Wednesday 25 April 2018

We may be cowed by recession, but our entrepreneurs are raring to go

Whether out of optimism or necessity, many business people are still branching out on their own -- and reaping the rewards

CONOR Sweeney can remember the moment when he decided to leave corporate finance to strike out on his own.

The 34-year-old was trying to drum up business at BDO Simpson Xavier during the credit crunch when an email came round offering a generous redundancy package.

"I had long had an ambition to do something for myself," he remembers. "I'd been working a lot with owner managers and I liked the way they were in control of their destiny, had the power to do things and the ability to create wealth."

He and his wife discussed it that evening and he applied for the package.

This month, after a year of preparations, the father of two will take part in an iron-man competition in Galway and launch his innovative new business called Acument, which will supply lawyers to companies that need legal advice by the hour, day or month.

Sweeney is almost a poster boy for the kind of entrepreneur coming out of Ireland these days. Hard working, well trained and offering an innovative business service unavailable anywhere else in the country.

Despite the recent setbacks in the economy, the Irish remain among the most entrepreneurial in the world and are more likely to have set up their own business than Americans and the citizens of most other European countries, according to the painstakingly detailed and authoritative Global Entrepreneurship Monitor (GEM) report, which employs scores of academic researchers to look at entrepreneurship across the western world.

This survey, written for a global readership and compiled every two years for the past decade, paints a picture of Ireland both cowed by the recession and raring to go.

An astonishing 8.6pc of the population here have set up a business, on a par with Australia and slightly ahead of the US where 7.7pc of the population fall into this category.

Support for the GEM report comes from a recent survey by Vision Net, which monitors new company formation. Vision Net reported recently that the number of new companies had risen 6pc so far this year compared to the same period last year.

About 8,800 new companies have been registered so far while the number of partnerships and sole trader business names registered so far this year was at 16,728, down 9pc on last year.

Companies in the education, health and medical, agriculture and manufacturing sectors have seen the most start-up activity in Ireland while activity in construction, hospitality and retail sectors is down. The number of start-ups in 2011 compares with 17,300 in total in 2005 and 18,200 in 2000.

The inspiration and motivation for setting up a business are varied but can basically be boiled down to two different reasons: opportunity or necessity, says Paula Fitzsimons, one of the two researchers who compiled the Irish element of the GEM report.

Survey

This year's survey shows almost equal proportions of people setting up a business out of necessity and because they spot an opportunity, she says.

In previous years, the percentage of businesses inspired by perceived opportunities was much higher than those inspired by necessity.

Among those to spot an opportunity (but also a threat to his existing employment) was 42-year-old Dublin engineer Russell Grant, who set up Powergreen with his brother Garrett following the last recession.

They now count soccer club Real Madrid and the Glastonbury rock festival as clients for their innovative products to protect lawns, dispose of green waste and kill moss.

Like Sweeney, Grant is typical of the Irish entrepreneur in many ways. He is male, aged between 35 and 44 and set up his business partly from necessity and partly to exploit a hunch.

Back in the 1990s, the UCD-educated engineer saw demand from his old employer Motorola declining.

Sensing he needed new strings to his bow, he and his brother created a biodegradable stick to help golf courses fix greens damaged by golfers.

Ten years on, Russell and Garrett employ a core group of six people in the Wicklow town of Bray and Dublin suburb of Stillorgan to manufacture an expanded range of products for overseas markets as well as the Irish market.

Pessimism

The GEM survey shows people everywhere are more pessimistic about the chances of setting up a business these days due to the financial crisis -- but the percentage of respondents who think now is a bad time in Ireland is especially large.

Less than a quarter of the working population thinks there are good opportunities to start a business -- half the figure seen during the boom.

Fear of failure is also comparatively higher in Ireland than most other countries although the reasons are not hard to see when so many shops have closed and so many businesses gone bust.

Interestingly, the survey, which has been compiled every two years since the beginning of the last decade, shows that the Irish population appears to have acted as if it anticipated trouble since around 2006.

By 2007, people here were not seeing as many opportunities for entrepreneurship, the year before the recession hit.

Fewer people were setting up businesses a couple of years before the recession started, and a smaller amount of entrepreneurs were running new businesses during the recession. In addition, the percentage of necessity entrepreneurs rose markedly just before and during the recession.

This all suggests that people were not optimistic about prospects for entrepreneurship before the recession, and were possibly more likely to hold on to their jobs, rather than start businesses because they saw an opportunity.

The result is that just 6.8pc of the Irish population were classed as early-stage entrepreneurs last year compared to 7.6pc two years earlier.

New Irish entrepreneurs may be getting a little less common and are operating in one of the world's most depressed economies but they do not lack confidence and show an above-average confidence in their own capabilities.

More than three-quarters expect to become employers and a fifth expect to have 10 or more employees within five years of establishing their business.

This growth aspiration is well ahead of EU and OECD averages of 15pc.

They also appear to be heeding the lessons from the economy as a whole by deploying a laser-like focus on exports.

Powergreen's Grant sells around half of his Irish-made products abroad and most new businesses hope to do the same.

A comparison between early stage and established entrepreneurs shows that early-stage entrepreneurs expect to employ more people, are more focused on export markets, and are more innovative.

Bank dependency

Intriguingly in a week when it finally became clear that the banks won't be lending the €3bn a year demanded by the late Brian Lenihan, the GEM survey suggests that Irish businesses are overly dependent on banks anyway.

Perhaps new entrepreneurs should learn from their foreign counterparts, who are much more likely to tap friends and family for money.

The proportion of the Irish population who are informal investors stands at 3.8pc but this is much lower than the US where it is 6pc and the OECD where the average is 4.7pc.

For all the difficulties of running a business where you are in charge of everything, few seem to regret going it alone.

"I would have absolutely no regrets," says Powergreen's Grant.

Still, he believes that it was fear that drove him and many others to take the plunge.

"If I were in a senior position with a generous pension and all the bits and bobs I probably wouldn't have been open to the opportunity," he muses.

With 450,000 people on the dole, it's a fair bet that many more will follow in his footsteps in the years ahead.

Indo Business

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