There is no shortage of ideas to help stimulate enterprise in the UK. Only last month David Cameron suggested that empty government office could be rented out to startup businesses. However, as the co-founder of a growing company most of these ideas would have had a marginal impact at best on my company’s success or failure. So I’ve reviewed some of the personal notes I kept as I was setting up the business in order to identify how Labour could better stand for entrepreneurs.
What’s good for Business is not necessarily good for business
Many of the professional organisations that speak on behalf of business are the preserve not of the small startups that the government wishes to encourage but the large or mature businesses who are fighting for their own interests. There’s nothing wrong with that. But the views of the CBI or Richard Branson do not particularly reflect what’s in the best interests of promoting startups. These representatives should be treated with no more or less scepticism than the TUC or the AA.
Often the best business people will have half an eye on what’s bad for the competition when they call for changes to government policy. I was also told by a special adviser that the tax that business people complained about most to Cabinet ministers was the top rate of income tax. If only startups had such things to worry about!
Business doesn’t vote – startups won’t donate
Building a coherent story to support enterprise won’t be easy for the Labour Party. Businesses don’t vote and most startups won’t donate money to the party. I was once fortunate to be invited to Labour’s Thousand Club annual summer party. A Peer and former senior party staffer looked at me with the disdain most reserve for bedroom-based eBay traders when she heard I set up a company. Her mood only shifted when she heard I employed people – as if that was the only measure of success she could understand.
This isn’t natural territory for Labour. That means finding unfamiliar ways to engage with business people – for whom much of politics is equally alien. Entreprenuers don’t like meetings that start late, lack focus and don’t have a clear benefit. Finding activities that can be useful for both parties will not be easy.
So what can Labour do for startups? Here are five modest ideas, intended to help Labour’s Business.
No one got sacked for hiring MIB
‘No one ever got sacked for hiring IBM’: an old adage but absolutely true in my experience. I met many organisations who were very attracted in our ideas but without 2/3 clients and case studies behind us, we were untouchable. Once we had that, we accelerated at great speed. One way of helping organisations reduce the risk aversion to something new would be to provide a ‘Made In Britain’ tax break for any company using services / products from a startup (perhaps within the first 12 months). A 25% tax break would be a significant incentive.
Secondly, stealing an idea from the West Wing, civil servants could be encouraged to spend a day meeting relevant startups with a service to offer. Once we had meetings with the public sector, many civil servants were very amenable. But identifying the right ones required a particular set of skills. And a case study from a government department can be hugely beneficial to get a business moving. Whilst in opposition, why doesn’t Labour publish tenders on its website? Or run a scheme for MPs to volunteer to serve as advisors to startup businesses?VAT free purchases
In the first year (or 2 if you’re unlucky) you will spend more than you earn. And cashflow will be a waking nightmare. Being able to reclaim VAT costs every quarter is painful. Not having to pay them at the start would be a major boost. Giving startups a VAT-free card to reduce B2B costs (web build, computer hardware etc) would free up cash to run the business.
The Child Trust Fund
Financing a business has never been easy but, right now, has rarely been harder. The Child Trust Fund meant that school leavers would have a put of money to invest – ether in HE or, possibly, in starting a business. That would mean fewer bank loans and less reliance on a small pool of hard to reach angel investors. That has to be a good thing.
This is a long hard slog; more so than starting a business – probably. Mature businesses may suffer because of small increase to national insurance. For startups, the 12% cost is marginal once we’ve persuaded ourselves that a) we can afford someone else and b) that person isn’t going to absorb so much management time that it holds back the business. That’s about having people who turn up on time. Don’t spend an hour on the phone to friends or checking Facebook. Who do what they’re told and don’t call clients ‘bruv’. It really is that simple, although I have little doubt how difficult it is for government to help achieve this. A small start might be encouraging universities place students in roles with businesses during their degree.
Most small businesses fail. Government doesn’t like failure. Better visit ‘success stories’ like Innocent Smoothies or be associated with a Richard Branson than a miserable failure of a business. But most businesses are small nad unglamorous, even if they succeed. But failing can teach you a great deal. And if those lessons can be captured, society is better off. Fewer people make similar mistakes. Government ministers aren’t going to embrace failure in a photo opp. But at the very least remember that a photo opp at the corner shop will likely mean more to more voters in a constituency than a visit to a remote industrial park.