CREATION OF ENTERPRISE

The benefits of self-employemnt for both the economy and the entrepreneur are are extremely rewarding, Irish Entrepreneur reveals.

Small businesses make up 98% of all business in Northern Ireland and 97% of all businesses operating in the Republic. According to the Small Business Forum Report published in May 2006, there are approximately a quarter of a million small businesses in Ireland employing 777,000 people which is more than half of the total private sector, nonagricultural workforce.

In Northern Ireland there are approximately 85,000 businesses who employ a sizeable number of the people in the region. These statistics say a lot about the state of the economy both north and south of the border and indicate that the creation of enterprise through self-employment and competitive small firms are vital for the well-being of the island.

Previous to the 2006 Small Business Forum Report, which sets out a number of key recommendations to improve the current environment for conducting small business in Ireland, the last major report on the small business sector was issued by the Small Business Task Force in 1994. Since then selfemployment and the creation of businesses has grown hugely, according to Patricia Callan, Director, Small Firms Association.

“In 1994 when the last Small Business Task Force report came out there was 160,000 businesses produced then, so you’ve gone up by 100,000 businesses in that space of time. That’s very very significant. They are contributing significantly in terms of competitiveness and output,” says the director.

COMPETING INTERNATIONALY

Recent years have seen multinational companies setting up in towns and cities all across Ireland and penetrating many sectors of the economy. International chains in retailing, technology, and entertainment along with many others pose great competition to indigenous companies. This competition is necessary and spurs on indigenous companies to develop, innovate, and internationalise their services in order to compete and survive. Pat Maher, Executive Director with Enterprise Ireland, believes it is important to keep encouraging entrepreneurship for the creation of enterprise in Ireland. He also explains that companies need to be continuously establishing to compete and survive alongside multinationals settling in Ireland, and for the sake of a balanced economy.

“It’s a hugely important part of the economy. We can’t just rely on foreign direct investment and existing businesses. We need new growth businesses all the time because competition is hitting some of the older businesses and we need new ones to take their place. We need a balanced economy, which includes big companies, small companies, foreign companies and local companies,” says Maher. Callan also agrees that a balance between multinationals and indigenous companies is crucial to the well-being of the Irish economy. “You need a balance in every economy between the multinational sector and indigenous businesses so that rather than your indigenous businesses being purely in domestic services; ultimately our economic well-being as a country depends on how we can sell our goods and products abroad,” explains Callan.

FUELING ECONOMIC GROWTH

Forfás publication ‘Enterprise 2010 - New Strategy for the Promotion of Enterprise in Ireland in the 21st Century’ reinforces the point that the enterprise sector in Ireland fuels economic growth, and will continue to do so into the future. The publication says that, “in the period to 2010 the enterprise sector will continue to be the main engine of economic growth and a source of wellpaid and stable employment which will underlie the achievement of overall national economic and social objectives.”

In the same publication, Forfás envisages an enterprise sector which encompasses a strong Irish-owned business sector, including a significant number of firms of international scale operating successfully in high-growth, high-productivity, knowledge-intensive sectors. Callan says that companies need to look more at international markets in the future which would help build a stronger enterprise sector. “We need to work on internationalising more of our businesses and making sure they can compete internationally rather than just focusing on Ireland as their market,” she says.

“One of the real problems we have in Ireland is converting people who are self-employed into real entrepreneurs who grow their businesses rather than being just lifestyle type people that are just happy pottering about by themselves. Maybe we should be targeting those people and encouraging them to grow,” continued the director.

The level of entrepreneurship in Ireland remains very high in European standards and many companies today have the potential to grow significantly to succeed in penetrating international markets. However, a lot of Irish start-ups are one-man operations so it’s important to encourage these companies to expand and challenge international markets. Callan says that companies should expand because otherwise it will be hard to keep up with competitors.

“When people have their business up and running for one or two years they need to take time out to go back and look at things like putting together a strategic plan, sales and marketing, seeing how can they develop their own personal skills and getting the skills to grow the business. It’s pretty hard to remain the same size as you are because your competitor will always be getting bigger and better,” explains Callan.

LOWERING UNEMPLOYMENT

It is not only entrepreneurs who benefit from the risks they take because when they set up their enterprise they are creating employment for many and keeping the economy moving forward. The 2006 Forfás Annual Employment Survey indicates that total full-time employment among Irish-owned companies amounted to 151,710 in 2006, an increase of 3,014 on the previous year. Employment among Irish-owned companies is 20,558 or 15.7% higher than it was in 1997. The publication also shows that, in foreign-owned companies, total full-time employment amounted to 153,352 in 2006, an increase of 2,913 on the previous year. Employment among foreign-owned companies has increased by 22,731 or 17.4% since 1997. These statistics indicate that Irish enterprises provide a huge amount of full-time employment, only a fraction smaller than employment provided by foreign-owned companies.

“Self-employment and in particular indigenous and local start ups are going to be hugely important in the future because we have to build an Irish industry as opposed to always looking abroad to bring in employment and jobs,” says Maher. The 2006 Report of the Small Business Forum says that, “since 1995 the small business sector has flourished: the number of small businesses in Ireland has grown by more than 50%, and employment in small businesses has grown by approximately 79%.”

BENEFITING THE ECONOMY

Self-employment and the consequent establishment of enterprise benefits the economy in many ways. Some benefits include developing a strong export base, driving productivity growth, positioning the Irish economy as a knowledge creator and innovator, attracting foreign investment, enhancing social and enterprise infrastructure and local development. The performance of these enterprises is therefore extremely valuable to the quality and standard of Irish life.

According to the 2006 Report of the Small Business Forum, small businesses are important for a number of reasons. It says they “provide regionally distributed employment around the country, deliver a huge range of local services, and contribute to the economic, social and cultural life of the entire population.” Along with this it also says they are important because they account for over 70% of gross value added (GVA) in construction, over 40% of GVA in services, and 34% of GVA in indigenous manufacturing.

On top of these benefits, Maher believes that, “Ireland is now an entrepreneurial society and that’s part of what makes Ireland attractive to both inward investors and skilled people coming into the country.”

OVERCOMING BARRIERS

There are numerous barriers that deter people from becoming self-employed. Securing financing, long hours, fear of risk taking, insufficient knowledge and confidence are some of the stumbling blocks. Fear of failure is another huge deterrent. However, there has been a significant change in societal attitude over the last decade where entrepreneurship and risk-taking has become more acceptable. This is partly due to economic growth providing many opportunities in Ireland today and different avenues for people to pursue. Despite this, many people are still afraid to leave their job and set up shop on their own. The fear of failure stops them from leaving secure employment and a steady wage to enter a realm of uncertainty.

Solutions to some of these barriers could be provided if, for example, entrepreneurship was more integrated in the educational system and aspiring entrepreneurs were coached about the barriers in advance and how to overcome them. However, the most renowned Irish entrepreneurs will all say that they have failed in the past but tried again until they succeeded.

Director of the Small Firms Association reiterates this point when she comments that, “all the best role models in terms of entrepreneurs that you hear speak all talk about how, at one point or another, they were madly in debt and everything was going wrong so they are great inspiration for existing businesses. The best business people are people who have experienced failure because that’s the only way you can learn.”