At the first meeting of the Entrepreneurs' Confidence Panel, run jointly by Director and Delta Economics, the discussion was all about the economic outlook and how it impacts small businesses
It's reassuring to know that not even the thought of a pending recession can dampen the spirits of an entrepreneur. At the first meeting of the Entrepreneurs' Confidence Panel, run jointly by Director and Delta Economics—and chaired by Rebecca Harding from Delta Economics—the general consensus was that the glass was half full. But then what would you expect from a group of people whose livelihood is created by exploiting the cracks in the system?
Many of the entrepreneurs felt more confident than they had done 18 months before, when the debate on whether or not there was going to be a recession was nowhere on the horizon. While commentators seemed happy to perpetuate the myth of eternal boom, the several panellists admitted to feeling less euphoric at the time. Entrepreneurs may by nature be optimistic, but if everyone around them is optimistic without cause, it apparently makes them uneasy.
Now that we are in tougher times, the reaction of our panel was quite sanguine. "It's an opportunity to be exploited, isn't it?" argued one. "After all, isn't that what we do? We assess the market, see the reality and then look for opportunities."
Even falling house prices did not appear to be unduly of concern for two panellists both in businesses that were directly dependent on the housing market. The top end of the housing market, especially in London, remains strong because of the buoyant demand from overseas residents.
There was some strong argument around the table about the changes to capital gains tax. For some, the flat rate was not going to make much of a difference; while others saw it as a signal of a disastrous collapse in the market for angel finance, but more importantly as a sign of the failure by government to understand the needs of the entrepreneurial sector in the earliest stages of growth.
But while everyone at the meeting felt that the economy was in for rough times in the next few months, they were all reasonably optimistic about the short-term prospects for their own businesses. While they felt that conditions might get tighter, the main area where this would have an impact would be on payment terms and invoice chasing. The entrepreneurs were all concerned that payments were made on time simply because of the reluctance of banks to provide bridging facilities to cover any shortfall. For larger businesses this was less of a problem.
One panellist even managed to find something positive in the tightening market conditions. "Because everyone is getting squeezed, we've found that people expect us to chase harder for payments. So in fact we're getting tougher on late payments, chasing payment more aggressively and we've actually managed to reduce our debtor days as a result. So, we're in a better position than we were."
The discussion also covered start-ups and one member of the panel observed that he had seen more business taking longer to get started, asking for less external investment and opting instead for more "boot-strapping" when it came to the start-up. "Put simply, people starting businesses are keeping their day jobs for the time being. They are taking longer to get started, but without the same finance available they are also having to be more creative. In the long term this is good for the businesses."
From an investment perspective, a venture capital expert at the meeting pointed out that there has been a huge switch from VCs away from the start-up sector towards more established, later-stage investments, where there is a solid trading track record in place. Investment for start-ups was much harder to find. Although often hard to find, there was anecdotal evidence that more individual investors were keen to find opportunities to provide start-ups with finance.
This overall feeling around the table was that the current financial and economic problems had seemingly come from nowhere. "A year ago there were no sign of clouds and now, suddenly, we're in the middle of thunderstorm. How people react to that is partly down to how close to the cliff edge they are."
Perhaps some of this confusion over levels of confidence can be attributed to huge variations between sectors. While business-to-business services and construction and engineering appeared to be doing quite well, some consumer-facing businesses were finding things harder.
Perhaps most surprising of all was the level of support for government around the table. While there were complaints about some taxation and regulation changes, one panellist got a good reception from the meeting for highlighting that the view across Europe is that the UK is still the best place to start a business. Having said that, there was some scepticism about recent activity in the government. One member of the panel had been to a breakfast at 11 Downing Street towards the end of Gordon Brown's time as Chancellor and again more recently. He said there was a marked difference between the two, with the second meeting being dominated by people wanting to give the Chancellor "an ear bashing".
The general consensus was that while good government should be about "doing the simple things, well", the current government seemed intent on doing complicated things badly. "As the pace of change in business speeds up, the pace of government seems to slow down. They simply can't keep up with what's happening in business. They end up as an irrelevance," said one panel member.
Where there was a big concern around the table for the coming six months it focused on the potentially damaging impact of the oil price. Even here, the opportunistic side of the entrepreneurs gathered came to the fore. As the price of oil continues to climb, many round the table saw huge opportunities to exploit new technologies in related fields including non-oil based fuels and energy sources.
All in all the mood around the table is best summed up as cautiously optimistic. As one panellist commented: "The life of the entrepreneur is not for the fainthearted. If you start your own business because you think it will be fun and exciting, you'd better keep your day job. But the challenge of finding opportunities in a tougher market is exactly what entrepreneurs are all about."
Posted 2 June 2008 : Director.co.uk
