Decisi´ on Bayesiana

growth ambition. Intuitively one would expect having fewer constraints to be associated with higher growth and ambition and the data shows that this appears to be the case.

6.4.1 Historic growth (sales or employment 2010-12)

Table 6.3 shows the proportion of businesses increasing either employment or sales over the period 2010-12 and the number of constraints they face. The proportion of micros with three constraints which grew either employment or sales was just 25 per cent, similar to the proportion among those with two constraints. The proportion of singly constrained businesses which grew was 36 per cent and 45 per cent of unconstrained businesses grew. This pattern is very much as expected, but there is a difference in growth according to the type of constraint (Table 6.4), with those market constrained far more likely to report growth than those affected by either of the other two constraints. Of those only affected by a single constraint, those which were market constrained were most likely to report growth (48 per cent), compared to 32 per cent of those affected by only the capacity constraint and 33 per cent of those only vision-constrained.

Table 6.3 Proportion of businesses growing (2010-12) by number of constraints (%) 0 employees N=302 1-4 employees N=371 5-9 employees N=256 All 0-9 employees N=929 % % % % No constraint 39 51 59 45

Any single constraint 33 43 46 36

Two constraints 26 43 51 28

All three constraints 20 29 37 25

Base: All microbusinesses with two years employment and sales history, weighted results (N=929)

Table 6.4 Proportion of businesses growing (2010-12) by type of constraint (%) 0 employees N=55 1-4 employees N=126 5-9 employees N=88 All 0-9 employees N=269 % % % % Capacity only 20 41 63 32 Vision only 32 45 54 33 Market only 60 42 32 48

Base: All microbusinesses with two years employment and sales history and facing a single constraint, weighted results (N=269)

6.4.2 Anticipated growth

Table 6.5 shows the proportion of businesses with substantive growth ambition and the number of constraints they face. The pattern here is similar to but stronger than for growth

history, which might suggest that owners’ views concerning growth are more synchronised with the obstacles they perceive than the actual growth they experience. More than half of businesses with no constraint could be classified as having substantive growth ambition, which fell to 10 per cent for two constraints, 30 per cent for a single constraint, and just 1.5 per cent for all three constraints.

Vision proved to be the more important barrier to ambition, with only 16 per cent of vision constrained micros having substantive growth ambition, compared to over 40 per cent of those with capacity or market constraints.

Table 6.5 Proportion of businesses with substantive growth ambition by number of constraints (%) 0 employees N=257 1-4 employees N=346 5-9 employees N=242 All 0-9 employees N=845 % % % % No constraint 41 33 67 52

Any single constraint 24 31 60 30

Two constraints 8 13 15 10

All three constraints 1 - 11 2

Base: All microbusinesses with a classification of their growth ambition, weighted results (N=845)

Table 6.6 Proportion of businesses with substantive growth ambition by type of constraint (%) 0 employees N=257 1-4 employees N=346 5-9 employees N=242 All 0-9 employees N=845 % % % % Capacity only 39 41 40 43 Vision only 15 10 20 16 Market only 36 41 30 41

Base: All microbusinesses with a classification of their growth ambition, weighted results (N=845)

6.5 Summary

 Using an index of 31 obstacles, the most obstacles faced by any of the 1,000 surveyed businesses was 21, indicating that no businesses are fully constrained.  Under this scheme of classification, on average, the larger the microbusiness the

shows that the number of obstacles faced is inversely related to both growth and growth ambition, with fewer obstacles being correlated with higher growth during 2010-12 and with substantive levels of growth ambition.

 Combining obstacles into associated clusters revealed that the vision of the business was a limiting constraint for 72 per cent of microbusinesses, while

capacity constraints applied to 67 per cent, and market constraints to 45 per cent of micros.

 Microbusinesses were rarely constrained in only one of these three dimensions. Two-thirds (68 per cent) of microbusinesses were subject to more than one type of constraint.

 There was a relationship between the number of constraints and the growth of microbusinesses. A greater proportion (45 per cent) of unconstrained businesses had grown, whereas fewer businesses subject to all three constraints had (25 per cent).

 Non-employing businesses were subject to the most constraints, with 74 per cent being subject two or more constraints, compared with 54 per cent of 1-4 employers and 51 per cent of 5-9 employers.

 The type of constraint is also specific to business size. The non-employing businesses were considerably more likely to be subject to capacity and vision constraints, but reported lower proportions of businesses with market constraints, compared to employers, particularly those with 5-9 employees.

 These findings suggest that work should occur on more than one front to help businesses overcome one or more constraints - interventions need to be holistic and multidimensional and the smallest businesses are more likely to require such compound interventions.

7 Myths commonly held by very

small businesses

7.1 Introduction

Eight focus groups were held around England, each with 8-10 participants (all business owners). Three groups consisted of owners of businesses with 1-9 employees. Three groups consisted of businesses without employees. The remaining two groups consisted of owners of businesses with 10-19 employees, reflecting on obstacles to growth they faced when smaller, and how they overcame them.

The aim of the focus groups was to explore in depth business owners’ views on growth, including how they conceptualise growth, perceived barriers, the consequences of growth for their business and their personal circumstances and evidence of mindsets among owners which may restrict their potential business growth. In particular, the focus groups sought to uncover ‘myths’: assertions about growth which were exaggerated, not correct and/or which served as a rationalisation or defence of their desire not to grow. As noted in the literature review, asking owners about their lack of growth may prompt a defensive response, or a justification for remaining small, rather than simply admitting that they would rather remain small. This did occur, although some did express the preference for remaining small as well. The point of this part of the research is not necessarily to

persuade an owner to pursue growth when they would rather not, but to uncover

systematic beliefs and biases which may prevent owners pursuing a growth strategy when they otherwise have the potential and inclination to do so. This process allows the

development of a response, derived from the views of other owners, surveys, official data etc., which demonstrate that the obstacles to growth are not as high as may have been believed, or that the anticipated negative consequences of growth (e.g. a higher regulatory burden) have been exaggerated.

It should be noted that none of the following myths are absolute i.e. they do not apply to all microbusinesses. Several are most relevant to businesses who have not yet taken on their first employee; others are more relevant to employers, or those in particular sectors.