 91% of established businesses New businesses were more likely than established businesses to seek general business advice (66%; 58%) and advice on regulation (68%; 63%) online 74% of new businesses had their own website (70% of established businesses)

26 Environment New businesses were less likely to have taken steps to reduce their environmental impact –55% had taken steps; 68% of established businesses –Increased to 82% of small new businesses (77% of small established businesses) –Higher than average in the construction sector (75%)

27 Access to finance

28 Whether sought finance in the last 12 months Base = all SME employers (bases shown in brackets). H4 Higher than average in the information/ communications sector (48%)

29 Finance sought New businesses and established businesses sought finance for similar reasons (mainly working capital, cash flow, 59%; 55%) New businesses were more likely to have sought a bank loan (58%; 46% of established businesses), but otherwise were similar to established businesses in this respect They were more likely to experience difficulties (58%; 45%) because of poor (18%; 7% of established businesses) or no credit history (19%; 2%)

30 Eventual outcome of application for finance

31 Relationship with the bank Base = all SME employers (bases shown in brackets). H1 51% of businesses aged up to 3 years had a good relationship with their bank; 62% of businesses aged over 3 years

32 Obstacles to business success

79% of new businesses mentioned the economy as an obstacle (78% of established businesses) More of an issue for new businesses were: –Taxation, VAT, PAYE, NI, business rates (63%; 56%) –Cash flow (59%; 49%) –Obtaining finance (55%; 36%) 33 Base = all SME employers (bases shown in brackets). G2 Main obstacles cited :

34 Business support

35 Awareness of public sector organisations offering business support Base = all SME employers (bases shown in brackets). K1

36 Whether sought information or advice in the last 12 months Base = all SME employers (bases shown in brackets). K2 Higher than average in Transport, retail and distribution sector (53%)

37 Information and advice sought Advice Both new businesses and established businesses are most likely to seek advice on business growth (37%; 28%) Followed by financial advice for general running of the business (25%; 23%) Information Financial information for general running of the business predominates (30%; 27%) Followed by tax/national insurance law and payments for new businesses (17%) and employment law/redundancies for established businesses (15%) England and Wales only

38 Sources of information and advice Advice Accountants predominate for both new businesses and established businesses (46%; 38%) Followed by consultants/business advisers for both new and established businesses (both 15%) Information Accountants also predominate (29%; 35%) Followed by friends/family for new businesses (16%) and banks for established businesses (10%) England and Wales only

39 Use of business mentors Base = all SME employers (bases shown in brackets). K15 38% of new businesses that had not used a mentor would be interested in doing so; 24% of established businesses

40 Types of business mentor used Unweighted base = where used a business mentor (bases shown in brackets). K17

41 Working for the public sector

Whether expressed an interest in, or bid for, public sector contracts 13% of new businesses have expressed and interest in, or bid for, any contract advertised by the public sector (15% of established businesses) 21% have actually done some business for the public sector (27% of established businesses), increasing to 32% of new businesses in the business services sector 42 Base = all SME employers (bases shown in brackets). L2 Have actually done any business for the public sector in the last 12 months:

Nature of work for the public sector 48% of new businesses that have worked for the public sector did so as prime contractor (55% of established businesses) They are most likely to have worked for local authorities (48%; 53% of established businesses), followed by the Health Service (17% for both new and established businesses) Awareness and use of websites advertising public sector tender opportunities: –Scotland: 43% aware of Public Contracts Scotland website; 64% of these have used it –Northern Ireland: 13% aware of the e-sourcing NI website; 16% of these have used it –Wales: 45% aware of Sell2Wales website; 45% of these have used it 43

Thank you For further information contact: June Wiseman, Steve Lomax, Emma Parry BMG Research Ltd Tel: