TheBeginner.eu - Business

Getting Down to Business

Thu, 07 Apr 2011

To encourage growth, the EU needs more people to start their own business, but to do so it must first change the opinions regarding entrepreneurship.

Finally some good news in the crisis - Europe’s SME’s have faired relatively well. The number of new businesses has been growing steadily for nearly a decade and even though the crisis hit small business especially hard, their growth rate bounced back surprisingly quickly, already nearing its previously hit highest point. When considering that fixed employment dropped by two percent on average, personal business management has not been the worst position to hold for the duration of the crisis. Self-employment proved to be more flexible and resilient than standard employment.

Currently, 14,3% of the active EU population is self-employed, approximately one percent less if the data were to exclude the agricultural sector. There are, however, variations present between member states. Greece and Italy, for instance, have a higher number of entrepreneurs, while the Netherlands have fewer. The entrepreneurial profiles also differ greatly from country to country. In Germany, most business owners are highly educated and over half of them create jobs for others, while in the UK and Greece less than 30% hire staff.

Though the existing statistics are not bad, if the EU would like to stimulate genuine growth, more entrepreneurship is indispensable. Too few Europeans with entrepreneurial talents even consider starting up a business. When surveyed, only 45% of EU citizens can imagine themselves being self-employed, an immense difference when compared to countries like China where 71% of the polled population has some entrepreneurial ambition.

To encourage development of the entrepreneurial sector, the EU’s first priority must be the associations individuals make with self-employment. According to the Eurobarometer, citizens find that the social status of business owners is too low for them to be willing to risk engaging in an independent venture. While many Europeans acknowledge that entrepreneurs create jobs and wealth, over half also feel that entrepreneurs are greedy and primarily consider their own financial security. The crisis has cemented such ideas and decreased the popularity of entrepreneurship even further. Unsurprisingly this gives slightly less than half of European a positive attitude towards business owners, standing in stark contrast to the over 80% noted in the United States. Perceived as innovators in the US, in Europe entrepreneurs are instead viewed as exploiting other people’s work.

The views are confirmed in an old stereotype differentiating between American and European perspectives. When a limousine pulls up and a businessman emerges, a European will think him a show off, but an American will already be trying to come up with a way to become just as rich. As part of the American dream, Americans are said to have entrepreneurship in their blood and Europeans are thought to be more comfortable with salaried employment.

The opinion that entrepreneurs are making money by exploiting others is also counterbalanced by an almost equally popular belief that they are too poor. Many EU citizens shun the risks associated with starting up a business in favour of a fixed income, stable employment and a work/life balance. Although employment in any form could be unreliable, the concerns associated are legitimate. According to Eurofound, 18% of the self-employed are classified as poor, versus 6 % of employees. Further, they are often under more stress, feel they benefit less from social security, and have trouble balancing family and work. Small business owners also complain at a lack of affordable training opportunities and 13 % of them report feeling lonely or left out of society. Yet despite all of the negative factors associated with running a business, a lack of credit remains the number one hindering those who may want to engage in entrepreneurship.

The existing hurdles from the point of view of the EU can be fixed relatively easily with a revamping of entrepreneurship’s public image. Governments have begun doing so by investing more in providing low cost training for small business owners, although these are still too focused on certain sectors and not universally available. The EU has also introduced the Small Business Act (SBA), which put forth several policies to facilitate access to capital and encourage the member states to reduce the administrative burden. As is often the case with EU-wide initiatives, a recent SBA review admits that although much progress has been made, not all member states have complied with the policies just yet.

Despite the slow pace of development thus far, investing in SME growth has already paid off.  Today, more SME’s are starting in Europe than in the US.  Improving the business environment will undoubtedly attract more people to entrepreneurship, especially with an unstable job market, and more SME’s might change Europeans’ opinions of business owners. With the right support from governments and the EU, entrepreneurship might become a viable option for young people choosing their career path. Of course, not everyone should become an entrepreneur, nor does everyone have the skills to do so, but SME’s are the motor of growth and they deserve a higher status in European society than they currently hold.

by Goele De Cort

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