As tycoon targets deprived areas...

Mone inquiry? Here’s what start-ups really need

Terry MurdenMichelle Mone is about to embark on a fact-finding tour of Britain to hear from deprived communities about why they cannot, or will not start a business.

So what will they tell her?

Some of it should be obvious: many do not own the assets required to provide collateral for the banks. They have few contacts with those in power or influence. They lack essential education in financial matters.

They may also have an aversion to business and enterprise. They have seen and heard about the greedy bankers, the rip-off merchants and other ne’er do wells which puts them off.

But let’s not underestimate the guile and instinct of those on the housing schemes where many a trade is done and trader created. Sir Alan Sugar, Mone’s former “boss” on the BBC Show The Apprentice, was himself a working class boy. Sir Tom Hunter, another of Ms Mone’s mentors, famously began his business life by selling trainers from the back of a van.

Ms Mone says instilling confidence is the main driver. So what instils confidence? It has to be a system in which the would-be businessman or woman does not feel intimidated, confused, belittled or beaten down by rejection. Therefore, the solution lies in making it easier to set up in business.

Here’s a ten-point guide to removing the obstacles, which might also save a bit of time (as well as 10 months’ hotel and travelling expenses):

1. Introduce a government-backed start-up grant or interest-free loan that would remove the need to put up your home as security for the bank. Many lower income people do not even have this option as they do not own their home.

2. Drastically reduce red tape. There is too much form filling and too many petty rules on everything from health and safety to licensing. It acts as a barrier to entry and to growth and overwhelms those who cannot afford accountants and other advisers.

3. Most potential start-ups fear failure and most fail through cash flow problems. Those with meagre resources will resist taking the plunge into starting a business if they lack confidence in being paid for their efforts. So, introduce tougher legislation to punish late payers backed by a government guarantee to ensure that while proceedings are under way businesses get the money they are owed.

4. Replace or reconstitute Business Gateway as a chain of Start-Up guidance agencies based in local neighbourhoods where they would be highly engaged and visible and have a remit to work with schools, colleges, financial institutions and local businesses. Business Gateway advisers have become centralised distributors of information referring start-ups to mountains of confusing and intimidating advice on the internet.

5. Simplify local authority planning regulations, shorten the time taken to make decisions and remove or reduce the costs associated with making applications.

6. Appoint a proper dedicated Enterprise Minister with responsibility for SMEs and an emphasis on getting the S companies to M companies as quickly and effectively as possible. He or she should spend time on the schemes, rather than pontificating at Holyrood and in television studios.

7. Instead of the scatter gun approach to seed-funding lots of small initiatives, government should channel financial support to those who can spot winners. This should encourage expansion of the venture capital sector which would take responsibility for the success or failure of these enterprises. Aside from their experience they have better contacts and instincts than the public sector.

8. Ensure the tax system is used to encourage high net worth individuals to invest in start-ups and to act as mentors, with a specifically advantageous tax relief for those supporting enterprises in designated deprived areas.

9. Scrap the bank levy which further weakens banks’ ability to lend. Alternatively, turn the bank levy into an SME Fund.

10. Ensure that every child leaves school with a basic understanding of how commerce and the financial system works, and its importance to society and their own well-being. Further to that, they should leave school considering business as a career option.

I will revisit this issue in 10 months time and see how many of these answers differ from Ms Mone’s findings.

Read also my analysis of her rise to fame and apparent fortune here


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